May/June 1997
How does Canada compare with the United States in terms of environmental regulations? What are the country’s top environmental issues? And how does all this affect Canadian—and potentially U.S.—recyclers? Here are some answers.
By Kristina Rundquist
Kristina Rundquist is an associate editor of Scrap.
In the United States, if you conducted a man-on-the-the-street poll on the topic of Canada, you’d likely get some blank stares.
The truth is that most Americans know little about their neighbor to the north, due, in part, to Americans’ preoccupation with America. Then, too, Canada has kept a relatively low profile throughout the course of North American relations.
Though the NAFTA debate called more attention to Canada, the spotlight focused mostly on Mexico. Not surprisingly then, the majority of Americans find themselves more familiar with their southern neighbor. (It should be noted that, while Mexico is the larger overall trading partner with the United States, Canada is by far the larger buyer of U.S. scrap.)
If Americans know little about Canada in general, they know even less about its environmental regulations. For U.S. scrap recyclers, this knowledge could be crucial, especially if they sell material to or receive scrap from Canadian processors. And as the United States has shown, environmental regulations—and the potential related liability—can have far-reaching effects on all facets of scrap companies.
This overview takes a look at the basics of Canada’s environmental policies, including how they’re determined and how they affect scrap recyclers there and abroad.
A World of Difference
Across the board, Canadian environmental regulations aren’t as harsh as those in the United States, asserts Rick Dvorkin, president of Calgary Metal (1985) Ltd. (Calgary, Alberta). Citing just one example, he notes that Canada has no groundwater regulations. As a result, Canadian recyclers haven’t been forced to make significant investments to hard-surface their operations or install groundwater protection systems.
Also notable, Canada has no national environmental cleanup program similar to Superfund, with the closest legislation pertaining exclusively to orphan sites in the mining industry. And analysts don’t expect Canada to introduce any Superfund-like legislation in the near future. “In general, we don’t have the kind of backtracking that exists in the States, probably because we’ve seen the nightmare of litigation and confusion it has caused,” says John Willms, a senior partner with Willms & Shier, a Toronto-based environmental law firm.
Another important difference to understand up front is that Canada doesn’t have a federal governing body such as the U.S. EPA that sets environmental standards for the entire country. Instead, its environmental policy is established on a province-by-province basis. And with 10 provinces and two—soon to be three—territories, that can add up to dramatically different policies, with some inevitably being stricter than others.
Ontario and Quebec, for instance, are recognized as two of the more environmentally aggressive provinces. This makes sense when you consider that they are home to the majority of the country’s industry and population. British Columbia, however, has also taken a tougher stance of late, especially in the area of regulations on the paper and lumber industries.
Alberta, on the other hand, is rather free of bureaucratic hassles, Dvorkin says, noting that it “is really not the type of provincial government that is confrontational at the outset. Its regulators would rather solve problems with industry through cooperation. And if they think something is going to have a major impact on recyclers, then they’ll talk with them.”
As for whether Canada’s province-based approach to environmental regulations poses problems for scrap recyclers, the answer seems to be yes and no.
John Hanson, executive director of the Recycling Council of Ontario (Toronto), says the provincial discrepancies can pose very real problems. As illustration, he points to recyclable packaging, noting that some provinces have beverage container deposit laws—bottle bills, in U.S. jargon—while others don’t. Adding to the confusion, some provinces require containers to be returned to retailers, while others require returns to depots. As could be expected, “you get flows of materials from non-deposit to deposit areas and cases where the deposit has been paid in one place but claimed in another,” says Hanson, observing, “What happens to the revenue is really a dog’s breakfast.”
Adding to the debate, Barry Thompson, chairman of the environmental committee of the Canadian Association of Recycling Industries (CARI) (Don Mills, Ontario), asserts that Canadian recyclers “have a lot of extra burden administratively,” noting that “other industries enjoy less paperwork and some tax breaks.”
A study conducted by the University of Toronto, for instance, compared the level of taxation on primary, or virgin, material industries and those dealing with recyclable plastics, metals, paper, and glass. What it found was that, taking into account both provincial and federal taxes, the primary materials groups had a 3-percent advantage over the recycled materials industries, says Len Shaw, director of public and government affairs for CARI. “When you get that sort of situation, you’re really not on a level playing field, and you’re certainly not promoting recycling,” he states.
