I have often written about the legislative and regulatory challenges facing the CASE industry in Canada. The implications of such challenges impact every industry in Canada, as many leading industry groups have recently pointed out. That is true for the CASE industry more than ever before. All industry is asking for is fair, evidence-based, and reasonable regulations. As a respected partner with the law firm, Gowling WLG, recently reminded Government in the Globe and Mail: “A regulator that does its work through transparent, inclusive, fact-based processes is important both for the quality of the determinations made, and for facilitating public confidence in, and acceptability of those determinations.” Every company in the CASE industry must find effective ways to ensure that is the case with the many federal regulations coming down the pipe over the next one to three years. It either deals with it now to get more reasonable regulations, or lives with the consequences later. Many large industry groups have called for the Federal Government to seriously reconsider the ratio of harm versus benefit as a matter of public policy, which has always been the key metric. It also needs to be reminded of its own Cabinet directive on regulations: “Regulations have to be evidenced based and support a fair and competitive economy, leading to economic growth and increased trade alignment.” CPCA has shown repeatedly over the past number of months that this is no longer the case in Canada. Something has to change. It seems as if Canada now has a ‘guilty until proven innocent’ approach to regulation of critical inputs used in thousands of already heavily ‘regulated’ products. It is not an approach that focuses on regulating chemicals ‘of highest concern,’ as the Government has always maintained. This has led to the three-fold increase in regulations our industry has experienced in recent months. That’s why a ‘whole-of-industry approach’ for the CASE sector, and other groups, is now required to advocate for a strong, vibrant, and sustainable industry for the foreseeable future. The CASE industry has made many significant advances on the sustainability front. For example, the industry reduced VOC emissions in consumer paint products by more than 90%, for a total of 42 kilotonnes over the past decade. There are ‘many’ other examples in this regard, and regularly reported on by CPCA’s monthly Prime Time News. However, things have changed drastically with respect to sustainability goals, most often referred to as ESG goals. More sustainably sourced inputs are now used regularly in a wide range of product categories in the CASE industry. That will continue to be the way forward, but regulations must consider the time needed to experiment with sustainably sourced alternatives in thousands of formulated products. The R&D required cannot be done overnight.
The CASE Industry Will be Challenged
Many sectors argue that more fairness is essential when it comes to current federal Government regulatory challenges. It is increasingly more difficult for three key reasons:
- Companies are moving forward as quickly as possible on the sustainability front with more alternatives used, but for various reasons not all can move expeditiously at the same time as substitutes are not readily available and sometimes cost prohibitive.
- There is very little ‘juice left in the orange’, that is, companies need to retain existing active ingredients in formulated products to ensure they function as demanded by customers, which in many cases helps them reduce ‘their’ environmental footprint with longer lifecycles for products and infrastructure, thereby delaying the need for both renewables and non-renewables.
- Some have argued that the federal government’s very aggressive ESG policy agenda will remove many formulated products from store shelves despite the fact they are already strictly regulated in Canada and safe for both human health and the environment.
Companies know that the economic impacts will be significant if the Federal Government’s currently proposed lower-use limits for critical ingredients are finalized over the next year and beyond. For example, as the grams per litre of VOCs in certain exterior CASE products are reduced from 500 to 150 to achieve further reductions in emissions, those products will not work. This will be the case for certain remaining CASE-alkyd products in 49 categories in the architectural, industrial, and maintenance regulations, with proposed amendments now being considered in all 49. In fact, one member’s calculation for lower VOC limits in just five AIM products would mean more than $10 million to re-formulate. Moreover, because the limits are significantly lower than today, re-formulation may not even work after sitting on a ‘test fence’ for several years, then abandoned. That’s the impact for just ‘one’ company for a few product lines, add a 100 more companies and even more products, one can imagine the far-reaching negative impacts. Remember, more than 42 kilotonnes of VOC emissions have already been removed from architectural coatings products in Canada, equivalent to taking 325,000 automobiles of the road, annually!
Real Impacts on the Economy Overall
Why is existing Federal Government policy being pursued when it clearly means negative impacts on the manufacturing sector as never before? Canada’s leading newspaper, The Globe and Mail, reported in early January 2024: “Living standards in Canada (as measured by GDP per capita) are now falling, as the long-lasting downward trend in economy-wide productivity growth has intensified.” To make matters worse, it notes that: “Canadian labor productivity, or output per hour worked, has fallen for six consecutive quarters. It is the first time ever that productivity has dropped in Canada over a four-year stretch, which has nothing to do with the pandemic as other economies had moderate gains in that same period.” It goes on to note that this is a public policy problem unique to Canada because productivity is the “fundamental building block of prosperity.” Adding insult to injury, it notes that: “Business investment per worker in the manufacturing sector is more than three times higher in the US ($52,000) than in Canada ($15,000) and this malaise has led to a lagging standard of living for Canadians.” Direct foreign investment in Canada has also dried up due to excessive Impact Assessment Act regulations preventing projects from moving forward. In fact, the Supreme Court of Canada recently found the Impact Assessment Act unconstitutional in part. Prior to that, in November of 2023, the Federal Court of Canada released a decision that held that the Federal Governments labelling of all ‘plastic manufactured items’ as toxic was both unreasonable and unconstitutional. This confirms the view Gowlings WLG noted at the outset, that is, ‘transparent, inclusive, facts-based processes’ must be in place for fair regulations to be meaningful, and legal.
The Pace Must be Slowed
The pace of federal regulations is not expected to stop any time soon as the Government added 21,290 new public servants in 2023 alone! That number totals 100,213 since 2015, a 40% increase. In the Ministry of Environment and Climate Change Canada, where many of the CASE industry regulations reside, staffing is up by 27% since 2015. Note the plastics division alone went from 40 people to several hundred staff over the past few years. Thus, the massive flood of new regulations we have seen in Canada in several critical areas, such as: new VOC limits in all segments; 62 amendments made to the Canadian Environmental Protection Act, with the new regulations from those amendments to be finalized over the next 18 months; carbon pricing; green technology requirements; over 200 regulations added to the Environmental Impact Assessment Act; 1,000+ new chemicals for risk assessment and new regulations from that assessment; 4,700 PFAS for risk assessment; plastics reduction and recycling, etc. These regulations will play out over the next few years and industry must be fully engaged.
