Canada-European Union: Comprehensive Economic and Trade Agreement (CETA) Negotiations

Initial Strategic Environmental Assessment - February 2012

Table of Contents

• I. Executive Summary
• II. Overview of the Environmental Assessment Process
  • Assessment Methodology
• III. Public Comments
• IV. Trade and Environment
• V. Overview of the Economic Relationship between Canada and the European Union
• VI. Initial Environmental Assessment Findings
  • Part 1: Qualitative Analysis
    • Overview of Qualitative Findings
    • A.Trade in Goods
    • B.Trade in Services
    • C.Government Procurement
    • D.Investment
  • Part 2: Quantitative Analysis
    • Overview of Quantitative Findings
    • A. Framework for the Quantitative Assessment
    • B. The Simulation Results of the 2008 Joint Study
    • C. Results of the Environmental Assessment
    • D. Other Environmental and Sustainability Indicator
• VII. Environmental Cooperation
• VIII. Conclusion of the Initial Environmental Assessment

I. Executive Summary

In May 2009, Canadian and European Union (EU) Leaders launched negotiations toward a Comprehensive Economic and Trade Agreement (CETA) between Canada and the EU.  The decision to launch the negotiations was based on the October 2008 Canada-EU Joint Study, Assessing the Costs and Benefits of a Closer EU-Canada Economic Partnership^{Footnote 1} (the “Joint Study”) and their scope was defined in the March 2009 Canada-European Union Joint Report: Towards a Comprehensive Economic Agreement^{Footnote 2} (the “Scoping Report”). The Joint Study concluded that increased trade with the EU, Canada’s second largest trading partner, would generate significant new economic opportunities across a number of sectors while the Scoping Report concluded that the maximum degree of benefit to both sides would result from the maximum degree of liberalization.

The Government of Canada is committed to conducting environmental assessments of all its trade negotiations. The objectives of an environmental assessment of trade negotiations are to assist Canadian negotiators to integrate environmental considerations into the negotiating process, and to document how environmental factors are being considered in the course of negotiations. Through the environmental assessment process, Canada hopes to ensure that proposed trade agreements contribute to the development of the Canadian economy in a sustainable manner.  Pursuant to the 2001 Framework for Conducting Environmental Assessments of Trade Negotiations (the “Framework”)^{Footnote 3}, this report constitutes Foreign Affairs and International Trade Canada’s (DFAIT’s) Initial Environmental Assessment of the CETA negotiations. According to the Framework, the primary purpose of an Initial Environmental Assessment is to scope out the main environmental issues likely to arise in Canada as a result of the proposed agreement.  This assessment focuses on potential economic and environmental impacts in Canada from a CETA with the EU by exploring the links between market access, investment and environmental regulation in Canada.  In other words, this assessment considers the effects in Canada of new trade and investment that may result directly from a CETA negotiation. As such, this Initial Environmental Assessment does not seek to predict with certainty the specific outcomes of a CETA agreement with the EU, such as new projects or investments. Instead, the Initial Environmental Assessment is a scoping study that estimates possible environmental impacts in Canada using informed judgements of potential changes resulting from increased economic activity brought about by a Canada-EU CETA. 

Technological changes, increasing demand, and reallocation of resources will have an ongoing effect on the Canadian economy, whether or not a CETA with the EU is achieved. Growth in services, agriculture and industry will depend on a complex interaction of economic forces in addition to the liberalization of trade that will result from any trade agreement. In addition, federal and provincial governments will continue to pass new laws and regulations, and Canada will continue to enter into agreements with other nations. As a result, it is a challenge to isolate the incremental economic effects attributable solely to trade liberalization in a Canada-EU agreement. Nevertheless, this assessment is focused on exploring the environmental effects of economic activities and trade policy changes resulting from CETA negotiations.

Overview of Initial Environmental Assessment Findings

In the context of the CETA negotiations, Canada and the EU have agreed to negotiate provisions on environmental protection that will commit both sides to maintaining high levels of environmental protection and ensuring that environmental laws and regulations are accomplishing their objectives while simultaneously not acting as barriers to trade.

This Initial Environmental Assessment of the CETA negotiations with the EU has been divided into two main parts: 

• Qualitative Analysis and
• Quantitative Analysis.

Potential environmental impacts and their significance are discussed, along with opportunities for mitigation and enhancement.

The qualitative and quantitative analyses both suggest that, in the aggregate, any direct impacts the CETA negotiations may have on the Canadian environment are likely to be minor. This conclusion is based on the following factors: (1) the quantitative analysis showed that the net impact of increased bilateral trade with the EU on Canada’s environment would be minor based on projected changes in GHG emissions, energy use and water use (2) environmental legislation is already in place or will be in place to mitigate negative effects; (3) many areas under negotiation in the Canada-EU CETA focus on facilitating trade (eg. provisions that seek clarification in procedures or establish a system of notification and registration), and as such are not expected to directly result in environmental impacts. Four areas where there is greater likelihood of environmental impacts were discussed in detail in the analysis: trade in goods, trade in services, government procurement and investment.

With respect to trade in goods, a CETA with the EU is expected to increase Canadian exports in a number of sectors that currently face tariff and non-tariff barriers. The resulting changes in output could generate environmental impacts both as result of emissions and waste from the production of goods themselves, impacts on resource consumption, as well as effects from increased transportation activity.  It is expected, however, that the majority of these impacts would be offset by a variety of mitigating factors.  For example, mitigating factors such as increased efficiencies in production processes resulting from composition and technique effects on production would serve to reduce the environmental effects of such increases in production. Furthermore, all production activity is subject to Canadian environmental laws and regulations. Given that both Canada and the EU have high environmental standards, the risks to Canada from potential environmental hazards in goods imported from the EU are expected to be appropriately addressed. Positive impacts are also possible, especially in areas where a CETA could lead to increased bilateral cooperation. 

A CETA is expected to facilitate increased services trade between Canada and the EU.  Increased cooperation in the areas of labour mobility, regulatory cooperation and science and technology is also expected to contribute to increased activity in the services sector trade. Most services benefiting from liberalization under a CETA with the EU would likely be in virtual areas (i.e. those without a physical component, such as legal advice), with less likelihood of negative environmental impacts. Negative environmental impacts such as increased energy usage and electronic waste (e-waste) caused by increased trade in services are expected to be mitigated by increases in environmentally sustainable practices in the services sector.  

Increased European access to Canadian government procurement is not expected to significantly impact the environment.  Although negative transportation impacts of labour and goods may increase marginally through an agreement, these may be offset by a slight positive impact as the most efficient technologies are procured by governments benefitting from increased competition and wider options.  Furthermore, government procurement tends to follow strict guidelines and policies with respect to environmental stewardship, and these policies will remain in place with or without a CETA with the EU.  This includes maintaining Canadian governments’ ability to procure environmentally favourable products.

In terms of investment, Canada negotiates investment protection provisions that adequately provide for governments’ right to set policy and regulate in the public interest. Canada will build on its experience in mitigating such impacts under the North American Free Trade Agreement (NAFTA). Nevertheless, a Canada-EU CETA is not expected to substantially change the already largely open Canadian investment regime, and it would be difficult to separate the effects of a CETA negotiation from those resulting from increased foreign interest in investment in Canada. Therefore, any environmental impact of investment directly attributable to CETA with the EU is expected to be minor.  Mitigation options exist in environmentally intensive sectors such as mining and oil / gas, and are described in further detail in the assessment. Furthermore, all potential environmental impacts will be mitigated by laws that bind foreign investors to the same environmental regulations that govern domestic investors.

Given the significance of a Canada-EU CETA for the Canadian economy, the government has conducted additional quantitative modelling in this analysis to supplement the qualitative assessment that forms the basis of the Initial Environmental Assessment. Using economic modelling from the Joint Study and environmental data from Statistics Canada and Environment Canada, DFAIT’s Office of the Chief Economist evaluated three environmental indicators: greenhouse gases, energy use, and water use. The effects of three catalysts (the scale effect, composition effect and the technique effect) were also assessed, through which a change in trade policy could affect the level of pollution and the rate of depletion of environmental resources. The quantitative modelling indicated that the net impact of increased bilateral trade with the EU on Canada’s environment would be characterized by minor increases in GHG emissions, energy use and water use. These increases, however, are significantly smaller than the corresponding increase in GDP and production output, meaning that a Canada-EU CETA would likely lead to a shift toward a more favourable Canadian industry composition in terms of emissions. The quantitative analysis concludes that the net impact of increased bilateral trade with the EU on Canada’s environment would be minor based on projected changes in GHG emissions, energy use and water use.

In conclusion, the Initial Environmental Assessment analysis indicates that a CETA with the EU is unlikely to lead to significant environmental impacts. 

Next Steps:

As a result of this conclusion and pursuant to the Framework, the government will proceed directly to the Final Environmental Assessment phase.

The Final Environmental Assessment will be released after negotiations conclude. As appropriate, the Final Environmental Assessment will include a discussion of any subsequent analysis undertaken and document comments received in response to the Initial Environmental Assessment concerning the potential environmental impacts of the agreement on Canada. 

Following the conclusion of the Final Environmental Assessment report, follow-up and monitoring could, if warranted, be undertaken in order to review any mitigation or enhancement measures ultimately recommended by the Final Environmental Assessment report. Monitoring and follow-up activities can be undertaken anytime during the implementation of a concluded trade agreement in order to gauge the performance of its provisions from an environmental perspective.

II. Overview of the Environmental Assessment Process

The Government of Canada has committed to conducting environmental assessments of all trade and investment negotiations using a process that requires interdepartmental collaboration and public consultations.  The 2001 Framework for the Environmental Assessment of Trade Negotiations details this process, and was developed in response to the Cabinet Directive on Environmental Assessment of Policy, Plan and Program Proposals.^{Footnote 4} Detailed guidance for applying the Framework is contained in the Handbook for the Environmental Assessment of Trade Negotiations^{Footnote 5} (the “Handbook”).  The revised Guidelines for implementing the Cabinet Directive require departments to describe, in appropriate detail, the scope and nature of environmental effects that could arise from implementing proposals and how they could affect the Federal Sustainable Development Strategy’s goals and targets.

The Framework provides a process and methodology for conducting the environmental assessment of a trade negotiation. It is intentionally flexible so that it can be applied on a case-by-case basis according to the nature of the agreement being negotiated.  The objectives of the environmental assessment process of a trade negotiation, as outlined in the Framework are:

• to assist Canadian negotiators to integrate environmental considerations into the negotiating process by providing information on the environmental impacts of a proposed trade and/or investment agreement; 
• to document how environmental factors are being considered in the course of trade negotiations.

The Framework provides for three phases of assessment:

• Initial Environmental Assessment: a preliminary examination to identify potential key issues.
• Draft Environmental Assessment: if required, builds on the findings of the Initial Environmental Assessment and provides detailed analysis of those issues.
• Final Environmental Assessment: takes place after the conclusion of the negotiations.

At the conclusion of each phase, a public report is issued along with a request for comments.^{Footnote 6} In the event that an Initial Environmental Assessment finds little likelihood of significant environmental impact occurring as a result of an agreement, a Draft Environmental Assessment is not required.  In those cases, environmental considerations continue to be integrated into ongoing discussions and a Final Environmental Assessment must still be completed.

If warranted by negotiators, follow-up and monitoring can be undertaken after the conclusion of an environmental assessment in order to review any mitigation or enhancement measures recommended in the Final Environmental Assessment. 

Assessment Methodology

The Framework provides a four stage analytical methodology for conducting the Initial, Draft, and Final Environmental Assessments. Guidance on how to conduct each stage of the analysis is provided in the Handbook.

• Identification of the economic effect of the agreement to be negotiated. This stage identifies the trade liberalization activity of the agreement under negotiation. It examines the areas the potential agreement may include, the changes or new trade activity that could result, and the overall economic relevance to Canada. This helps determine the scope of analysis for the environmental assessment and to prioritize the issues to be assessed.
• Identification of likely environmental impact of such changes. Once the economic effects of the proposed trade agreement have been estimated, the likely environmental impacts of such changes are approximated. Consideration is given to potential positive and negative impacts.^{Footnote 7}
• Assessment of the significance of the identified likely environmental impacts. The identified likely environmental impacts are then assessed as to their significance. The Framework outlines various criteria in determining significance, including frequency, duration, permanency, geographical scope and magnitude, level of risk, irreversibility of the impacts, and possible synergies among the impacts. This study uses the following scale in relation to the criteria outlined above to describe significance: none, minor, moderate, high and extreme.
• Identification of enhancement/mitigation options to inform the negotiations. The Initial Environmental Assessment is intended to identify, in a preliminary fashion, the possible policy options or actions that might be required to mitigate potential negative impacts and/or to enhance potential positive impacts that may result from the proposed agreement.

The environmental assessment of a trade negotiation requires interdepartmental collaboration.^{Footnote 8} An interdepartmental committee is established to review the environmental assessment of each negotiation, including the Canadian Environmental Assessment Agency and Environment Canada, as well as other officials from government departments and agencies participating in the negotiations. This approach facilitates informed policy development and decision making throughout the negotiating process.

The environmental assessment process also includes consultations with the public, provincial and territorial governments and with the non-governmental Environmental Assessment Advisory Group (EAAG). The EAAG is made up of persons drawn from the business sector, academia and non-governmental organizations who provide advice in their own capacity on the DFAIT assessment process.  At the conclusion of each assessment phase (i.e. Initial, Draft and Final), environmental assessments are shared with provincial and territorial representatives and the EAAG for initial feedback before being released for public comment.

The Initial Environmental Assessment

The Initial Environmental Assessment is a forecasting exercise that allows for the identification of potential environmental effects resulting from a trade negotiation, as well as providing an opportunity to reflect on environmental considerations while negotiations are ongoing. This Initial Environmental Assessment focuses on potential economic and environmental impacts in Canada from a CETA with the EU by exploring the links between market access, investment and environmental impacts in Canada.  In other words, this assessment considers the environmental impacts of new trade and investment in Canada that may result directly from a CETA.

As the CETA negotiations are still in progress, there is a fair degree of uncertainty associated with identifying what the outcomes of a negotiation will be. The actual trade policy changes necessitated by a potential agreement may not be known until after a Canada-EU CETA is concluded and the agreement enters into force and the obligations therein are fully implemented.

Structure of the Initial Environmental Assessment

This Initial Environmental Assessment of the Canada-EU CETA negotiations is divided into two parts:

Part 1 – Qualitative Analysis

The qualitative analysis begins by providing a general overview of all the qualitative issue areas in the negotiations and a brief summary of their potential environmental impacts, both positive and negative. This is followed by a more detailed analysis of potential environmental impacts in four key issue areas where environmental impacts may occur. Although significant impacts are not considered likely, the four areas where there is a greater possibility of environmental impacts based on anticipated changes under a Canada-EU CETA are: trade in goods, trade in services, government procurement and investment.  Each area is assessed using the four-stage methodology outlined earlier in the report, which includes identifying a) potential economic effects, and how they may translate into b) potential environmental impacts, followed by discussion of c) significance of potential environmental impacts, and finally d) options for mitigation / enhancement of potential impacts.

Part 2 – Quantitative Analysis

The quantitative economic and environmental analysis was developed by DFAIT’s Office of the Chief Economist to assess the environmental impact in Canada resulting from increasing trade and economic cooperation between Canada and the EU under the Canada-EU CETA. The assessment was carried out based on the estimated economic impacts from the Computable General Equilibrium (CGE) modelling in the Joint Study.  The environmental impact of a CETA with the EU is expressed in three categories of environmental indicators: greenhouse gas (GHG) emissions, energy use and water use. The environmental impact arising from expanding trade and economic cooperation under the CETA is further decomposed into three components: the scale, composition and technique effects.  The quantitative analysis is meant to complement and strengthen the qualitative analysis.

III. Public Comments

As required by the Framework, a Notice of Intent to conduct a Strategic Environmental Assessment of the Canada-EU CETA negotiations was published on July 18, 2009.^{Footnote 9} This Notice invited interested individuals to submit their input for consideration in the drafting of the Initial Environmental Assessment.   Few public comments were received during the consultation phase.