To combat this imbalance, CARI is developing educational materials for public and government officials designed to shed light on the benefits of recycling and dispel what Thompson refers to as the industry’s wrongful “image problem. We need to overcome this and let our story out.” Shaw agrees. Educated consumers may be able to pressure the government to give Canadian recyclers a break, he says.
Another more general problem is that provincial governments rarely discuss potential regulatory changes with recyclers in the incipient stages. “We have difficulties at times in getting the governments to involve us before making their first draft of regulations,” says Thompson. “Once the first draft is produced, the direction has been set and then our input only succeeds in modifying the direction a bit.”
Still, others don’t view Canada’s province-based approach to environmental regulations as particularly problematic. Among them is Willms, who notes that “companies that operate in different provinces tend to have offices in different provinces,” which enables them to know and keep up with each one’s regulations. It’s more challenging, he notes, for Canadian recyclers that trade with U.S. companies to know U.S. regulations that could affect them. “That’s where operators need to be cognizant of the rules,” he says.
Lightening the Regulatory Load
Taking a cue from their U.S. compatriots, Canadian environmental officials seem to have embraced the movement toward regulatory reform and, in particular, regulatory streamlining.
The Ontario Ministry of Environment and Energy, for one, proposed a reduction in the number of regulations from 80 to 47 under the Responsive Environmental Protection Act. This document would in effect combine 23 regulations into six, covering issues such as air emissions, waste management, ozone-depleting substances, acid rain, and training and certification. Another 20 regulations—on issues including industrial wastewater, energy efficiency standards, spill reporting, pesticides, and more—would be streamlined, while eight regulations would find themselves on the chopping block.
In addition to Ontario’s regulatory streamlining efforts, some provinces are increasingly proposing that Canadian industries regulate themselves. The Montreal Gazette reported in February 1996, for instance, that Quebec planned to do away with environmental regulations for ISO-certified companies, instead allowing them to police themselves. Already, the Quebec government has initiated a pilot plan whereby the chemical, aluminum, and petroleum industries would face more lenient environmental regulations if they agree to pursue voluntary cleanup plans.
The same article noted that the national Canadian government in Ottawa was exploring the possibility of allowing businesses to seek environmental regulatory exemptions—the proposal later died in Parliament—and considered briefly making compliance with reduced smokestack emissions a legislative concern. That failed too when Alberta, with its fossil-fuel lobby, pushed to make compliance voluntary.
While this trend of reducing regulations and regulatory oversight is being applauded by some, many in the environmental community fear that without government controls in place, environmental laws will weaken to the point of nonexistence. “Government environmental policy these days is driven much more by economics than environmental protection,” says Hanson. “I think a devolution of power could result in a weakening of the laws. It’s certainly a major concern in Ontario.”
Some, however, are skeptical that streamlining will ever make it past the initial stages. “There’s a lot of talk about it,” Willms notes, “but we’re also getting big cutbacks in government expenditures and more people are being laid off, so who will implement it?”
The Major Issues
While it’s true that each Canadian province and territory has its own issues and can set its own rules, there are some issues that know no boundaries.
In general, for instance, Canadian recyclers would like to see more attention paid to the market side of recycling. “The government only gets involved in the collection side,” notes Shaw. “It’s not looking at the green procurement policies.”
Transboundary exports have been another concern for Canadian recyclers, especially since Canada is a ratifying party to the Basel Convention. This international treaty was formed to prevent industrialized nations—predominantly members of the Organization for Economic Cooperation and Development (OECD)—from dumping their wastes in developing, or non-OECD, countries. Beginning in January 1998, the treaty will ban the shipment of so-called hazardous wastes from OECD nations that have ratified the Basel Convention to non-OECD nations that are also Basel parties.
On the plus side, the treaty will likely have no effect on the trade of recyclables between Canada and the United States, which is not a full party to the convention. The main reason is that the two nations have both bilateral and, as OECD members, multilateral trade agreements in place that preempt the treaty’s restrictions.
On the potentially negative side, however, Canada could find its scrap export opportunities diminished, especially to the Pacific Rim, if it ratifies the treaty’s 1998 hazardous waste ban and if some currently traded scrap materials are judged to be “hazardous” waste. In this situation, Canada could find itself cut off from export markets still open to U.S. scrap shippers.
