Originally published in Policy Options on December 2, 2021
In the aftermath of the 26th United Nations Climate Change Conference of the Parties (COP26), countries must now focus on turning their ambitious commitments into effective action. Needless to say, Canada has systematically been long on ambition but short on action in international climate negotiations. Will this time be any different?
Without reforming our systems for energy project decision-making, we don’t think so.
Canada is among the nations championing net zero by 2050 and in April enhanced its 2030 reduction target to 40-45 per cent from 30 per cent below 2005 levels. Making progress on these ambitious commitments requires a host of actions, including widescale deployment of new energy technologies and building vast amounts of lower-emitting energy infrastructure.
Yet, Canada has struggled to plan, permit and build energy infrastructure in recent decades. While pipelines have been the flashpoints for these issues, all types of energy infrastructure – from hydropower projects to wind farms to electricity transmission lines carrying clean power – have faced challenges. There is tremendous uncertainty over who decides what, when and how when it comes to energy projects.
Without greater clarity, this will be a huge stumbling block for Canada on the road to net zero. There is much to do in the decades ahead to reform our decision-making systems in ways that foster a lower-emitting energy system and economy.
A new research study from Positive Energy at the University of Ottawa finds that successfully charting a net-zero future will depend in considerable measure on whether Canada’s public energy decision-making systems – including regulators – are up to the job.
Based on detailed historical case studies of five energy regulators in Canada with decision-making responsibilities for resource development and infrastructure, this study explores the relationships among regulators and other actors in energy decision-making systems, including policy-makers, the courts, Indigenous and municipal governments, other regulatory authorities and all members of civil society.
We examine these relationships through two lenses: effectiveness and independence. What constitutes an effective energy decision-making system, what defines an independent regulator and how does independence influence the effectiveness of decision systems?
The concept of regulatory independence is under tremendous pressure. Regulators are grappling with the emergence of broader societal goals beyond the traditional scope of energy regulation. Since the 1990s, they have had to take a more holistic and systemic approach, engaging values as well as interests and making more complex decisions with input from ever more public, private and civil society sources.
Meanwhile, the pace of technological change has accelerated and forces a rapid rethink of business models for energy supply and delivery. COP underscored that climate change is one imperative underpinning these mounting demands, but our research shows that so are other imperatives such as local environmental impacts, reconciliation with Indigenous peoples and energy security. Energy decision-making systems have many masters.
In this context, coherent policy to guide regulatory processes will be essential to make progress on Canada’s net-zero commitments. Our report provides a framework to understand what makes a public energy decision-making system effective and what makes regulators within the system more or less likely to contribute to effectiveness.
Crucially, the study finds that regulatory effectiveness rests on three essential elements: functionality (can the system get the job done?); adaptability (can it evolve with changing circumstances?); and legitimacy (can it sustain broad public confidence?). Importantly, the degree of decision-making independence of a regulatory agency shapes not only the effectiveness of the regulator but also of the system overall.
There are unavoidable trade-offs in the discussion of effectiveness and independence. Different jurisdictions face different imperatives. There is no “right” answer: only the considered judgment of those who design and operate the systems.
We offer a number of recommendations for those designing energy project decision-making systems.
First and foremost, there are many models and avenues for reform, but they must all be informed by a careful assessment of the context, inherent trade-offs and tensions, as well as intended and unintended consequences.
Second, to successfully pursue net zero by 2050, we need to get the institutional arrangements right. A viable energy and climate future requires that public decision-making systems act competently, quickly, judiciously and in ways that build and balance the confidence of all parties. But fast public decision-making is not the way of things in the 21st century. Political leaders face the dilemma of balancing the need for speed with the imperatives of careful planning and sound analysis, inclusiveness, stability and predictability, consultation and meaningful accommodation.
Third, to expedite project decisions without unduly compromising those competing goals, Canada needs much more sophisticated policy and planning at federal, provincial and local levels and much more coherence across jurisdictions. Every critical decision delayed until late in the process compounds uncertainty for investors and communities alike. Overcoming this tendency requires more policy and planning to sketch potentially viable technological futures, risks and uncertainties. Energy planning needs to go regional – including across provincial and territorial boundaries – and needs to put up front early engagement with communities, as well as clear and consistent signals to investors.
Fourth, when it comes to system design, democratic accountability is arguably best-served when political decisions are made well upstream in the decision-making cycle and through formal means. Governments should frame their broad intentions through legislation, policy and regulations. In contrast, late-stage cabinet decisions or ministerial directives often amount to regulation by stealth. This increasingly common tactic is incompatible with strengthened public and investor confidence. Transparency – as hard as it can be for political actors – is essential.
Fifth, in terms of day-to-day decision-making, engagement must take place at multiple levels. Communities, most especially Indigenous communities, will need to be active shapers of the energy future and partners on all manner of projects. Terms like “co-creation,” “co-production” and “co-development” aim to capture this change. Defining the practical meanings of these terms and building the capacity necessary for true co-creation should be an urgent priority for governments.
Finally, all decision-makers in the system need to prioritize rapid and systematic learning of what works and what doesn’t on the road to net zero. Learning needs to happen both within and between organizations.
Looking to the future, the durability of decisions will matter more and more. As the last decade has shown, policy reversals, partisan battles and federal-provincial conflict can be incredibly costly and can undo progress on both energy and climate imperatives. New governments should be very cautious about overturning major decisions of their predecessors without being mindful of the costs and risks to reputation, public confidence and system stability and predictability.
As much as technology or policy, confidence and trust of all parties in decision-making will determine whether Canada succeeds in meeting its energy and climate goals. Investors need to have faith that projects have a fair chance of succeeding. Local communities need to have faith that their voices will be heard and their concerns addressed, Without clarity about who decides what, when and how for energy projects, Canada is unlikely to make much progress towards net zero by 2050. We hope those designing decision-making systems are listening.