The Government welcomes input and comments on this Initial Environmental Assessment. Suggestions for enhancement of mitigation measures regarding potential negative environmental impacts and augmentation of positive effects identified at this stage are also encouraged.  Input can be sent to:

Canada-European Union Comprehensive Economic and Trade Agreement Secretariat (TEU)
Environmental Assessment – Canada-EU CETA
Foreign Affairs and International Trade Canada
125 Sussex Drive
Ottawa, Ontario, Canada K1A 0G2
Fax: 613-943-1102
E-mail: ceta_ea_consultations_aecg_ee@international.gc.ca

IV. Trade and Environment

The Government of Canada is committed to ensuring that its trade negotiations consider environmental sustainability so as to encourage mutually supportive trade and environmental objectives.The importance of mutually supportive trade and environmental outcomes is underscored by the strong correlation between open markets, economic development and environmental protection.  A strong rules-based trading system and efficiently regulated markets are key building blocks for economic growth and development. The reduction of trade barriers plays a key role in facilitating the exchange of environmentally friendly technologies and the establishment of investment rules that help create conditions for technology transfers. In addition, the environmental provisions of trade agreements can include other commitments and obligations that help protect and conserve the environment.

At the same time, an increase in global economic integration and investment may have an impact on Canada’s domestic Federal Sustainable Development Strategy (FSDS) goals and targets.  The FSDS is the government’s overall sustainable development strategy. The environmental assessment of this trade negotiation takes into account FSDS goals and targets.^{Footnote 10}

The identification of likely and important environmental effects of a proposed trade agreement enables negotiators to consider whether existing mechanisms, such as regulatory frameworks and environmental assessments of new trade development projects, are sufficient to mitigate any identified impact as a result of a proposed agreement and to examine the need for additional mitigation.  The objective is to ensure that the implementation of trade agreements minimizes negative environmental impacts while at the same time contributes to the economic well-being of Canadians.

Recognizing that increased economic activity can lead to both positive and negative environmental effects, Canada and the EU agreed to negotiate provisions on environmental protection in a CETA that will ensure that both sides maintain high levels of environmental protection and that environmental laws and regulations are accomplishing their objectives while simultaneously not acting as barriers to trade. 

Like all of Canada’s free trade agreements, a CETA with the EU will be consistent with Canada’s obligations under multilateral environmental agreements such as the Convention on International Trade in Endangered Species of Wild Fauna and Flora, the Montreal Protocol on Substances that Deplete the Ozone Layer, the Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and their Disposal, the Rotterdam Convention on the Prior Informed Consent Procedure for Certain Hazardous Chemicals and Pesticides in International Trade, and the Stockholm Convention on Persistent Organic Pollutants.^{Footnote 11}

V. Overview of the Economic Relationship between Canada and the European Union

Composed of twenty-seven member states with a total population of 502 million people and a gross domestic product (GDP) of $16.7 trillion (€12.3 trillion) in 2010, the EU is the world’s largest market, foreign investor and trader. It is Canada's second largest trading partner for both goods and services.  In 2010, Canadian goods and services exports to the EU totalled $49.1 billion.  Imports of goods and services from the EU amounted to $55.2 billion.  Eleven of Canada’s 21 priority markets for investment attraction are located in the EU.  The EU accounted for $148.7 billion in foreign direct investment stock in Canada at the end of 2010, which represented 26.5% of these stocks.  In 2010, the stock of Canada's direct investment in the EU totalled $145.7 billion, representing 23.6% of Canadian direct investment abroad.  Key sectors of interest to Canadian companies in the EU include: information and communication technologies, aerospace and defence, life sciences, agriculture and agri-food, and environmental products, services and technologies.

Canada already has a number of other agreements with the EU.^{Footnote 12} For example, a bilateral Veterinary Agreement has been in place with the EU since 1998. Cooperation under this agreement has helped to find constructive solutions to managing animal health issues, while ensuring high standards of protection of public health. In December 2009 Canada and the EU signed a historic Air Transport Agreement. The Agreement, negotiated under Canada’s Blue Sky Policy, provides flexibility for airlines to offer more convenient air services and lower fares for the benefit of travellers, shippers, as well as the tourism and business sectors.  

Canada and the EU are also engaging in science and technology cooperation at many levels and across public and private sector boundaries.  The 1996 Canada-EU Agreement for Scientific and Technological Cooperation provides access for Canadian and EU nationals to each other’s programs on a self-funded basis.  The EU is a major player in global science and technology cooperation through programs, such as the Seventh Framework Programme^{Footnote 13} which will invest approximately $69.3 billion (€50.7 billion) in research and development, with an explicit intent to facilitate increased international cooperation. Canadian collaboration with the EU is particularly strong in information and communications technology and agriculture.  Progress is also being realized in health research; other promising areas include functional foods, energy efficiency technologies, bio-energy and information and communications technology.

In addition, Canada has a number of bilateral economic agreements with several European Union countries, covering a range of economic issues. For example, tax agreements protect consumers and businesses from double taxation.  Foreign Investment Promotion and Protection Agreements (FIPAs) protect Canadian investors doing business abroad and encourage investment and growth in Canadian business. These agreements reduce impediments to business and allow Canadians to take advantage of opportunities in the European market and encourage Europeans to invest in the Canadian market.

Closer economic ties with the EU through a CETA would significantly enhance Canada’s global competitive advantage. According to the Joint Study, greater trade liberalization has the potential to bring substantial economic benefits to Canada, as well as to the EU. The study suggests that an agreement could provide a $12 billion boost to Canada’s GDP and generate an increase of at least 20% in bilateral trade by the time an agreement is fully implemented.^{Footnote 14}

VI. Initial Environmental Assessment Findings

The Initial Environmental Assessment consists of two levels of analysis – Qualitative Analysis (Part 1) and Quantitative Analysis (Part 2).

Part 1: Qualitative Analysis

Overview of Qualitative Findings

The qualitative analysis is further subdivided below into a general overview (all areas), and a detailed analysis (four key issue areas).

The General Overview of All Qualitative Issue-Areas section below provides a summary of all areas of the negotiations and their potential environmental impact.  The overview covers the twenty-three negotiating areas initially established between Canada and the EU, including: Trade in Goods, Trade Facilitation, Rules of Origin, Origin Procedures, Technical Barriers to Trade, Regulatory Cooperation, Sanitary and Phytosanitary Measures, Trade Remedies, Subsidies, Trade in Services, Temporary Entry, Investment, Financial Services, Telecommunications, Electronic Commerce, Government Procurement, Intellectual Property Rights, Monopolies and State Enterprises, Competition Policy, Labour, Environment,  Dispute Settlement, and Institutional Provisions.  

Following the general overview, a more detailed analysis is undertaken of potential environmental impacts in four key issue areas, the significance of those potential impacts, and opportunities for mitigation and enhancement.  These four areas, where there is a greater likelihood of environmental impacts, are: Trade in Goods, Trade in Services, Government Procurement and Investment.

General Overview of All Qualitative Issue-Areas

Area: Preamble

Anticipated Outcome

• Preambular provisions would normally reference the Parties’ ongoing commitment to sustainable development and cooperation on environmental matters.
• Such provisions provide context and aspirational language on how a CETA should be interpreted.

Possible Environmental Impacts

• By underscoring Canada’s commitment to environmental stewardship these provisions could have indirect positive effects.

Area: Objectives

Anticipated Outcome

• Objectives normally include the following: establishment of the free trade area; relation to other agreements; relation to environmental and conservation agreements; and extent of obligations.

Possible Environmental Impacts

• Where such provisions refer to multilateral environmental and conservation agreements, they could serve to underscore the Parties’ commitments to environmental stewardship.

Area: Trade Facilitation

Anticipated Outcome

• The objective of Trade Facilitation provisions is to streamline customs processes and facilitate the movement of goods.

Possible Environmental Impacts

• Facilitating the movement of goods can increase environmental impacts such as those in the transport sector, but can also have positive indirect effects through the reduction of transaction costs.

Area: Rules of Origin

Anticipated Outcome

• The objective of rules of origin is to ensure that the benefits of an agreement flow to goods originating in the territory of either party.
• Negotiators are seeking rules that are clear and simple to understand.

Possible Environmental Impacts

• Production and consumption changes resulting from product-specific rules of origin would be captured in the Trade In Goods section, along with the corresponding environmental impacts.

Area: Origin Procedures

Anticipated Outcome

• The objective of such procedures is to ensure that the rules of origin are administered in a fair and transparent manner by the customs administration and to provide the trading community with the means to take advantage of the preferential tariff treatment afforded under the trade agreement.

Possible Environmental Impacts

• Strengthening the administration of rules of origin can deliver commercial and environmental benefits by reducing costs and delays to traders, while minimizing the environmental impacts relating to the movement of goods through increased transportation efficiencies, promotion of paperless environments, and other mitigating factors.

Area: Technical Barriers to Trade

Anticipated Outcome

• Such provisions would affirm commitments made under the World Trade Organization (WTO) Technical Barriers to Trade Agreement.^{Footnote 15}

Possible Environmental Impacts

• To the extent that these provisions strengthen environment stewardship they could have positive indirect effects.

Area: Regulatory Cooperation

Possible Environmental Impacts

• Such provisions would promote greater cooperation in the field of standards-related measures, address horizontal transparency issues, including notifications and participation in consultation processes, and establish a mechanism to provide direction on identification, management, and resolution of issues dealing with standards-related measures to avoid disputes.

Possible Environmental Impacts

• Such provisions would contribute to achieving high levels of safety for the protection of human, animal or plant life or health, the environment and consumers.
• To the extent that such provisions strengthen environment stewardship they could have positive indirect effects.

Area: Sanitary and Phytosanitary Measures (SPS)

Anticipated Outcome

• Such provisions would affirm commitments under the WTO Agreement on the Application of Sanitary and Phytosanitary Measures (SPS Agreement)^{Footnote 16}, and the continued use of the WTO dispute settlement procedures for any formal disputes regarding SPS measures.
• In addition, consideration can be given to the establishment of a bilateral mechanism to manage SPS issues so as to avoid disputes.

Possible Environmental Impacts

• SPS measures are designed to protect human, animal and plant life or health in the territory of each Party.
• Positive impacts may result from increased bilateral cooperation with the EU.

Area: Trade Remedies

Anticipated Outcome

• These provisions would protect domestic producers from temporary difficulties associated with bilateral trade liberalization (e.g. sudden surge in imports).

Possible Environmental Impacts

• It is not known whether such measures would be taken nor on which products. As a result, it is not possible to predict any likely environmental effects.

Area: Subsidies

Anticipated Outcome

• Such provisions would delimit the rights and obligations of the Parties in respect of subsidies.

Possible Environmental Impacts

• Such provisions would not be expected to have any direct environmental effects.

Area: Temporary Entry

Anticipated Outcome

• Such provisions would facilitate the temporary movement of business persons.
• These provisions support bilateral trade in goods, services and investment by negotiating more liberal access by waiving regulatory requirements, such as labour market tests.

Possible Environmental Impacts

• It is not possible at this time to predict the likely increases in business travel and temporary stays resulting from an agreement.
• Such provisions would be unlikely to result in direct environmental effects. 

Area: Financial Services

Anticipated Outcome

• Such provisions would promote high quality, forward looking market access commitments and improve regulatory transparency in the financial services sector.

Possible Environmental Impacts

• As detailed in the section on services trade, the likely environmental effects, if any, would be minimal.

Area: Telecommunications

Anticipated Outcomes

• Such provisions ensure that regulations on public telecommunications transport networks and services do not impede market access commitments, as well as providing an open and competitive market for telecommunications services.

Possible Environmental Impacts

• Such provisions would be unlikely to result in direct environmental effects.

Area: Electronic Commerce

Anticipated Outcome

• Such provisions guarantee a predictable environment for the conduct of electronic commerce.

Possible Environmental Impacts

• There is little likelihood of direct environmental effects. 

Area: Intellectual Property Rights

Anticipated Outcome

• Such provisions concern the potential extension of intellectual property (IP) provisions beyond the minimum levels under the WTO Agreement on Trade-related Aspects of Intellectual Property Rights.^{Footnote 17}

Possible Environmental Impacts

• Such provisions are unlikely to have a direct environmental effect as they are unlikely to directly translate into increased production or trade.

Area: Monopolies and State Enterprises

Anticipated Outcome

• Such provisions ensure that anti-competitive business practices do not undermine the benefits of the Agreement.

Possible Environmental Impacts

• Such provisions are unlikely to have a direct environmental effect as they are unlikely to directly translate into increased production or trade.

Area: Competition Policy

Anticipated Outcome

• Such provisions ensure that anticompetitive business conduct do not undermine the benefits of the Agreement

Possible Environmental Impacts

• Such provisions are unlikely to have a direct environmental effect as they are unlikely to directly translate into increased production or trade.

Area: Labour

Anticipated Outcome

• Such provisions ensure respect for internationally-recognized labour principles and the effective enforcement of domestic labour laws.

Possible Environmental Impacts

• Such provisions are unlikely to have a direct environmental effect, as they are unlikely to directly translate into increased production or trade.

Area: Environment

Anticipated Outcome

• Such provisions ensure that trade and environment conservation and protection are mutually supportive.
• Such provisions could include commitments to high levels of environmental protection; the effective enforcement of domestic environmental laws; non-derogation from domestic environmental laws to encourage trade or investment; public participation and engagement; dispute resolution.

Possible Environmental Impacts

• Such provisions seek to ensure that Parties maintain their ability to set their own environmental priorities, to establish their own domestic levels of environmental protection and to adopt or modify relevant environmental laws and policies. 

Area: Dispute Settlement

Anticipated Outcome

• Such provisions establish mechanisms for resolving disputes arising under the Agreement between the Parties.

Possible Environmental Impacts

• To the extent that such provisions strengthen environment stewardship they could have positive indirect effects.

Area: Institutional, General and Final Provisions, Transparency

Anticipated Outcome

• Such provisions provide a framework for the overall management of a CETA, including consultative mechanisms for the effective resolution of disputes outside the formal dispute settlement framework. Such provisions could involve the establishment of specific committees and/or working groups.

Possible Environmental Impacts

• Such provisions would allow both parties to review and comment in a transparent manner on any new laws or regulations that may have environmental implications.
• Such provisions could provide for a general exception allowing for the adoption and enforcement of measures to protect animal or plant life or health, and measures relating to the conservation of exhaustible natural resources.
• Such provisions would allow the Parties to implement the trade related multilateral environmental agreements to which they are parties.

Area: Trade in Goods

Anticipated Outcome

• Such provisions would provide improved and more secure goods market access for Canadian and EU importers and exporters.

Possible Environmental Impacts

• Changes in output could generate environmental impacts as a result of emissions and waste from production, resource consumption, changes in landscape and natural habitats, and changes in transportation activity.  Factors mitigating these impacts include technological innovation, economy composition and Canada’s regulatory regime.
• The overall levels of environmental risk for water, soil, air and biodiversity are not expected to change significantly as a result of the liberalization of agricultural and non-agricultural trade between Canada and the EU.
• Possible environmental impacts due to trade in goods are examined further in subsequent sections of this assessment.

Area: Trade in Services

Anticipated Outcome

• Such provisions would provide for improved market access, transparency and predictability for Canadian and EU service providers.

Possible Environmental Impacts

• Most services benefitting from liberalization under a Canada-EU CETA would likely be in virtual areas with less likelihood of negative environmental impacts.
• Negative environmental impacts (e.g., increased energy usage and electronic waste) caused by increased trade in services are expected to be mitigated in part by increases in environmentally sustainable practises in the services sector.
• Possible environmental impacts due to trade in services are examined further in subsequent sections of this assessment.

Area: Government Procurement

Anticipated Outcome

• Such provisions provide Canadian and European suppliers with open, transparent and non-discriminatory market access to each other’s government markets.