Canadian scrap recyclers also face potential problems related to provincial definitions of what constitutes a hazardous waste. “In the United States, items like lead-acid batteries and shredded circuit boards have been excluded under RCRA,” Shaw points out. “But that doesn’t exist up here. Definitions are still all-inclusive.” This has created a need to promote the scrap-is-not-waste idea popularized by U.S. recyclers. As Thompson asserts, “It’s a misnomer to call these materials waste, let alone hazardous waste.”
Producer responsibility is yet another point of contention for the Canadian recycling industry. This idea is taking hold not only in Canada but across the world, as countries begin to realize that if companies don’t take care of their waste problems, someone else will. And as Shaw points out, “It’s usually by people who don’t understand the industry. You end up with systems that are costly and inefficient and don’t begin to address the problem.”
The idea of producer responsibility has a direct connection to the issue of CFCs and, hence, the recycling of appliances. Ontario, for example, has fairly strict regulations concerning the removal and disposal of refrigerants, “but the burden is on the recycler and not on an entity closer to the source,” says Thompson. Recycling facilities that normally recycle and measure goods by the ton are mandated to categorize each refrigerator individually and tag it at each stage of the recycling process, he notes. This process is not only burdensome and incompatible with the normal flow of the scrap recycling process, but “it’s an example of where costs are being added with questionable return,” Thompson asserts. CARI would prefer an approach in which suppliers of scrap appliances would have to sign an agreement stating that all refrigerant has been removed from the products prior to delivery for recycling, he says.
In the absence of any such manufacturer stewardship or supplier requirements, Calgary Metal, for one, has come up with its own approach, charging suppliers a fee for refrigerators and then using this money to pay for the removal of the coolant. “We charge what it costs us,” Dvorkin says, noting, “We take a proactive approach so we can be sure there isn’t going to be a problem later.”
At least some of this push for producer responsibility can be linked to the banking industry. Banks throughout North America have been loathe of late to extend loans to companies that can’t or won’t produce assurance of environmental regulatory compliance. High-risk companies in particular—such as those in the scrap business —face a high degree of scrutiny, especially those dealing with hazardous or potentially hazardous materials.
Why are banks becoming so sensitive to environmental issues? Because many have been held liable for cleanup costs on properties they hold as collateral on loans. “These situations can get out of proportion very quickly and can be a serious problem,” says Willms. “It can give rise to serious liability down the road.”
In contrast to the United States, which excludes secured lenders from liability if they weren’t involved in the daily management of the business, Canada offers no such exclusion. In 1991, in fact, Ontario’s Environmental Protection Act included current controllers of a site to the list of those who can be held liable.
To gain some protection against the possibility of assuming long-term cleanup costs, some Canadian banks are requiring environmental risk assessments as part of their loan process. Taking it one step further, the Canadian Imperial Bank of Commerce created a special position: general manager of environmental services. Moreover, Canadian banks entered into an agreement requiring an environmental audit whenever a group of banks is involved in a corporate credit facility.
Yet another environmental issue of note is Canada’s growing interest in sustainable development, which has become a “watchword” in the country, says Jack Lazareck, a principal of several Canadian scrap operations, including General Scrap & Car Shredder Ltd. (Winnipeg, Manitoba). While subtleties exist, the overall implication of sustainable development, explains Lazareck, is that before a new enterprise is allowed to open in a province, it will be examined on the basis of the employment opportunities and environmental implications it poses to the community. “Governments will look at the whole package, with the environment being part of it,” he says. “They’re planning to do away with rigid environmental reviews and use sustainable development instead.”
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While this review provides a snapshot of Canada’s current environmental regulatory practices, it raises questions about the country’s future directions. Will it push for more national environmental regulations at the expense of the current province-by-province system? Will it continue to streamline its regulations or assume a more involved role? Will it learn from the errors of U.S. environmental regulations, eschew the command-and-control approach, and adopt the best-and-brightest regulatory ideas?
The answers to all of these questions will surely be a long time coming, but when they do come, the results could have a profound effect on Canadian scrap recyclers and, perhaps, their U.S. trading partners. •
How does Canada compare with the United States in terms of environmental regulations? What are the country’s top environmental issues? And how does all this affect Canadian—and potentially U.S.—recyclers? Here are some answers.