Possible Environmental Impacts

• Increases in transportation of labour and goods are expected to be offset by an increase in procurement of efficient technologies.
• Government procurement tends to follow strict guidelines and policies with respect to environmental stewardship.  This will be the case even after a CETA with the EU is implemented.
• Possible environmental impacts due to government procurement are examined further in subsequent sections of this assessment.

Area: Investment

Anticipated Outcome

• Such provisions would provide Canadian and EU investors with greater certainty and predictability as well as enhanced confidence to invest in the territory of the other Party.
• Such provisions acknowledge the importance of not derogating from environmental, health and safety laws to encourage investment.

Possible Environmental Impacts

• A balance between the need to regulate and the need to facilitate open investment is important.
• A CETA is not expected to substantially change the already largely open Canadian investment regime.
• Potential environmental impacts will be mitigated by laws that bind foreign investors to the same environmental regulations that govern domestic investors.
• Possible environmental impacts due to investment are examined further in subsequent sections of this assessment.

The last four areas addressed in the overview represent the four key issue areas that have been identified where there is a greater likelihood of environmental impacts:

• Trade in Goods
• Trade in Services
• Government Procurement, and
• Investment

The four key issue areas are discussed in detail following a description of the limitations of the qualitative assessment. The remaining qualitative analysis focuses on potential environmental impacts in the four key areas, their significance, and opportunities for mitigation and enhancement.

Limitations of the Qualitative Assessment

As indicated previously, this Initial Environmental Assessment is a scoping exercise that attempts to determine whether significant environmental impacts are likely to occur as the result of a CETA with the EU. The qualitative assessment of potential environmental impacts is not an exhaustive examination of sectors of the economy or environmental issues. Instead, it is intended to provide an overview of the potential impacts of the trade agreement. As a result, several cautionary notes are required concerning the interpretation of the reported environmental impacts.

• The purpose of this assessment is not to assess the environmental impact of economic growth, but rather of the economic activity and trade policy changes potentially resulting as a direct result of the Canada-EU CETA negotiations. There are many macro- and microeconomic forces at play that influence the pattern and flow of trade. The actual economic effects of the CETA negotiations with the EU will also depend on how various economic actors, producers, and consumers react to the new trade policy environment.
• This analysis focuses on overall impacts for Canada. It does not focus on distributional impacts by Province/Territory and/or region. Although net impacts might be positive, certain regions may be impacted differently.
• As the Canada-EU CETA negotiations are still in progress, there is a fair degree of uncertainty associated with identifying what the outcomes of a negotiation will be. The actual trade policy changes necessitated by a potential agreement may not be known until after a CETA is concluded and the agreement enters into force and the obligations therein are fully implemented.
• Measures taken to protect the environment may cause other, unintended effects on society that have not been considered in this assessment due to their complexity to predict.  For example, changed behaviour may offset part of the environmental gain, something that has variously been labeled “take-back” or “rebound” effect. (e.g. gains from energy efficiency can be subsequently negated by increases in energy use.)

A. Trade in Goods

A1. Overview

In this section we analyze in greater detail the economic opportunities, potential environmental impacts, and mitigation / enhancement options available in five non-agricultural sectors that would benefit from increased exports to the EU under a CETA: metals, industrial manufacturing (electronic equipment, machinery and equipment, motor vehicles and parts), chemical products, forestry products, and fish and seafood products.

The analysis is then repeated for the agricultural sectors likely to experience major export gains: beef and pork, grains, oils and oilseeds, pulses and special crops, fruits and vegetables, and maple products.

Finally, the significance of the potential environmental impacts as a result of these possible changes to Canada’s trade in goods under a CETA with the EU is assessed.

A2. Anticipated Economic and Environmental Effects

As noted in the Joint Study, tariffs on goods traded between the EU and Canada are on average low, principally as a result of the progressive lowering of tariffs at the multilateral level. Furthermore, a large percentage of trade (70%) currently enters duty-free. On a trade-weighted basis, Canadian goods faced an average tariff of 2.2% in 2007 entering the EU market while EU goods faced a comparable tariff of 3.5% in the Canadian market.

Despite these low tariff levels, in both cases a number of sectors still face significant levels of tariff protection, including a number of agriculture and food sectors, textiles and apparel and the automotive sector. In this respect, the Joint Study indicates that liberalization of trade in goods and services will bring significant benefits to the EU and to Canada. The annual GDP gain by the year 2014 (when the Joint Study estimated that an agreement would have been fully implemented) would be $16.3 billion for the EU (0.08% of EU GDP), and $11.5 billion for Canada (0.77% of Canadian GDP). Total EU exports to Canada are expected to go up by 24.3% or $25.1 billion by 2014 while Canadian bilateral exports to the EU are expected to go up by 20.6% or $12.6 billion by 2014. The gains derived from the elimination of all tariffs on bilaterally-traded goods represent 25% of the total economic gains for the EU and 33.3% for Canada.

The largest trade gains resulting from a Canada-EU CETA are expected in sectors in which current trade is high and significant tariff barriers exist. In addition to tariff elimination, Canadian negotiators are seeking to include provisions that would facilitate increased cooperation with the EU to make trade more efficient, for example through trade facilitating measures and customs procedures designed to provide certainty, transparency and effective origin verification procedures. Rules of origin that are transparent, predictable and consistent in application will be developed to ensure that the benefits negotiated under the trade agreement accrue to its Parties.

Non-Agricultural Goods

Canadian Non-Agricultural Exports to the EU

Over the 2006-2008 period^{Footnote 18} Canadian non-agricultural exports to the EU averaged $31.4 billion. Canadian non-agricultural exports that are likely to benefit from tariff elimination include: metals, machinery and equipment, chemical products, motor vehicles and parts, electronic equipment, as well as forestry products and fish and seafood products. The resulting production and trade increases may affect the environment through increases in resource utilization, production processes, waste, and other areas that are further explored below. Opportunities for mitigation of negative impacts are also examined, as increases in production would occur in facilities operating under Canadian legislation and regulation. Canada’s strong regulatory framework ensures that industrial and commercial practices are developed in accordance with sustainable development principles and environmental stewardship.  Canadian policies and regulations focused on sustainable development are a critical element of the country’s broader regulatory framework at the federal, provincial and territorial levels of government.

In a horizontal sense, increased trade in non-agricultural goods may create more generalised effects related to the transportation industry, which plays a key role in linking local production to exit ports for shipment to markets abroad, especially in a country as geographically dispersed as Canada. Growth in a large trans-Atlantic market like the EU may mean additional shipping requirements, particularly in the rail and ship sectors (this is also addressed in the section on trade in services.)

Gradual increases in Canadian incomes as a result of a CETA with the EU may eventually translate into increases in consumption of goods, which could generally lead to impacts on the environment through higher resource utilization and waste production.  Although it is not possible to measure or quantify these impacts at this time, potential increases in consumption are indirectly considered below.

Metals

• Opportunities: Canadian exports of metals to the EU averaged $4.6 billion annually between 2006 and 2008.  Canada’s top dutiable metal exports to the EU in this period included: nickel and its products ($1.9 billion; average duty of 6.3%); iron and steel products ($1.5 billion; average duty of 0.8%); aluminum products ($707 million; average duty of 6.3%); and non-ferrous metals such as zinc and cobalt ($470 million; average duty of 6.3%). Between 2006 and 2008, the EU was Canada’s second largest export market for the metals sector, accounting for 10.5% of global exports.
  
  
• Potential Environmental Impacts: An increase in demand and production of Canadian metals could have a two-tiered impact on the environment. Firstly, an increase in output would require an additional supply of non-renewable raw materials and mineral inputs. The resulting extraction activities would have a direct impact on the environmental landscape through mining and excavation activities. Furthermore, extraction processes often require heavy industrial equipment and water usage, which can combine to produce waste water and mining tailings, in addition to any emissions linked to equipment usage. The second tier of potential environmental impacts relates to the refining and processing stage of metal production, which often requires significant energy consumption and the use of chemicals and other potentially harmful substances.
  
  
• Mitigation / Enhancement: Mining is an intensive type of land use with potential for environmental impact over a limited area. However, with proper environmental protection and planning mechanisms, adverse impacts on the environment can be minimized. Possible negative impacts on the environment include the potential to disturb sensitive ecosystems, pollute the local water and contaminate soils. In Canada, environmental protection is an important element in modern mining and is oriented toward the safe and sustainable development of mineral resources.
  
  Provincial governments are primarily responsible for mining – the exploration for, and the development and extraction of, mineral resources, and the construction, management, reclamation, and close-out of mine sites – within their jurisdiction.
  
  Comparable direct federal involvement in the regulation of mining operations is limited and specific in nature.  In addition to the Canadian Environmental Protection Act (CEPA),^{Footnote 19} the federal Fisheries Act^{Footnote 20} is one of the key pieces of legislation for managing aquatic resources in Canada and it ensures the conservation and protection of fish habitat in Canadian fisheries waters.^{Footnote 21}
  
  As well, most major mining projects in Canada are subject to a federally-legislated environmental assessment process, either through the Canadian Environmental Assessment Act, or under legislation in force in Nunavut, the Northwest Territories and the Yukon.^{Footnote 22} 
  
  The Metals and Minerals Policy of the Government of Canada: Partnerships for Sustainable Development^{Footnote 23} integrates policies, programs and legislation that ensure the continued use of Canada’s natural resource endowment within a sustainable development framework.  Furthermore, Natural Resources Canada's (NRCan’s) Minerals and Metals Sector has developed activities and partnerships that demonstrate Canadian expertise in a wide range of issues-areas related to sustainable development. These include the safe use of minerals and metals, life-cycle assessment, product stewardship, science-based decision-making, and advances in science and technology related to mining technology, the mitigation of environmental impacts of mineral and metal development, and mine decommissioning and site reclamation.^{Footnote 24} If increased export activity does occur as a result of a CETA with the EU, federal, provincial and territorial laws and regulations on both mineral development and environmental assessment would assist in ensuring that any increased production occurring in Canada would be carried out in an environmentally acceptable and responsible manner.^{Footnote 25}

Industrial Manufacturing

• Opportunities:
  • Electronic Equipment: Canadian exports of electronic equipment to the EU averaged $2.9 billion annually between 2006 and 2008. Canada’s top dutiable electronic equipment exports to the EU in this period included: telephone sets, including telephones for cellular/wireless networks ($764 million; average duty of 1.3%); transmission apparatus for radio-broadcasting or television ($263 million; average duty of 4.3%); electronic parts ($96 million; average duty of 3.3%); electrical transformers, static converters and inductors ($69 million; average duty of 2.9%); and electrical machines ($68 million; average duty of 3.4%). The EU was Canada’s 2nd largest export destination for electronic products, accounting for 12.4% of Canada’s total electronic equipment exports.
    
    
  • Machinery and Equipment: Canadian exports of machinery and equipment to the EU averaged $1.9 billion annually between 2006 and 2008. Canada’s top dutiable machinery and equipment exports to the EU included: industrial machinery ($1.2 billion; average duty of 2.1%); construction equipment ($352 million; average duty of 0.7%); power-generating machinery ($343 million; average duty of 3.2%); and agricultural equipment ($64 million; average duty of 0.5%). The EU was Canada’s second largest machinery export market, accounting for 8.2% of Canada’s machinery exports.
    
    
  • Motor Vehicles and Parts: Canadian exports of motor vehicles and parts to the EU averaged $633 million annually between 2006 and 2008. Canada’s top dutiable automotive goods exports to the EU included: auto parts ($353 million; average duty of 3.4%); light vehicles ($185 million; average duty of 11.2%); other vehicles such as all-terrain recreational vehicles and motorcycles ($56 million; average duty of 5.3%); and other vehicles such as tractors, trucks and buses ($26 million; average duty of 9.3%). The EU was Canada’s third largest motor vehicles and parts export market, accounting for 0.9% of Canada’s exports for this sector.
    
    
• Potential Environmental Impacts: Industrial manufacturing represents an area where increased production could have environmental impacts.  Increased demand stemming from trade liberalization would likely result in greater Canadian exports to the EU and potentially increased production in Canada.  Greater production of electronic machinery, motor vehicles, machinery and equipment and related goods would increase the demand for inputs, including key raw materials, such as metals, chemicals and plastics. This could lead to environmental impacts in the areas of hazardous waste, water usage and runoff, emissions and the depletion of non-renewable resources. Additionally, increased industrial production and manufacturing could contribute to increased air pollution, waste, greenhouse gas emissions and energy use.  Conversely, positive impacts may occur by improving access to environmental goods and technologies that advance the objectives of sustainable development in certain industries. Demand for environmental goods is high in the EU.  Trade liberalization in the area of environmental goods will create strong incentives for related environmental firms to develop new, more efficient pollution prevention and conservation technologies. 
  
  
• Mitigation/Enhancement: The regulatory framework governing environmental impacts from industrial manufacturing includes the Canadian Environmental Protection Act and its regulations. A key aspect of CEPA is the prevention and management of risks posed by toxic and other harmful substances, including those that result from industrial manufacturing.  Under CEPA, manufacturing facilities may also be required to disclose their emissions of selected pollutants through various programs such as the National Pollutant Release Inventory (NPRI)^{Footnote 26} and Environment Canada’s Greenhouse Gas Emissions Reporting Program.^{Footnote 27}  Pollutant emissions to water resulting from industrial manufacturing are also subject to legislation governing water management, notably the Canada Water Act^{Footnote 28} (which provides for the management of water resources in Canada) and the Fisheries Act (which is concerned with maintaining the quality of fish habitat).
  
  An increase in industrial manufacturing of electronic equipment typically leads to an increase in e-waste. In 2004, the Canadian Council of Ministers of the Environment (CCME), a council composed of environment ministers from the federal, provincial and territorial governments adopted 12 principles for the proper management of e-waste. The principles focus on life cycle management, which places the responsibility for electronic waste (e-waste) primarily with the producers, with the costs to be borne by producers and users. The list of products to be included in any regulatory regime encompasses not only what is considered to be IT-related equipment, but also a full range of household devices.
  
  Management of e-waste is generally regulated by the provinces and territories. E-waste that is hazardous waste must be managed according to applicable provincial and territorial hazardous waste regulations. Municipalities may also be involved in the management or disposal of e-waste generated by households. Several provinces are implementing e-waste management programs. These programs focus on collection, disposal, recycling, take-back, recovery, reprocessing and treatment.

Chemical Products

• Opportunities: Canadian exports of chemical products to the EU averaged $2.4 billion annually between 2006 and 2008. Canada’s top dutiable chemical product exports to the EU included: hydrogen, rare gases and other non-metals ($64 million; average duty of 3.5%); reaction initiators, reaction accelerators and catalytic preparations ($29 million; average duty of 4.3%); nucleic acids and their salts ($15.5 million; average duty of 4.1%); and prepared binders for foundry moulds or cores ($19.5 million; average duty of 5.4%). The EU was Canada’s second largest chemical products export market, accounting for 17% of Canada’s chemical products exports. Canada’s chemicals sector is Research and Development (R&D) intensive, technology and innovation driven, and is well positioned to benefit from a CETA with the EU, particularly in emerging industries linked to biotechnology, nanomaterials, and green chemistry.
  
  
• Potential Environmental Impacts:Increased trade in chemicals (or products containing chemicals) with a foreign jurisdiction could lead to pressures on the environment through, inter alia increases in energy consumption, higher demand for primary and other intermediate inputs needed for the production of chemicals, and higher levels of air emissions and hazardous waste. In addition, substances of concern contained in imported finished products could enter Canada in a greater amount.  Nevertheless, Canada has the necessary environmental and regulatory framework to mitigate and minimise potential negative environmental impacts from chemical manufacturing, use and disposal, which are linked to greater Canada-EU trade.  The increased trade in chemicals derived from greater access to the European market are not expected to yield new environmental challenges that could not be addressed under existing regulatory structures. 
  
  
• Mitigation / Enhancement: The Government of Canada has a number of laws and a regulatory framework which protect human health and the environment from the risks of harmful chemicals.  The primary legal authority for assessing and managing harmful chemical substances is the Canadian Environmental Protection Act^{Footnote 29}. Other legislation which may be used includes the Canadian Consumer Products Safety Act, the Food and Drugs Act, and the Pest Control Products Act.^{Footnote 30} The Government of Canada’s Chemicals Management Plan (CMP),^{Footnote 31} enables decision-making processes and coordination under the “best placed act” initiative, to ensure that the most appropriate authorities and suite of legislative, regulatory and other tools available under these various acts are used to protect human health and the environment from hazardous chemicals.  The CMP, launched in 2006, is jointly managed by Environment Canada and Health Canada in order to:
  • take rapid action on new and existing chemicals;
  • integrate chemical management activities across the government; and
  • provide predictability for business and engender public trust through transparent work plans
  
  The CMP takes action to minimize and/or eliminate risks posed by harmful chemical substances to the environment and human health using a risk-based approach that relies on science, assessment and effective monitoring to inform risk management decisions regarding chemicals of concern.
  
  

  Environment Canada and Health Canada have signed a Memorandum of Understanding (MoU) with the European Chemicals Agency outlining a number of areas for technical cooperation.^{Footnote 32} The overall objective of the MoU is to share knowledge, information, exchange experiences and best practices on matters of mutual interest regarding the management of chemical substances.

Forestry Products

• Opportunities: Canadian exports of forest products to the EU averaged $2.2 billion annually between 2006 and 2008. Canada’s top dutiable forest products exports to the EU included sawn or chipped wood ($382 million; average duty of 1.0%); fibreboard ($14 million; average duty of 7%); particle board, oriented strand board and similar boards ($13 million; average duty of 7%); plywood, veneered and similar laminated wood ($11 million; average duty of 8.1%). The EU was Canada’s second largest forest products export market, accounting for 6% of Canada’s exports for this sector.
  
  
• Potential Environmental Impacts: In Canada, determining and regulating the amount of wood that can be harvested is central to sustainable forest management strategies. Provincial governments regulate harvest levels on provincial Crown lands by specifying an allowable annual cut (AAC), which is the annual level of harvest allowed on a particular area over a specified number of years. The AAC levels are based on the sustainable growth rate of the forest. The goal is to maintain biological diversity while considering economic and social factors.
  
  Canada’s total wood supply, the estimated volume of timber that can be harvested from an area while meeting sustainability criteria, has been relatively stable since 1990. It reached 246 million cubic meters in 2009, including 188 million cubic meters for softwoods and 58 million cubic metres for hardwoods. However, the softwood harvest level has averaged 144 million cubic meters from 2000 to 2009, more than 20% below the sustainable level. Moreover, harvest levels have fallen rapidly since 2004 and the current harvest level is at about half of the sustainable level. A similar situation can be described for hardwood harvests which currently stand slightly above one third of the sustainable level.^{Footnote 33}

  Tracking harvest volumes allows forest managers to determine whether these levels comply with regulated amounts. Canada’s provinces and territories have rigorous programs dedicated to inspections, compliance and enforcement of forest legislation.^{Footnote 34}
  
  A Canada-EU CETA will not mean an increase in timber harvests above the ACC levels set by governments, nor will it alter landscapes and natural habitats. At the same time, exports of forest products to the EU are expected to increase. As such,, a CETA is expected to lead to a shift in the composition of export markets, wherein a greater share of forest exports goes to the EU instead of other markets, or to lead to an increase in price that would improve the terms of trade for Canadian forest products. The export potential is not a factor in the determination of harvesting levels. Therefore, a CETA may lead to an increase in forest product exports to the EU without putting pressure on Canadian harvesting levels.
  
  Pulp and paper products currently enter the EU market duty free, so a CETA is not expected to increase Canadian exports of these products and the associated air and effluent emissions generated by the industry. The products that are currently subject to higher tariffs are value-added wood products (fiberboard, particle board, oriented strand board, veneer). The potential removal of these tariffs through a Canada-EU CETA could lead to increased exports and production of those products. The wood products industry as a whole is generating less air and water pollution than the pulp and paper industry. Moreover, the secondary transformation of wood products does not generate effluent emissions and has a negligible contribution to GHG emissions. However, the production processes behind these products often generate some particulate matter and volatile organic compound emissions. If a CETA with the EU increases the production of secondary wood products, the environmental impact would be negligible.

• Mitigation / Enhancement: Government policies and programs that regulate the production of wood and forest products are shared responsibility between provincial governments, Environment Canada (through CEPA) and by Natural Resources Canada guided by the concept of sustainable forest management. At all levels of government, forest policies within this framework ensure that forests are managed in accordance with sustainable development principles.  Canada’s commercial forest resources are largely managed by the provinces using forest management tenure agreements that strictly regulate harvesting, silviculture and forestry practices.  These policies further provide for regulatory and audit mechanisms based on sustainable development practices, to ensure that timber is not harvested at rates exceeding a forest’s capacity to regenerate.  As part of sustainable forest management, less than 1% of the managed forest is harvested in any given year in Canada.

Fish and Seafood Products:

• Opportunities: Canadian exports of fish and seafood products to the EU averaged $541 million annually between 2006 and 2008.  Canada’s top dutiable fish and seafood exports to the EU included: crustaceans, such as lobster and shrimp ($243 million; average duty of 11.1%); prepared or preserved crustaceans, such as crab, shrimp and lobster ($80 million; average duty of 17.6%), and frozen fish, such as salmon ($56 million; average duty of 8.5%).  The EU was Canada’s second largest export destination for fish and seafood, accounting for 13.8% of Canada’s fish and seafood exports.
  
  
• Potential Environmental Impacts: Growth in production and exports as a result of a Canada-EU CETA could lead to pressures on the environment.  Wild fisheries operations may affect ocean and freshwater ecosystems, while aquaculture may cause environmental changes in areas where it takes place.

  Canada’s fish and seafood exports to the EU include shrimps/prawns, lobster, salmon and scallops, with Canadian exports currently spread over a number of species and products.  A CETA with the EU is not expected to substantially change this export composition, but it bears mentioning that impacts could occur to specific fish stocks if not properly managed.  Although the species exported to the EU are not currently considered at risk, it will be important to continue monitoring these stocks for negative impacts, especially in areas where increases in exports could be expected.
  
  Increasing Canada’s exports of fish and seafood products to the European Union could impact on a number of components in the ecosystem including the target fish stock; the fish species caught incidentally; the food sources for other species (i.e. forage species); the fish habitat; and the sensitive or unique bottom habitats and ecosystems, such as seamounts, hot thermal vents, corals and sponges.
   
  Increased exports to the EU of aquaculture products could also lead to negative impacts through  increased volumes of aquaculture waste (e.g. nutrient and organic matter); increased use of chemicals (e.g. pesticides, drugs, antifoulants); and increasing chances of interactions between farmed and wild species (with the potential for disease transfer, genetic, and ecological effects).
  
  Positive impacts as a result of a Canada-EU CETA are also possible through increased collaboration on specific issues.  Illegal, unreported and unregulated (IUU) fishing is a major contributor to declining fish stocks and marine habitat destruction.  Globally, IUU fishing takes many forms both within nationally-controlled waters and on the high seas. While it is not known with certainty how much IUU fishing is taking place, it is estimated that it accounts for approximately 30 per cent of all fishing activity worldwide.  Most current cooperation between Canada and the EU in fisheries matters (including IUU) takes place in the context of Regional Fisheries Management Organizations, particularly the Northwest Atlantic Fisheries Organization (NAFO).  In spite of modern approaches to fisheries management, the stocks of many traditional NAFO fish species continue to be low, an indication that the rebuilding process will take time.  A CETA may have a positive impact through increased bilateral cooperation between Canada and the EU in this area.
  
  Overall, management and regulation consistent with principles of sustainable development are necessary to mitigate potential environmental impacts that may be foreseen with increased exports to the EU of fish and seafood products.  Fishing, aquaculture, and related processing activities are regulated in Canada to ensure that resources are harvested at a sustainable level, including through the use of quotas or input controls for capture fisheries, and proper siting, management, and regulation for aquaculture. Measures such as these, which may be used to mitigate potential negative impacts, are further discussed below.

• Mitigation / Enhancement: While various Acts and Regulations define the rules and regulations for both fish harvesting and aquaculture development in Canada, Fisheries and Oceans Canada’s (DFO) Sustainable Fisheries Framework^{Footnote 35} provides the basis of policy formulation for the conservation and environmental sustainability of Canadian fisheries.  Fish stocks are managed through controls on the amount of fishing, with the use of a total allowable catch and effort limitations as the predominant control mechanisms, often complemented by restrictions on effort (e.g. limited entry, vessel and gear restrictions), and/or catch composition (e.g. size and age of fish).  DFO develops and implements Integrated Fisheries Management Plans for many fisheries, which integrate conservation, management and scientific objectives for the stock(s) and detail the measures required to conserve and manage the fishery.  Controls are subject to regulation and enforcement.  Most new and expanded aquaculture sites in Canada are required to undergo an environmental assessment under the Canadian Environmental Assessment Act.  This Act covers environmental, social and economic effects, all phases of operation, as well as cumulative effects.  The Act requires identification of mitigation and monitoring strategies to ensure there are no significant residual negative effects.
  
  Capture fisheries and aquaculture are two areas where environmental impacts are closely managed through federal, provincial, and territorial initiatives.  These are discussed in further detail below
  • Capture Fishery
    The controls and regulations developed and used by DFO ensure that increased demand for fish and fish products in foreign markets does not automatically result in greater catch quotas, and that stock sustainability is taken into account in all decisions.  In addition, provincial and territorial legislation and regulations serve to mitigate certain environmental effects that might otherwise result from increased market access.
    
    Canada adheres to international instruments such as the United Nations Fisheries Agreement (UNFA)^{Footnote 36} and the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES)^{Footnote 37}, is a member of regional fisheries management organizations, and is a party to several agreements which collectively serve to manage, conserve and protect fish stocks, and mitigate potential negative environmental impacts.
    
    The overriding goal of fisheries management in Canada is to protect fish stocks by ensuring long-term sustainable use based on sound scientific advice.  This is achieved in most fisheries in Canada by setting conservative target levels of fishing mortality (i.e. a percentage of the total stock that may be caught), limiting the capture of fish below a minimum target size, and/or by ensuring that a minimum number of fish escape to spawn.  These targets are based on the best scientific advice available and are achieved through regulation and enforcement on the Total Allowable Catch and effort controls (i.e. limits on the number of fishing operations, fishing days and vessel and gear restrictions), as well as the catch composition (i.e. fish size and age) through some mix of regulations aimed at mesh or hook size, fish length, closed areas and seasons.  In the case of Pacific salmon, regulations centre on spawning escapement targets, and for lobster the controls focus primarily on minimum carapace size, supplemented by limited entry (i.e. number of lobster-trapping operations).
    
    With regard to fishing on the high seas, there is now significant international momentum aimed at strengthening existing regional fisheries management organizations and broadening their mandates to include a wider range of species and ecosystem considerations.  This includes the creation of new organizations, where necessary, to cover previously unregulated areas or species, and through support for developing countries in their effort to improve domestic fisheries management and to permit them to become more engaged in international fisheries governance issues.  Canada has taken a lead role in this global effort to achieve international ocean governance reform, particularly through an international conference on high seas governance in May 2005, hosted by Canada.
    
    
  • Aquaculture
    The federal, provincial and territorial governments share jurisdiction over Canadian aquaculture, and have cooperatively implemented measures to ensure the environmental integrity of aquaculture operations.
    
    Aquaculture can serve to mitigate certain pressure on wild stocks, and thus prevent negative effects on the environment that might otherwise occur. For example, British Columbia’s salmon farming sector produced approximately 78,700 tonnes of salmon in 2010.  In the same year, the province’s commercial fisheries accounted for approximately 23,100 tonnes.  If farmed salmon not been available, there would have been an even greater pressure on Canada’s wild salmon resources.  Aquaculture bears similarities to traditional agricultural production functions and, as such, relies for its success and growth on policies that ensure sustainability and mitigate negative environmental impacts.  More than 80 federal and provincial acts and regulations govern the environmental performance of this industry, ensuring that increased production would not be allowed to take place unless it had been determined to be environmentally sustainable.  In general, the Fisheries Act provides a national regulatory framework within which the provinces operate to provide leases and licences to individual operators.  These regulatory measures would prevent or mitigate the majority of negative environmental impacts that might otherwise result if fish tariff reductions added pressure to supply more aquaculture fish and fish products to the EU.
    
    

    These fisheries management systems and federal, provincial and territorial governments’ measures have been put into place to ensure the sustainability of Canada’s fisheries, irrespective of market demands and tariff levels in export markets, and are therefore independent of any impact of trade agreements.  These systems also ensure the environmental integrity of Canada’s aquaculture operations so that increased trade resulting from a trade agreement will have minimal environmental impact.  Given that Canadian fish and seafood exports are spread over a number of species and products, it is expected that any subsequent increases in exports would be equally diversified.  Consequently, an increase in exports to the EU due to a CETA and tariff liberalization in fish products is not expected to result in a significant change in the sustainability of individual fish stocks, nor on Canada’s marine or freshwater environment.

Agricultural Goods

Canadian Agricultural Exports to the EU

Over the period 2006-2008 Canadian agricultural exports to the EU averaged $2 billion annually. Canadian agricultural sectors that could benefit from trade liberalization under CETA include: beef, pork, grains, oils and oilseeds, pulses, fruits and vegetables and maple products. Improved market access for Canadian agricultural goods into the EU is contingent upon tariff elimination, as well as to addressing a number of non-tariff barriers, including SPS measures, biotechnology and appropriate rules of origin.

• Opportunities:
  • Beef and Pork: Currently, small Tariff Rate Quota (TRQ) volumes with high tariffs and non-tariff barriers prevent significant access into the EU market for Canadian beef and pork. As a result, Canadian exports to the EU are low at present. From 2006-2008, Canada exported an average of $11 million of beef and bison to the EU at an in-quota duty of 20%. Over the same period, Canada’s pork exports to the EU averaged $31 million. However, this figure included exports to Bulgaria and Romania prior to their accession to the EU in 2007; in effect, pork exports to the EU averaged only $3.6 million over the period 2006-2008. Assuming tariff and non-tariff issues will be addressed adequately in the context of a CETA, there is capacity for the Canadian beef and pork industries to increase exports to the EU market.
  • Grains: Over 2006-2008, Canada exported an average of $535 million of grain and grain products to the EU (8% of Canada’s grain exports). Nearly 95% of these exports were wheat ($266 million) and durum ($235 million), the majority of which entered duty free based on the EU’s wheat and durum tariff calculations.
  • Oils and Oilseeds: Over the same period, Canada exported an average of $534 million of oils and oilseeds to the EU (10% of Canada’s oil and oilseed exports). Canada’s primary exports to the EU included: soya beans ($230 million), linseed ($211 million) and canola oil ($84 million).
  • Pulses and Special Crops: From 2006-2008, Canada exported an average of $328 million of pulses and special crops to the EU (19% of Canada’s pulse and special crop exports). Canada’s most significant pulse exports to the EU included: dried, shelled lentils ($75 million); dried, shelled kidney beans ($71 million) and peas ($58 million). Nearly all of Canada’s pulse and special crop imports to the EU enter duty free.
  • Fruits and Vegetables: Canada exported an average of $123 million of fruit and vegetables to the EU (4% of Canada’s fruit and vegetable exports). Major exports to the EU included frozen berries ($63 million), prepared or preserved fruits ($8.9 million), fresh cherries ($7 million), fresh apples ($3.4 million), sweet corn ($8.8 million), potato flakes ($4.0 million), and cooked, frozen potatoes and French fries ($2.8 million). Nearly all of this trade entered the EU on dutiable lines, with various ad valorem, compound and seasonal tariffs being applied, although duties on frozen berries have temporarily been suspended until December 31, 2013.
  • Maple Products: Canada exported an average of $33 million of maple syrup and maple sugar to the EU (15% of Canadian exports of maple syrup and maple sugar). Imports of maple syrup and maple sugar face an EU tariff of 8%.
• Potential Environmental Impacts: Primary agriculture has an impact on the environment as it is an important user of natural resources such as land and water.  The Government of Canada continues to make considerable efforts to understand the impact of agriculture on the environment, to seek ways to reduce negative impacts and to promote the sustainable use of natural resources.  For example, under Agriculture and Agri-Food Canada’s (AAFC) National Agri-Environmental Health Analysis and Reporting Program (NAHARP), Agri-Environmental Indicators (AEIs) have been developed to provide the information required to assess the sector’s impact and environmental performance over time. Better decisions about whether and how to improve that performance are the expected result.^{Footnote 38} 
  
  The Joint Study projects that exports of Canadian primary and processed agricultural products to the EU could increase by 42% and 142%, respectively. For the products that could benefit from the reduction or elimination of prohibitively high tariffs, such as beef and pork, any foreseeable increase in Canadian exports to the EU will not be of sufficient magnitude to affect world price levels, which would be the key driver in providing an incentive to change resource use and output levels. Given that resource utilization in these areas is expected to change very little under a Canada-EU CETA, the resulting environmental impacts would be very small.
  
  With increased imports from the EU, Canada must maintain its vigilance regarding the prevention of invasive alien species and diseases that could threaten sectors that closely interact with the environment, such as the agricultural sector.^{Footnote 39}
  
  It is important to note that there is potential for some small localized environmental impacts.  However given the small expected changes in resource use, it is likely that these impacts would be isolated and not widespread.
  
  
• Mitigation / Enhancement: Environmentally sustainable agriculture is a key component of Growing Forward,^{Footnote 40} an agricultural policy framework initiative of the federal, provincial and territorial governments. Growing Forward's environmental initiative, with nearly $200 million in funding, focuses on developing new agri-environmental knowledge, programs and initiatives.
  
  The Growing Forward Environment Program^{Footnote 41}consists of four main initiatives covering a suite of six programs whose objective is to develop knowledge, information and technology, and subsequently encourage adoption of agricultural systems that contribute to economically and environmentally sustainable agriculture that benefits producers and Canadians. The four main initiatives are:
  • Agri-Environmental Science ($32 million);
  • Knowledge and Information Tools ($63 million);
  • Supporting On-Farm Sustainable Agricultural Practices ($91 million); and
  • Performance Measurement and Reporting ($13 million).
• Examples of projects, activities, and programs contributing to mitigation within each of the main initiatives of Growing Forward are described in further detail below.
  
  • Agri-Environmental Scie^{Footnote 42}Target – a research and development initiative which focuses on understanding the mechanisms by which agricultural practices, water and climate variability interact with each other and aims to identify new or improved practices that can be used by producers to maximize the positive impact of agriculture on the environment. The focus of this initiative is on using knowledge of the effects of existing practices to develop new or improved beneficial management practices.
    
    Synergy – a research and development initiative that addres ses water and climate variability in a broader context. The focus is similar to Target but capitalizes on external resources and emerging technologies to understand the linkages between agriculture and the broader ecosystem. Issues such as how climate variability influences land use and understanding, assessing and managing agriculture's impact on water quality are studied.
  • Knowledge and Information Tools^{Footnote 43}
    Watershed Evaluation of Beneficial Management Practices (WEBs) – a project that measures the economic and water quality impacts of selected agricultural beneficial management practices (BMPs) at seven watershed sites across Canada. WEBs continue to enhance land-use decision making at the farm and landscape levels and is part of the environment theme in the Growing Forward Agriculture Policy Framework.
    
    Agri-Geomatics – a program that provides geographic-based information and knowledge online to improve decision making and risk management for agriculture and the environment
  • Sustainable on-Farm Practices^{Footnote 44}Innovative Approaches Initiative – projects funded under this initiative address the need for technical assistance related to environmental planning, and explore new program delivery models.
    Four projects form the basis for Innovative Approaches:
• Technical Assistance – accelerates adoption of beneficial management practices (BMPs) by developing and disseminating science-based information and experience through partnered projects (e.g. studies related to agricultural water shortages and climate change adaptation; alternative cropping systems; and water supply projects).
  
  
• Landscape-Based Planning – through support of industry, watershed and other groups this project provides producers with tools, information and resources to help address priority issues related to water management and climate change impacts, mitigation and adaptation.
  
  
• Market-Based Instruments – identifies and tests market-based approaches that may encourage producers to further address agri-environmental issues. It develops a number of recommendations and/or incentive program designs, with priority given to emerging issues in the sector, as well as input from producers and the industry.
  
  
• Tiered Program Pilot – explores a tiered programming approach for Canada, emphasizing the need to increase the uptake of on-farm BMPs that provide significant public benefits.
  
  
• Performance Measurement and Reporting^{Footnote 45}National Agri-Environmental Health Analysis and Reporting Program (NAHARP) – a system of quantifiable agri-environmental performance indicators.
  
  National Carbon and Greenhouse Gas Accounting and Verification System (NCGAVS) – a system that will improve the scientific basis for measuring the agricultural sector's greenhouse gas emissions.

A3. Significance of Potential Environmental Impacts

Non-Agricultural Goods

Earlier discussion of non-agricultural goods identified potential environmental impacts that might result from trade liberalization under a Canada-EU CETA in the areas of metals, industrial manufacturing, chemical products, forestry products, and fish and seafood products.  Growth in each of these sectors could result in increased demand for raw materials.  Increases in Non-Agricultural Goods production could also cause higher energy consumption, and increased emissions to the environment. These impacts are expected to be manageable for several reasons. First, increases in production would occur under Canada’s regulatory framework with well-established federal, provincial and territorial environmental oversight regimes that would address ensuing negative environmental impacts. In particular, legal frameworks requiring environmental impact assessments of new developments will help to mitigate impacts of projects in several sectors.  Second, further trade liberalization supports environmental goals by improving access to technologies, goods and services that advance the objectives of sustainable development.  Canada is well-positioned as a world leader in environmental technologies.  Canada has the right conditions, world-class skill sets, equipment and technology, and increasing numbers of leading-edge companies that are poised to take advantage of expanding world markets. Third, cooperation between Canada and the EU on regulatory issues, in resource areas and elsewhere, could result in improved implementation and oversight of environmental measures in both countries.

Agricultural Goods

The overall levels of environmental risk for water, soil, air and biodiversity are not expected to change significantly as a result of the liberalization of agricultural trade between Canada and the EU.  Any change that might result would be smaller than the normal fluctuation in output levels that occur in response to changing market conditions.  As discussed earlier, resource utilization is not expected to change significantly and shifting trade patterns are unlikely to cause any significant impact on output levels.  In considering the potential threat posed by invasive pests and diseases as a result of increased trade with the EU, it will be important for Canada to maintain vigilance in this area.  Moreover, there are several mitigation measures and programs currently in place managed by several federal government departments that would address potential negative environmental impacts in the areas discussed above, while enhancing positive environmental impacts.

Given the above considerations, environmental impacts as a result of increased trade in goods with the EU are expected to be minor.

B. Trade in Services

B1. Overview

The EU is the world’s largest services exporter accounting for 42.5% of the world’s total share of commercial services^{Footnote 46} exports in 2010. EU services trade is concentrated toward other industrialised economies. The United States is the main partner on both the supplying and the receiving side, followed by Switzerland, China, Russia, Japan and Canada. The EU is Canada’s second largest partner for trade in services with two-way trade amounting to $27.5 billion in 2010.

Services is the largest economic sector in Canada and the EU, and both have undertaken  substantive commitments under the World Trade Organisation’s General Agreement on Trade in Services (GATS) in practically all major service sectors.^{Footnote 47} Both have also entered into commitments on the protocols for the telecommunication and financial services sectors. A limited number of most favoured nation (MFN) exemptions are maintained across a small number of sectors.

Canada-EU services trade takes place primarily under the rules and market access commitments of the WTO GATS. Canada and the EU participate actively in the GATS negotiations.

There is sufficient scope to advance Canadian interests bilaterally under a CETA with the EU, and a North American Free Trade Agreement (NAFTA)-plus type approach would likely yield benefits beyond GATS to both parties.^{Footnote 48}> An ambitious negative list approach – where all sectors are deemed to be liberalized unless specified – will provide both parties with improved regulatory transparency and market access beyond their respective existing commitments under the GATS.

B2. Anticipated Economic Effects

While studies have shown that there are substantial positive benefits to services liberalization, it remains difficult to assess the economic impacts of removing barriers to services trade. In addition, the definition of services trade reaches beyond cross-border flows to include three additional modes of supply: consumption abroad, commercial presence, and the movement of natural persons.

Services are a key component of global value chains as they help promote value-added activities in different markets. Restrictions on service activities are rarely located at the border. Barriers often arise from the domestic regulation of services provision such as: barriers to commercial establishment, restrictions on types of commercial presence and the number/type of services that can be provided, and discriminatory treatment advantaging domestic companies over foreign ones.

The Joint Study projected that liberalization of trade in services would contribute substantially to the GDP gains (50% of total gains for the EU, and 45.5% of gains for Canada). Total EU goods and services exports to Canada are estimated to rise by 24.3%, while Canadian exports to the EU are predicted to increase by 20.6%. In services trade, the EU’s exports to Canada are expected to increase by 13.1% and Canada’s exports to the EU by 14.2%. In addition, the study shows potential for improvement in a wide range of areas, from labour mobility including temporary entry for business persons, to environment, to regulatory cooperation and science and technology. Canada can be expected to gain from increased access to innovations, state-of-the-art technologies and best practices that will contribute to enhancing productivity, and which may also increase environmental performance.

B3. Potential Environmental Impacts

Due to the fact that services are becoming increasingly integrated in the production of complex goods, the environmental impacts that could result from increased trade in services would likely be indirect.  Increased cooperation in the areas of labour mobility, temporary entry, regulatory cooperation and science and technology is also expected to contribute to increased activity in the services sector trade. The environmental effects of increased cross-border trade in services, however, is difficult to quantify or predict, as not all commercial services are recorded as they cross the border. For example, the movement of persons associated with services trade is captured in business travel statistics, but these records are not industry-specific and thus difficult to attribute to increases or decreases in specific service sectors.

That said, most services benefiting from liberalization under a Canada-EU CETA would likely be in virtual areas (i.e. those without a physical component, such as legal advice), with less likelihood of negative environmental impacts. Although the net effect on the environment will be difficult to assess qualitatively or quantitatively, this will likely be small, as innovations and further development and use of green technologies in these services sectors are adopted.

In sectors such as environmental services and telecommunications services, positive environmental impacts can be anticipated as new more environmentally sustainable goods and services are adopted. For example, environmental services include services such as “refuse disposal services, sanitation and similar services, noise abatement services, nature and landscape protection services, other environmental protection services,” which are environmentally friendly. Telecommunication services could facilitate virtual transactions of services.

This may also be the case in the areas of professional, scientific, and technological services, where Canada can be expected to gain from access to innovations, state-of-the-art and “green” technologies and best practices that will contribute to enhancing productivity in Canada.

B4. Significance of Potential Environmental Impacts

While an agreement with the EU is expected to provide increased market access, Canada is already quite open in most services sectors. Generally speaking, while any environmental impacts – positive or negative – are not expected to be significant, it would be useful to consider the synergies between environmental goods and services, which may affect the magnitude of any impacts. Potential negative environmental impacts can be offset by mitigation options and opportunities for environmentally sustainable growth, including technological innovation and industry best practices, as discussed above.

B5. Mitigation / Enhancement

Services sectors tend to be heavily regulated. Governments at different levels, as well as professional associations that have been delegated self-regulating authority have implemented and maintained regulations governing the provision of services. Generally, such regulations establish and maintain a legal framework to serve various public-policy purposes, including the protection of the environment.

With respect to specific service sectors, changes and improvements in procedures, equipment and technology lessen possible impacts, as do environmental legislation and industry awareness of environmental issues. For example, in the oil and gas sector, changes in procedures and technology include: using directional and horizontal well drilling that reduces the number of roads, power lines and pipelines needed for a site, and using low–impact seismic technologies in environmentally sensitive terrain. New procedures and technologies can also help prevent potential accidents which could have serious environmental impacts.

In the tourism sector, environmental damage can be limited by controlling access to ecologically-sensitive sites and limiting the number of visitors in certain areas based on capacity to accommodate, without pollution, loss of wildlife habitat, or other damage.  With respect to transport services, there is an extensive range of environmental guidelines, codes of practice and international standards in place to reduce environmental impacts. In the construction sector there is a wide range of environmental protection guidelines, tools, and techniques applicable to engineering works. These include facility design and site selection measures, energy conservation measures, and on-site measures to control soil erosion, manage wastes, and control pollutants. For example, the Super E® strategic initiative is a new housing standard which utilizes state of the art construction techniques that promote energy conservation, environmentally responsible construction and healthy housing.^{Footnote 49}

Private sector mitigation options include paper conservation within the office, greater use of cross-border trade facilitating means (i.e. the internet/email, fax, teleconference, and videoconference), recycling of various materials, and corporate policies on “sustainable procurement.”  While these activities are within the scope of the private sector, government policy can lead in the adoption of such practices, specifically through the greening of government procurement strategies.

C. Government Procurement

C1. Overview

The rules governing foreign access to government procurement markets are established under the World Trade Organisation’s plurilateral Agreement on Government Procurement (GPA).^{Footnote 50} The GPA extends the principles of non-discrimination, national treatment and transparency to commitments made by the parties to the Agreement.  While Canada and the EU are both signatories to the GPA, there is opportunity for mutual improvement of commitments through a CETA, particularly in the area of market access. For Canada, this could include expanded commitments for sub-central entities (provincial, territorial, and municipal) and other entities such as Crown corporations.  Currently, while the EU offers commitments in these areas to other GPA members, including in the area of “utilities,” it does not – on the basis of reciprocity – extend access to procurement by such entities to Canada. 

The Joint Study concluded that liberalization of government procurement at all levels would offer great business opportunities for Canadian and European exporters and investors.^{Footnote 51} Government procurement agreements open up new opportunities for Canadian suppliers to bid on procurement contracts issued by foreign governments.  These agreements also help to ensure that Canadian suppliers are treated in fair, open, transparent, competitive and non-discriminatory manner when they bid on these procurement contracts.  The same will be true for European suppliers seeking to bid on government procurement contracts awarded in Canada. 

The government procurement provisions of a Canada-EU CETA will build on the rules and obligations established in the WTO-GPA revised text (November 2007) and will focus on expanded market access. 

C2. Anticipated Economic Effects

Government procurement markets represent a significant proportion of national incomes. While there is some uncertainty over the value of government procurement of goods and services in both the EU and Canada, the European Commission estimates that the European procurement market is the largest in the world. Public purchasing by the EU’s 27 Member States and the main EU institutions, the European Commission and the Council of the EU was estimated at 17% of GDP (or $2.94 trillion / €2.15 trillion) in 2008.^{Footnote 52} According to the Treasury Board Secretariat (TBS) of Canada, the estimated annual value of contract awards by federal government departments and agencies was C$16 billion for 2008.^{Footnote 53} This estimate includes neither sub-federal procurement nor that of other federal entities (Crown corporations), the value of which is generally understood to be well in excess of federal procurement values.

The major economic effects from any agreement regarding government procurement between the EU and Canada would stem from extending the current commitments to cover sub-central and other procuring entities (“utilities” in the EU, Crown corporations in Canada). This would result in a formal and binding opening of the relevant markets in the EU and Canada.  Canadian suppliers would benefit from improved access to government contracts in key growth sectors in the EU, such as information and communications technology, telecommunications, energy technologies and environmental products and services.  Access to EU government contracts would also improve in areas of Canadian expertise, such as infrastructure, civil works, transportation, energy, electricity generation, distribution and transmission, and water services.  

C3. Potential Environmental Impacts

Overall, increased liberalization of government procurement is not expected to significantly impact the environment.  Although negative transportation impacts of labour and goods may increase marginally through an agreement, these may be offset by a slight positive impact as the most efficient technologies are procured by governments benefitting from increased competition and wider options.  Furthermore, government procurement tends to follow strict guidelines and policies with respect to environmental stewardship, and these policies will remain in place with or without a CETA with the EU.

C4. Mitigation / Enhancement

Environmental impacts as a result of increased government procurement under a Canada-EU CETA are expected to be largely mitigated by green procurement practices in both Canada and the EU.  In dealing with government procurement, as for other trade matters, provinces and territories are committed to take into account the need to restore, maintain and enhance the environment.^{Footnote 54} Canada will retain its ability to develop and implement green procurement policies, and Canada and the EU may benefit from further cooperation on eco-labelling and green procurement. In this respect the Greening Government Operations theme of the FSDS will help ensure that federal government procurement meets environmental standards. 

The federal government is a significant purchaser in Canada. As such its activities impact the national economy and can influence both the price and the availability of goods and services, including construction services, in the marketplace. Through the increased promotion of environmental sustainability, and by integrating the application of environmental performance considerations in its procurement process, the federal government is in a position to influence the demand for environmentally preferable goods and services and the ability of industry to respond to the escalating use of environmental standards in global markets.

In 2006, the federal government established a Policy on Green Procurement.^{Footnote 55} As part of its ongoing commitment to improve the environment and the quality of life of Canadians, the government’s Policy on Green Procurement seeks to reduce the environmental impacts of government operations and promote environmental stewardship by integrating environmental performance considerations in the procurement process.

The policy also supports the federal government in targeting specific environmental outcomes where procurement can effectively be used to mitigate the environmental impacts.

D. Investment

D1. Overview

As outlined in the Joint Study, investment is a significant component of the economic relationship between Canada and the EU. The EU is Canada’s second largest source of foreign direct investment while Canada is the EU’s fourth largest source of foreign direct investment into the EU. Both economies have large inflows and outflows of foreign direct investment.

The Canadian and EU economies are generally open to foreign direct investment. Investment occurs within a framework of rules established by the respective regulatory regimes of each Party as well as international commitments respecting the establishment of a commercial presence in Canada or the EU. Foreign affiliate sales are the most important component of the Canada-EU investment relationship. They now rival the volume of cross-border trade in goods and substantially exceed that of cross-border trade in services.

A number of factors can impede investment flows. These range from specific and formal regulatory restrictions that limit foreign participation in specific sectors through foreign equity caps and citizenship and residency requirements for directors, to burdensome regulatory regimes that make it difficult for foreign workers to obtain visas and work and residency permits. There is, therefore, sufficient potential to advance Canadian investment interests by removing or disciplining these impediments.

D2. Anticipated Economic Effects

Quantifying the economic impact of investment liberalization in the context of a CETA on European investment in Canada raises two data issues:

• quantifying the scope of current barriers to foreign direct investment embodied in national economic regulatory frameworks, and
• determining the extent to which such barriers can be reduced through further liberalization.

Despite the difficulties in quantifying the economic impacts of increased EU investment in Canada, the Joint Study showed important benefits for both sides in pursuing a closer economic partnership. There is currently a large amount of EU investment in Canada and CETA would offer the potential to further facilitate such investments. However, while the existence of such investment provisions will be a positive factor in decisions on whether to invest in the territory of the other Party, it will be but one of many. 

Investment in the Canadian market offers EU investors access to the NAFTA market of 448 million consumers, simple and straight-forward procedures and an attractive business climate. Although statistics quantifying increased European investment as a result of a CETA are currently unavailable, based on current European investment and its growth in Canada over the past decade, one can expect investment in key areas of European interest such as financial services, manufacturing, real estate, business services and energy. Other provisions within a CETA may also support increased investment from the EU in less direct ways, as improved temporary entry, services liberalization, and other areas may be attractive to investors.

D3. Potential Environmental Impacts

The likelihood and significance of the environmental impacts that could stem from the anticipated economic effects of a CETA with the EU will depend on the degree of increase in investment, the sectors of the investment, and the measures in place to protect the environment.

Investment plays an important role in the establishment of global value chains which facilitate the modern global economy. As such, international commerce very frequently involves extensive intra-firm trade in goods and service within multinational corporations. This is combined with international sourcing of components and services and the international movement of business executives and technical experts as well as capital. The kinds of environmental impacts that could arise from this increasingly integrated global economy could include effects on air and water pollution, as well as land and biodiversity conservation.

Increased investment between Canada and the EU may facilitate positive impacts due to the exchange of greener and more efficient technologies and best business practices.

D4. Significance of Potential Environmental Impacts

The EU accounts for 26.5% of all foreign direct investment in Canada. Consequently, relatively small shifts in investment from Europe as a result of a CETA could be significant in terms of the overall level of investment in Canada. While it would be difficult to separate the effects of an eventual agreement from those resulting from generally increased foreign interest in investment in Canada, a CETA with the EU is not expected to substantially change the already largely open Canadian investment regime. Therefore, any environmental impact of increased investment directly attributable to a Canada-EU CETA is expected to be minor.

D5. Mitigation / Enhancement

As in all previous investment agreements, Canada fully intends to maintain its right to regulate in the public interest in sectors such as health, public education, social services and culture, and its right to protect the Canadian environment.  In the event that a CETA results in increased EU investment in Canada, potential environmental impacts will be mitigated by existing laws and regulations which govern domestic and foreign investors alike.

Canada will move forward in the negotiations with a position that provides robust investor protection in a way that does not compromise governments’ right to regulate in the public interest, including with respect to environmental protection. Canada’s approach is to negotiate the flexibility necessary to protect legitimate public policy objectives into the substantive articles of the investment chapter, including providing adequate guidance to arbitrators in the case of a challenge.

Although Canada’s already largely open investment regime means that increased investment directly attributable to a Canada-EU CETA is expected to be minor, it is useful to discuss how environmental impacts resulting from potential increased investment could be mitigated, specifically in the most environmentally intensive sectors of mining and oil/gas.

The different provincial, territorial and federal regulatory processes ensure that potential impacts on the environment of investments in mining and oil and gas projects are mitigated. As well, changes and improvements in procedures, equipment and technology lessen possible negative impacts as do environmental legislation and industry awareness of environmental issues. Some examples of changes in procedures and technology include:

• provinces and territories have an environmental assessment regulatory process for mining, oil and gas projects;
• at the federal level, the Canadian Environmental Assessment Act (CEAA), sets the conditions for which a project would require a federal EA;
• taking special precautions during the drilling of critical sour gas wells;
• using equipment such as vapour recovery to reduce impact;
• using directional and horizontal well drilling that reduces the number of roads, power lines and pipelines needed for a site;
• recycling the water used in the drilling and processing of oil sands and mineral processing;
• using low-impact seismic technologies in environmentally sensitive terrain to reduce GHG emissions from energy use during exploration;
• using best practices to reduce benzene emissions and the impact on the air quality in the toll refining services industry;
• providing services on oil and gas fields to reduce the quantity of odours, extract elemental sulphur (and thus reduce emissions of sulphur dioxide), while using the recovered vapour on a commercial basis;
• implementing ores sorting, segregation and advanced mineral processing practices to minimize the volume of mining waste requiring management
• using a holistic approach to mineral resource development such as environmental ore deposit models;
• implementing prediction techniques to minimize acid generation from mining waste
• promoting environmental effects monitoring as an assessment and decision making tool to protect aquatic ecosystems;
• implementing energy saving measures into mineral resource development operations; and
• implementing green mining technologies and practices.

There are many other examples of responses to environmental concerns.  The Canadian oil and gas industry is aware that it shares the land and water (in the case of offshore exploration) with many stakeholders (e.g. forestry, fishing, and recreational users) and therefore invests heavily in programs and technology that help to reduce its environmental footprint.  Many national associations have signed memorandums of understanding with NRCan regarding climate change. Moreover, government-led initiatives aim at sustainable development of resources, and potential environmental impacts will be mitigated by laws that bind foreign investors to the same environmental regulations that govern domestic investors.

D6. Conclusion of the Qualitative Analysis

In this analysis, the government provided a qualitative overview of relevant issue areas in the Canada-EU CETA negotiations and their potential environmental impacts. This was followed by a more detailed analysis of four key issue areas where a greater likelihood of environmental impacts is anticipated: trade in goods, trade in services, government procurement and investment.  Within these areas, anticipated economic effects as a result of a CETA with the EU were considered, and the potential environmental impacts and their significance were further explored.  Policy frameworks, regulations, and other options for mitigation of potentially negative impacts and enhancement of positive impacts were finally discussed, and these were considered in anticipating overall environmental impacts of a CETA.

In conclusion, the qualitative analysis of this Initial Environmental Assessment indicates that a CETA with the EU is unlikely to lead to significant environmental impacts in Canada.

Part 2: Quantitative Analysis

Economic and Environmental Modelling

Overview of Quantitative Findings

This quantitative economic and environmental analysis was developed by DFAIT’s Office of the Chief Economist to assess the environmental impact in Canada resulting from increasing trade and economic cooperation between Canada and the EU under the Canada-EU CETA. The assessment was carried out based on the estimated economic impacts from the Computable General Equilibrium (CGE) modelling in the Joint Study. Specifically, the estimated output changes from the CGE-based economic analysis in the Joint Study are linked to Statistics Canada’s Canadian System of Environmental and Resources Accounts^{Footnote 56} and Environment Canada’s National GHG Inventory^{Footnote 57} to track the environmental change in Canada resulting from increasing trade and economic cooperation under the Canada-EU CETA for the period 2007 to 2014. This period was chosen in the Joint Study to reflect the time span that is necessary to fully digest all long-run adjustments in the economy resulting from eventual CETA implementation.

The environmental impact of a CETA with the EU is expressed in three categories of environmental indicators: greenhouse gas (GHG) emissions, energy use and water use. The environmental impact arising from expanding trade and economic cooperation under a CETA is further decomposed into three components: the scale, composition and technique effects. The scale and composition effects are the direct results of changes in trade and expanding economic activities under the Canada-EU CETA: the scale effect relates an expansion in economic activity to increased environmental impacts, and the composition effect relates structural changes to environmental impacts.  The CETA-induced technique effect is not considered in this exercise due to the relatively small scale effect as discussed below; rather, this analysis will focus on the general technique effect that accounts for the improvements in energy efficiency, GHG emission reduction, and water usage independent of a CETA, which are projected to occur over the examined period.

According to the Joint Study, Canada’s GDP (net value added) is expected to increase by 0.77 percent, while total output (including both net value added and intermediate inputs) would rise by 0.6 percent as a result of increasing trade and economic cooperation under a Canada-EU CETA. This expansion of economic activities is expected to generate new demand for Canada’s natural capital, which would lead to impacts on the environment in Canada. It is important to understand the extent of such an environmental impact in Canada and to assess whether appropriate measures to mitigate such an impact should be considered.

Based on the estimated measures of scale, composition and technique effects, the implementation of a CETA with the EU would increase marginally Canada’s GHG emissions, energy and water use.  Overall, GHG emissions would increase by 2,306 kilo tonnes via the scale and the composition effects.  Compared to Canada’s annual greenhouse gas emissions of 616,580 kilo tonnes of CO₂ equivalent in 2007^{Footnote 58}, the net increase in emissions due to a Canada-EU CETA represents only 0.38 percent of total greenhouse gas emission in that year.  Further, during the CETA implementation period, progress in adopting new environmental techniques and enforcement of environmental regulations captured by the technique effect is expected to further reduce GHG emissions by 393 kilo tonnes. Hence, the resulted net increase in GHG emissions would only be 1,913kilo tonnes.

Total energy consumption is expected to increase by 30,985 terajoules via the scale and composition effects, which represents 0.36 percent of Canada’s energy use of 8,679,177 terajoules in 2007.  Total energy usage under a Canada-EU CETA will further decrease by 677 terajoules via the technique effect. The resulted net increase in energy use would thus be 30,308 terajoules.  The estimation based on the selected the sector information (due to the shortage of data) indicates that water use is expected to increase by 387.2 million m³ as a result of a trade deal, which represents 1.1 percent of Canada’s water usage of 35,574.4 million m³. A lack of projecting data for future years does not allow for the estimation of the technique effect for water use.

Therefore, the potential negative impact on Canada’s overall environment arising from the Canada-EU CETA implementation is expected to be minor.  Further, a CETA with the EU could lead to a shift toward a more favourable Canadian industry composition in terms of emissions and energy use, as the projected net increases in emissions and energy usage are smaller than the corresponding increase in GDP and production output.

Table 1: Summary of Environmental Impacts of the Canada-EU CETA

	Scale Effect	Composition Effect	Total CETA-Induced Effect		Technique Effect	Total Effect, 2014
GHG Emissions (in kilo tonnes of CO2 Equivalent)	3,681	-1,375	2,306	0.38%	-393	1,913
Energy Use (in terajoules)	51,820	-20,835	30,985	0.36%	-677	30,308
Water Use (in thousands of m3)	212,401	174,817	387,218	1.1 %	N/A	387,218

Methodology and detailed results are described below.

A. Framework for the Quantitative Assessment

The assessment is carried out using the estimated economic impact from the CGE model in the Joint Study. The estimated economic impact from the Joint Study is linked to data in Statistics Canada’s Canadian System of Environment and Resources Accounts and Environment Canada’s National GHG Inventory to track the environmental impacts of expanding trade and economic cooperation under the Canada-EU CETA in Canada.

The CGE model

The CGE model employed in the Joint Study is a dynamic, multi-region, multi-sector, global CGE model developed by Copenhagen Economics.^{Footnote 59} The model quantifies the potential economic gains of liberalization in trade between the EU and Canada under a Canada-EU CETA by comparing the economic performance in Canada and the EU before and after the CETA implementation. The model isolates the effect of the trade policy change by assuming zero change for all other economic factors that affect the economy such as macroeconomic fluctuations and exchange rate shifts. The estimation results presented include overall improvements in economic welfare as well as changes in output and trade flows by sector arising from the implementation of a CETA with the EU.

The database used for simulation is based on the Global Trade Analysis Project (GTAP) database version 7 Release 5, which is benchmarked to 2004. The data was updated to the 2007 level including revisions to various national tables to reflect recent trends in agricultural and energy prices, and revisions to protection data based on the recent draft Doha text. 

The Joint Study develops a baseline scenario and a liberalization scenario for which trade flows, GDP and output changes are evaluated.

• Baseline scenario – Outlines the likely economic circumstance in the absence of a CETA between Canada and the EU.
• Liberalization scenario – Assumes full elimination of protection in goods trade for all industrial and agricultural sectors including all tariffs and tariff-rate quotas; a reduction of trade costs generated by non-tariff measures by an amount equivalent to 2 percent of the value of trade in non-commodity goods sectors; and a reduction of trade costs in services trade by an amount equivalent to that estimated to have been achieved in respect of service trade amongst EU Member States.

For the purpose of this study, the GTAP database has been aggregated into 35 regions, some of which include:  EU (27), Canada, US, Mexico, China, Association of Southeast Asian Nations (ASEAN), Japan, India as well as some Least Developed Countries (LDCs), European and Mediterranean countries with preferential agreements with the EU, African, Caribbean, and Pacific Countries for which GTAP data is available. The database has also been aggregated into 33 Canadian sectors, of which 23 are commodity sectors and 10 are service sectors.

A2. The Environmental Indicators

The environmental indicators used for the analysis include GHG emissions, fossil fuel energy use, and water use. The analysis examines the impact of liberalized trade and expanded economic cooperation between Canada and the EU under the CETA on the use of energy and water as well as the production of GHG emissions in Canada based on the direct intensity coefficients for GHG emissions and energy use in 2007 and water use in 2007 obtained from Statistics Canada and Environment Canada. All these intensity coefficients have been converted into the GTAP sector categories used in the Joint Study. 

With respect to GHG emissions, the analysis considers both the 2007 level and direct intensity of 3 main GHGs associated with the production of a group of commodities: carbon dioxide (CO₂), methane (CH₄) and nitrous oxide (N₂O).  The measured level of emissions is in kilo tonnes of carbon dioxide equivalent (kt CO₂ eq.) and the intensity is measured in kilo tonnes of carbon dioxide equivalent per million dollars (kt CO₂ eq./$1,000,000). The emissions sources consist of 10 different fuel types: coal, natural gas (excl. liquefied), motor gasoline, aviation fuel, diesel oil, light fuel oil, heavy fuel oil, liquid petroleum gases (incl. natural gas), electric power and coke.

Concerning energy use, the analysis is based on both the 2007 level and direct intensity of energy use associated with the production of a group of commodities including coal, natural gas (excl. liquefied), motor gasoline, aviation fuel, diesel oil, light fuel oil, heavy fuel oil, liquid petroleum gases (incl. natural gas), electric power, and coke. Energy has been measured in terajoules (TJ), and the intensities are measured in terajoules per million dollars (TJ/$1,000,000).

In terms of water use, the basis is the volume of use in 2007 which is the latest information currently available. The measured level of water use is in thousands of cubic metres, while the intensity is measured in cubic metres per dollar.

A3. Evaluation Methods

This analysis distinguishes three separate mechanisms by which a change in trade policy can affect the level of GHG emissions and the rate of depletion of natural resources (energy, water): scale, composition and technique effects.^{Footnote 60}

Where there is an expansion of economic activity, and if the nature of that activity remains unchanged, the total level of GHG emissions and water and energy depletion must increase. This is known as the scale effect.

A composition effect captures the change in emissions and depletion resulting from the shifts in the industrial structure of the economy as a result of change in trade policy. When trade is liberalized, countries concentrate their activities to a greater extent in the sectors in which they enjoy comparative advantages and specialization. The net effect of the structural adjustment on the levels of GHG emissions and water and energy depletion for each economy depends on whether pollution-intensive, water-intensive and energy-intensive activities expand or contract.  Thus, the net composition effect on the environment resulting from trade policy change can only be assessed empirically. 

Finally, a technique effect is measured: economic output may not be produced by exactly the same methods subsequent to trade liberalization as it was prior to a CETA with the EU. In order to be fully assessed, the environmental impact of a Canada-EU CETA needs to be examined not only on the basis of the environmental technologies and regulations in existence at the time of the policy change, but also on the basis of the technological evolution that will have occurred while the agreement is implemented. For example, emissions per unit of economic output can decrease for the following reasons:

• Higher energy prices induce the adoption of energy efficiency and conservation measures;
• New capital formation during the CETA implementation period would result in a lower emission level than the existing capital stock as new capital is typically cleaner and more efficient than existing capital stock;
• Increased trade will also facilitate the transfer of modern and clean technologies among trading partners, which will reduce the cost of such technologies and increase their availability.  The increased use of cleaner and more efficient technologies would help to reduce harmful emissions and improve energy and water conservation; and
• The development of more stringent pollution standards and greater enforcement of existing anti-pollution laws and regulations may also lead to better environmental outcomes.

However, the CETA-induced technique effect is not considered in this assessment; rather, this analysis will focus on the technique effect that represents the on-going progress of environmental quality in Canada independent of a Canada-EU CETA.  Overall, the net impact of a CETA with the EU on the environment is determined by these three competing forces, each having a unique relative value: the scale effect (negative impact), the composition effect (ambiguous impact), and the technique effect (positive impact). The scale and technique effects tend to work in opposite directions, while the composition effect depends on whether emission-intensive sectors expand and shrink. The overall impact of trade will depend on the magnitude or strength of each of these three effects.

A4. Limitations on Economic and Environmental Modelling

The modelling results should be considered in the context of both the advantages and limitations of the model. Several cautionary notes are required concerning the interpretation of the reported environmental impacts.

Quantitative assessment of the environmental impact of a Canada-EU CETA is undertaken based on the estimated economic impact reported in the Joint Study. Consequently, the environmental assessment conducted in this report inherits some limitations of economic modelling in the Joint Study. These are set out below.

First, while economic modeling is a useful estimating tool, all economic models, by definition, represent a simplification of reality and rely on numerous assumptions. Therefore, the results presented should be viewed as complementing the qualitative analysis of benefits from a CETA that are presented elsewhere in the Joint Study and earlier in this environmental assessment.

Second, the economic assessment presented in the Joint Study is best understood as estimates of the potential economic impacts of a CETA with the EU, not as forecasts of the actual results. It isolates the trade policy impact by netting out all other macroeconomic influences such as economic growth and exchange rate fluctuations.

Third, economic modelling assumes full elimination of tariff barriers for all industrial and agricultural products; notably, no exception is made for “sensitive sectors”, notwithstanding that Free Trade Agreements (FTAs) typically include provisions to address impacts in sensitive sectors. Canada’s trade gains in areas of EU’s sensitivity and EU’s trade gains in areas of Canadian sensitivity may be constrained in timing or ultimate extent by special provisions that are not known prior to the conclusion of the agreement.  These provisions could not be taken into account in the economic modelling.

Fourth, the economic modelling utilized in the Joint Study captures only the expansion of trade in products already traded in the bilateral relationship, and cannot predict the creation of trade in new product areas, which is particularly important for the new trade agreement as the trade deal lowers the entry threshold to the FTA partner countries.

Fifth, economic modelling only allows for analysis of gains from liberalization in goods and services trade, and does not include gains from liberalization and enhanced economic cooperation in other areas (investment being a key example due to the data limitation).

With respect to the results of environmental modelling presented in this report, there are some cautionary notes concerning the interpretation of estimation results. 

First, the report provides an assessment of the environmental impact resulting from increasing production activities under a CETA with the EU, but it fails to capture direct household emissions, energy, and water use resulting from changes in the consumption pattern due to a CETA as the economic modelling in the Joint Study captures the changes in the production pattern only. 

Second, this study separates economic modelling from environmental modelling. The shortfall of this approach is that it fails to take into account the change in emission intensity, energy, and water use that could result from the implementation of a Canada-EU CETA. The pre- and post-CETA emission intensity may not be the same. The removal of barriers could affect firms’ choices of production inputs (domestic vs. foreign or less fuel efficient vs. more fuel-efficient), resulting in different emission intensity.

Third, the technique effect reported in this study represents the on-going progress of environmental quality in Canada independent of a CETA with the EU. This technique effect is different from a CETA-induced technique effect in the sense that the improvement in income as a result of a Canada-EU CETA could translate into greater demand for environmental quality, leading to lower emission intensity.  However, there is no compelling reason to believe that such a technique effect would be significant given the limited income gains under a Canada-EU CETA relative to the size of the Canadian economy.

Fourth, due to data availability, the results of environmental modelling reflect the impacts based on the three indicators used in the analysis, and they do not capture the breadth of environmental issues that could occur as a result of a CETA with the EU. These un-quantified potential impacts are discussed under Section D.

B. The Simulation Results of the 2008 Joint Study

B1. GDP Impacts

The simulation results of the 2008 Joint Study suggest that Canada’s GDP gains through the CETA would amount to $12.1 billion,^{Footnote 61} or a 0.77 percent increase in GDP, while the EU’s GDP gains would be $17 billion, a 0.08 percent increase in GDP. While Canada’s gains are, in absolute terms, smaller than those of the EU, the impact on the Canadian economy is proportionally greater, because of the difference in the size of the economies.
Liberalization of trade in goods contributes substantially to Canada’s GDP gains. About 55 percent of Canada’s GDP gains result from the liberalization of trade in goods: with 33 percent of the gains derived from the elimination of tariff barriers and another 22 percent of the gains from a reduction in non-tariff barriers. Services trade liberalization is responsible for the remaining 45 percent of gains.

B2. Trade Impacts

The economic model projects that two-way bilateral trade measured by exports of goods and services would expand by $37.8 billion, or by 22.9 percent. Canada’s total exports of goods and services to the EU are expected to grow by 20.6 percent or $12.5 billion.

Table 1 (Appendix A) details the sector impact on Canada’s exports of goods and services to the EU as a result of a CETA. Overall, the sectors that benefit the most from liberalized trade with the EU are processed food, metals, transportation services, primary agriculture, petroleum & coal products and transport equipment. Machinery & equipment, chemical products, electronic equipment, and business services also register considerable export gains. 

Table 2 (Appendix A) features the sector impact on Canada’s imports from the EU as a result of a CETA. The Canadian sectors that experience the greatest increase in the value of imports are processed foods, chemical products, machinery & equipment, transportation services and business services.

As expected, each partner’s gains are greatest in their own areas of major comparative advantages. The primary sector represents 8.6 percent of Canada’s exports gains, compared to only 0.3 percent gains for the EU – indicating a comparative advantage for Canada in the primary industries. On the other hand, the Joint Study projects substantial gains in the same industry (mostly in the manufacturing and business services sector) for both Canada and the EU – mainly in processed foods, chemical products, machinery and equipment, reflecting the gains in intra-industry trade that often occurs between countries at a similar income level.

B3. Output Impact

The shift in the structure of trade along with associated changes in consumption and investment patterns under a Canada-EU CETA suggests a reallocation of resources across sectors would occur in each economy according to each Partner’s comparative advantages and specialization. It is those changes at the sector output level that serves as the basis for the environmental impacts analysis below.

Using the 2007 output level data from the GTAP database version 8, we applied the percent changes in output reported in the Joint Study to obtain the post-liberalization output for each sector in Canada. Some sectors like processed foods and leather products are subject to significant negative changes in production, declining by -6.0 percent and -4.9 percent, respectively, while transport equipment, metals, and electronic equipment register significant positive gains varying from 5.2 percent to 7.7 percent. Most other sectors’ production is only marginally affected by the liberalization under a CETA with the EU.  Overall, total production or output in Canada is projected to increase by 0.6 percent or $15 billion in 2007 prices.

C. Results of the Environmental Assessment

This section reports the results of the environmental assessment using the three indicators of GHG emissions, fossil fuel energy use, and water use followed by a brief conclusion of the quantitative analysis.

C1. Sectoral Greenhouse Gas (GHG) Emissions

To determine the GHG emissions that would result from a CETA with the EU, the actual 2007 direct intensity of carbon dioxide (CO₂) equivalent was applied to changes in Canadian production between the prior- and post-CETA periods for 33 Canadian commodities and services. In terms of GHG emission intensity, the utility sector has the highest emissions per million dollars, followed by primary agriculture, oil and gas extraction, mineral products, and transportation services. 

The overall environmental impact of a CETA between Canada and the EU depends on the scale of the economic expansion (the scale effect) and whether the expansion of pollution-intensive sectors dominates the structural adjustment (the composition effect) under a CETA. Table 4 (Appendix A) shows that the scale effect dominates the overall GHG emissions. Here, the scale effect is calculated by comparing the differences in GHG emissions between pre- and post-CETA periods holding the structure of the economy at the pre-CETA level.  By holding the structure of the Canadian economy at the pre-CETA level, the expansion of economic activities in Canada under a CETA with the EU gives rise to a net increase in CO₂-equivalent emissions by 3,681 kilo tonnes. The sectors most affected by the augmented scale of economic activities under a Canada-EU CETA are utilities, transportation services, primary agriculture, chemical products, construction and oil and gas extraction which together represent almost 70 percent of the net increase in emissions via the scale effect under a CETA with the EU.

The composition effect is calculated by comparing the differences in GHG emissions at the sector level between the pre- and post-CETA periods holding the level of economic activities at the pre-CETA level. The net composition effect on total emissions depends on whether pollution-intensive sectors dominate growth in output. The composition effect will result in less GHG emissions if the expanding sectors under a Canada-EU CETA are less emission-intensive.

As indicated in Table 3 (Appendix A) on output changes under a CETA with the EU, the sectors that have the above-average growth under a CETA are led by metals, transport equipment, and electronic equipment. According to the intensity coefficients reported in Table 4 (Appendix A), none of these sectors are considered as emission-intensive.  On the other hand, the sectors that have the higher than normal GHG intensity such as utility, primary agriculture, and chemical products and petroleum products are reported to have the below-average growth. The composition effect, therefore, contributes negatively to total GHG emissions in Canada, equivalent to a reduction of 1,375 kilo tonnes of GHG emissions. This reduces the total GHG emissions from 3,681 tonnes based on the scale effect calculation to 2,306 tonnes.  Compared to Canada’s annual GHG emissions of 616,580 kilo tonnes of CO₂ equivalent in 2007, the net increase in emissions due to the implementation of the Canada-EU CETA represents only 0.38 percent of total GHG emissions in that year. Therefore, the potential negative impact arising from the Canada-EU CETA implementation to Canada’s overall environment would be minor. 

At the sector level, the overall environment in Canada benefits most from the contractions in two sectors: processed foods and transportation services. Increased imports from the EU in processed food reduce the sector’s output by 6.0 percent which leads to a decline of 397 kilo tonnes of GHG emissions. A reduction in transportation services’ output by 0.4 percent leads to a decline of 314 kilo tonnes in GHG emissions.

Several sectors contribute significantly to the increase in emissions in Canada.  A 0.97 percent increase in the output of utilities leads to an increase in emissions of 948 kilo tonnes of CO₂ equivalent emissions. The increase in exports of metal from Canada to the EU augments the sector’s output by 7.7 percent which, in turn, gives rise to an increase of emissions by 292 kilo tonnes of CO₂ equivalent emissions. Finally, it is important to consider the technique effect which represents the on-going improvement in environmental quality in Canada independent of a CETA with the EU.  The technique effect in this case is a result of the adoption of better environmental technology, better enforcement of environmental regulations, changes in the structure of the Canadian economy, and is also due to increases in trade in environmentally-friendly goods, services and technologies over the CETA implementation period. It is expected that the emission intensity measured by the amount of pollution generated per unit of output would decrease as a result of the general technique effect. Failure to take into account the technique effect would overstate the environmental impact of a CETA between Canada and the EU. As is illustrated in Figure 1 below, the GHG emissions per billion dollars of GDP gradually trended down over the period, declining from 0.72 in 1990 to 0.54 in 2009.

Figure 1: GHG Intensity (Mt/$B GDP)

Source: Statistics Canada, Canadian System of Environmental and Resources Accounts

This analysis uses the projected GHG intensity provided by Environment Canada from 2007 to 2014 to assess how the technique effect could mitigate the potential negative impact on the environment in Canada during the course of the CETA implementation.^{Footnote 62} As such, when a CETA with the EU is fully implemented, the actual negative impact on Canada’s environment might not be as significant as in the case without considering the technique effect.

The projected emission intensities in 2007-2014 are from Environment Canada's E3MC model.^{Footnote 63} By applying the projected emission intensity to the estimated output changes, it can be seen that the technique effect has a positive impact on the environment in Canada by reducing GHG emissions by 393 kilo tonnes. The most significant improvements are expected to come from the sectors of utilities (-178) chemical products (-46) and processed foods(-63).

Overall, the Canada-EU CETA is expected to increase Canada’s overall GHG emissions marginally due mainly to a strong scale effect. The three effects have the following impact on GHG emissions in Canada: a scale effect of 0.6 percent, a composition effect of -0.22 percent and a technique effect of -0.06 percent, resulting in a net increase in emissions by 0.32 percent.

C2. Energy Use by Sectors

In terms of energy usage, this analysis considers the 2007 levels as well as the direct intensities of energy uses associated with the production of 33 Canadian commodities. The resulting increase in economic activity from a CETA with the EU would increase Canada’s total energy use compared to the baseline scenario, as shown in Table 5 (Appendix A).

The total energy use for the Canadian economy as a whole in the post-CETA era would increase by 51,820 terajoules via the scale effect. The sectors in which the largest effect is observed are utilities, public services, transportation services, construction, chemical products and paper products, which together represent more than 62 percent of the total increase in energy use. These sectors have positive variations in output (0.2 percent to 7.2 percent) as a result of the Canada-EU CETA implementation and bear some of the highest rates of energy intensity in the Canadian economy (in a range of 2.15 – 37.74 terajoules per million dollars).

Freer trade with the EU under a CETA would alter the composition of Canadian production and hence the total energy use of national output. Two contracting sectors are the source of additional energy savings: processed foods and transportation services. A CETA with the EU reduces the output of the Canadian processed foods sector by 6.0 percent, which accordingly leads to a reduction in energy use by 11,467 terajoules. A reduction in the output of transportation services of 0.4 percent also leads to a decline in energy use by 10,478 terajoules. The sectors that present the bulk of increases in energy uses as a result of a Canada-EU CETA are metals and utilities.

Both sectors expand under a CETA. The increase of Canada’s exports of metals to the EU augments the sector’s output by 7.2 percent, which boosts the energy use by 6,733 terajoules. An increase in the output of the utilities sector of 0.97 percent, leads to an increase in energy use by 5,054 terajoules. Overall, the shift in the composition of industry results in a decrease of 20,835 terajoules of energy use in Canada.

This analysis uses the projected energy intensity data for 2007 and 2014^{Footnote 64} provided by Environment Canada to assess the technique effect that would accrue from the expanded economic activities resulting from freer trade with the EU under a CETA. The projected energy use estimate comes from Environment Canada's Energy–Economy–Environment Model for Canada (E3MC). By applying the changes in energy intensity to output changes under a CETA with the EU, Canada’s energy use would decline marginally by 677 terajoules. Most energy saving is expected to come from utilities (-2,849) and chemical products (-807), whereas the processed foods and metals sectors are expected to increase their energy use, by 1,800 and 995 terajoules respectively.

Overall, the three effects, considered separately, bring about the following impacts on energy use for the Canadian economy: a scale effect of 0.6 percent, a composition effect of -0.24 percent and a technique effect of -0.008 percent. Therefore, the Canada-EU CETA is expected to increase Canada’s energy use via a significant scale effect.  Nevertheless, the total impact of a CETA with the EU on Canadian energy use is relatively small compared with only 0.35 percent of total Canadian energy use. 

C3. Water Use by Sectors

For the water use data, this analysis applies Statistics Canada’s tables of 2007 Water Use in Canada, by Sector to assess the potential impact of a CETA with the EU on Canada’s water use. The water use data used for this analysis refers to the water use for agricultural, industrial and municipal purposes including irrigation in agriculture and hydroelectric power generation (vector 3).^{Footnote 65}

The increased economic activity resulting from the Canada-EU CETA raises Canada’s total annual water use by 387.2 million m³ of water. This represents a 1.1% increase in water use over Canada’s annual industrial water use of 35,574.4 million m³. The sectors found to be the most water-intensive, as shown in Table 6 (Appendix A) are utilities, metals, and paper products. By contrast, the sectors found to be the least water-intensive are processed foods and beverage & tobacco. The total water use for the Canadian economy would increases by 212.4 million m³ via the scale effect as a result of a CETA. The sectors most affected with increases in water uses are utilities, primary agriculture and paper products & publishing, which together represent more than 87 percent of the total increase in water use under a Canada-EU CETA.

The composition effect signals that a CETA between Canada and the EU would bring about an additional increase in water use in Canada by 174.8 million m³. The significant increase in water use under a CETA via the composition effect occurs in the metals and utilities sectors. A CETA with the EU strengthens Canada’s trade in metals by inducing a 7.7 percent increase in the sector’s output, which translates into an increase of 150.9 million m³ of water use.  Similarly, a 1.0 percent rise in the output of Canadian utilities as a result of freer trade with the EU will lead to 85.3 million m³ of water use.  The largest reductions in water use correspond to three water-intensive industries that face significant declines in output as a result of a Canada-EU CETA: processed foods, paper products and primary agriculture.

The technique effect for water use could not be calculated due to the absence of projected data.  The water use for the whole economy is thus characterized by a scale effect of 0.6 percent and a composition effect of 0.5 percent. Therefore, a CETA between Canada and the EU would lead to marginally higher levels of water use in Canada.

C4. Conclusion of the Quantitative Analysis

In this analysis, the intensity data for GHG emissions, energy use and water use compiled by Statistics Canada and Environment Canada are used to assess the potential environmental impact of a CETA with the EU in Canada.  By linking the intensity data to the projected output changes from the Joint Study, the analysis estimates the effects of three catalysts (the scale effect, the composition effect and the technique effect), through which a change in trade policy could affect the level of pollution and the rate of depletion of environmental resources. The analysis finds that the net impact of increased bilateral trade with the EU on Canada’s environment would be characterized by minor increases in GHG emissions, energy use and water use.  Further, these increases are significantly smaller than the corresponding increase in GDP and production output, indicating a shift toward a more favourable Canadian industry composition in terms of emissions and energy use under a Canada-EU CETA.  As a result, this quantitative assessment concludes that there is little likelihood of significant environmental impacts to Canada as a result of an agreement.

D. Other Environmental and Sustainability Indicators

The environment and economic models used by the Office of the Chief Economist provide for three quantitative, national indicators: GHG emissions, energy use and water use.  These indicators were chosen because they represent quantifiable impacts that match the methodology of the CGE model employed by DFAIT’s Office of the Chief Economist. There are several additional quantitative environmental indicators, national in scope, which are currently available for monitoring environmental impacts and worthy of brief discussion.^{Footnote 66}

Because of difficulties in matching environmental data with the data framework in the economic modeling, it was not possible for the Office of the Chief Economist to incorporate these indicators into the quantitative assessment of the CETA between Canada and the EU at this time.  Nevertheless, the indicators provide valuable data and information for tracking Canada’s performance on key environmental sustainability issues. They ensure that international, national, regional, and local trends are readily accessible and transparently presented to all Canadians.  These indicators will continue to be used to track sustainability when the Canada-EU CETA is implemented.

D1. Biodiversity

Biodiversity is the term used to describe the diversity or variety of life on earth. It refers to the millions of species that have evolved over billions of years. Biodiversity is essential for healthy ecosystems and provides goods and services that are essential to human survival, including the production of food, fuel, and medicine; the regulation of climate, flood, and disease control; the purification of air and water; the pollination of plants; and the cycling of nutrients. Conserving biodiversity and using biological resources in a sustainable manner are essential parts of Canada's effort to achieve sustainable development. The Joint Study indicates that agricultural production will increase after a CETA is implemented between Canada and the EU.  Agriculture relies heavily on biodiversity for crop and livestock production, sources of genetic advancement and ecosystem services. At the same time, agriculture can have a significant impact on the local environment and biodiversity levels.  However, economic sustainability is not incompatible with conserving biodiversity in agricultural production systems.

The Canadian Biodiversity Strategy^{Footnote 67} reaffirms that governments in Canada must create the policy and research conditions that will lead to the conservation of biodiversity and the sustainable use of biological resources. The provincial, territorial and federal governments, in cooperation with stakeholders and members of the public, will pursue the implementation of the strategic directions contained in the Canadian Biodiversity Strategy in accordance with their policies, plans, priorities and fiscal capabilities. The Canadian Biodiversity Strategy provides a framework for action at all levels that will enhance the ability to ensure the productivity, diversity and integrity of natural systems and, as a result, the ability as a nation to develop sustainably.

D2. Air Contaminants

Air pollution is a broad term applied to any chemical, physical, or biological agent that modifies the natural characteristics of the atmosphere. Examples include particulate matter and ground-level ozone. Air pollutants fall into four main categories: criteria air contaminants (e.g. SO₂, NO_x, volatile organic compounds), persistent organic pollutants (e.g. dioxins and furans), heavy metals (e.g. mercury) and toxics (e.g. benzene). These contaminants are undesirable because of their impact on human health and the environment, and are listed as toxic substances in Schedule I of the Canadian Environmental Protection Act. Greenhouse gases are included in Schedule I, and are considered in the quantitative modelling of this analysis.

Sources of air pollution include current patterns of energy production and consumption, manufacturing industries and the production and use of products.  The Joint Study indicates that some manufacturing sectors (e.g. motor vehicles and parts, transport equipment) are expected to have long-run increases in output due to a CETA between Canada and the EU.

The Federal Government, along with other levels of government, industry, non-government organizations, and individuals have taken action to reduce emissions of harmful air pollutants from human sources. 

The Canadian Council of Ministers of the Environment (CCME) serves as a principal forum for parties to develop national strategies, norms, and guidelines that each environment ministry across the country can use, including for air pollution.  The CCME comprises the environment ministers from the federal, provincial and territorial governments, who discuss national environmental priorities and determine work to be carried out under the auspices of CCME.  The Council seeks to achieve positive environmental results, focusing on issues that are national in scope and that require collective attention by a number of governments.  For air pollution in particular, governments have engaged in a variety of activities directed at specific issues, such as acid rain, ozone-depleting substances, and standards for toxic substances. 

The CCME’s Air Quality Management System (AQMS)^{Footnote 68} is a proposed comprehensive approach for reducing air pollution in Canada. It is the product of close collaboration by the federal, provincial, and territorial governments and stakeholders. When implemented in 2013, the AQMS will include new Canadian ambient air quality standards, local air quality management by provinces in air zones, and base-level industrial emissions requirements for key sectors and equipment groups. For greenhouse gases, the Federal Government is taking a sector-by-sector approach to developing regulations. Recently proposed electricity regulations will reduce both greenhouse gas and air pollutant emissions from coal-fired electricity, and stringent vehicle regulations will improve fuel efficiency and reduce greenhouse gas emissions from light duty vehicles and trucks. 

D3. Waste

The amount of solid waste generated in Canada includes wastes disposed in landfills and incinerators plus wastes diverted for recycling and reuse. The generation and management of solid waste raise important environmental, economic and social issues for Canadians. Solid waste can pollute land, air, and water. Collection and disposal of solid waste costs Canadians billions of dollars per year. Waste diversion (recycling, composting, re-use) reduces the material sent to landfills and lessens the need to extract, process, and produce materials and products, and results in lower greenhouse gas and toxic emissions. Reducing the amount of waste Canadians produce is the most effective way to decrease waste generated.  Increases in production from a CETA with the EU, as predicted by the Joint Study, could result in increases in waste from industrial processes, resource extraction, and packaging.

In Canada, the responsibility for managing and reducing waste is shared among the federal, provincial, territorial and municipal governments. Municipal governments are responsible for collecting and managing waste from homes for recycling, composting, and disposal, while provincial and territorial authorities are responsible for the approval, licensing and monitoring of waste management operations. The Federal Government, through Environment Canada, exercises responsibilities with respect to international and interprovincial movements of hazardous waste, releases of toxic substances to the air, land, and water, and activities on federal lands.  The CCME is engaged in developing tools and resources for environmentally sound waste management in Canada, promoting sustainable use of materials and resources to reduce negative environmental impacts, and encouraging waste minimization.  For example, the CCME has endorsed principles for electronics product stewardship, developed guidelines for hazardous waste landfills, and is now developing a Canada-wide approach to optimizing packaging reductions.^{Footnote 69}

D4. Chemicals

The Joint Study expects a long-term 0.6% increase in the production of the chemical products sector as a result of a Canada-EU CETA, along with other sectors that use chemicals as part of their processes.

Chemical substances are everywhere around us – in the environment, our food, clothes, and even our bodies. Many of these chemical substances are used to improve the quality of our lives. Most of these chemical substances are not harmful to the environment or human health.

As discussed under the Trade in Goods section of the qualitative analysis, the Government of Canada manages chemical substances of concern to protect human health and the environment through the Chemicals Management Plan. Canada’s Chemicals Management Plan was launched in 2006, and is jointly managed by Environment Canada and Health Canada.  Chemical substances of concern are assessed and measures are put in place to eliminate or minimise potential risks of those found to be toxic. Monitoring and surveillance activities under Canada’s Chemicals Management Plan are national in scope, and are therefore discussed further below. 

D5. National Monitoring and Tracking Programs

In addition to the risk management frameworks outlined in specific areas above, Canada has established several ongoing national monitoring programs for the environment. These include, but are not limited to:

• Monitoring and Surveillance Activities under Canada's Chemicals Management Plan – A key element of the Chemicals Management Plan is the monitoring and surveillance of levels of harmful chemicals in Canadians and their environment. Environmental and human biomonitoring and surveillance are essential to identify and track exposure to hazards in the environment and associated health implications.
• National Pollutant Release Inventory – is Canada's legislated, publicly accessible inventory of pollutant releases (to air, water and land), disposals and transfers for recycling.
• Canadian Environmental Quality Guidelines^{Footnote 70} – have been established by the Canadian Council of Ministers of the Environment (CCME) to provide nationally endorsed science based goals for the quality of atmospheric, aquatic, and terrestrial ecosystems.
• Canadian Environmental Sustainability Indicators (CESI)^{Footnote 71} – This program provides data and information to track Canada’s performance on key environmental sustainability issues including climate change and air quality, water quality and availability, and protected nature. The environmental indicators are based on objective and comprehensive information and convey environmental trends in a straightforward and transparent manner. Indicators are added and updated throughout the year as new data become available.

VII. Environmental Cooperation

Canada and the EU have been working since 1975 to increase their bilateral environmental cooperation.  The Canada-EU High Level Dialogue on Environment provides an opportunity for both sides to meet and exchange views on policies on a regular basis.  It is co-chaired by senior officials from Environment Canada and the EU’s Directorate General Environment.  There is also work on regulatory cooperation to exchange information on life cycle approaches to managing electrical and electronic products and waste, and on the regulation of chemical substances and execution of regulatory regimes.^{Footnote 72}

Canada and the EU have also made several other bilateral commitments to environmental cooperation.  These existing dialogue frameworks provide the basis for current and future environmental cooperation to enhance positive impacts of a CETA between Canada and the EU and mitigate any negative impacts. 

• The 1995 Agreement for Scientific and Technical Cooperation between Canada and the European Community seeks to encourage cooperation in research and development in areas of mutual interest.  One such area is the environment.  The agreement covers the exchange of information, researchers, laws and regulations as well as the shared use of research facilities.^{Footnote 73} 
• The Joint Statement^{Footnote 74} from the Canada-EU Summit in 2002 commits both partners to working toward sustainable development and exploring cooperation in the following areas: environment, including climate change, environmental monitoring, sustainable development, and resource management.  Moreover, further cooperation was planned for the northern regions where Canada and the EU share common challenges: environmental threats from climate change, arctic pollution, including persistent organic pollutants, and the difficulties posed by geographical remoteness. 
• The 2004 Canada-EU Partnership Agenda further underscored the importance of dialogue and cooperation on environmental issues including climate change, fisheries, forestry and the North.^{Footnote 75}

Canadian researchers have also been active participants on environmental research projects funded by the Seventh Framework Programme.  Their studies have looked a range of current environmental issues including climate change, forests, the Arctic and environmental technology verification.  This research allows for work on issues of mutual interest so that results and findings can be disseminated and used to improve technological process and improve quality of life. 

Recognizing that tackling today’s environmental challenges is too large a task to be done on solely a bilateral basis, and that environmental issues transcend geographic boundaries, Canada and the EU have been active international partners in working with other nations around the world. International agreements help to reinforce international norms on the environment and protect resources for future generations.

Canada has ratified many multilateral environmental agreements such as the Convention on International Trade in Endangered Species of Wild Fauna and Flora, the Convention on Biological Diversity, the Montreal Protocol on Substances that Deplete the Ozone Layer, the Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and their Disposal, the Rotterdam Convention on the Prior Informed Consent Procedure for Certain Hazardous Chemicals and Pesticides in International Trade, and the Stockholm Convention on Persistent Organic Pollutants.

(Note: A non-exhaustive list of treaties signed between Canada and European Organizations is presented in Appendix C.)

VIII. Conclusion of the Initial Environmental Assessment

Closer economic ties with the EU through a CETA would significantly enhance Canada’s global competitive advantage. According to the Joint Study, greater trade liberalization has the potential to bring substantial economic benefits to Canada, as well as to the EU. The study suggests that an agreement could provide a $12 billion boost to Canada’s GDP and generate an increase of at least 20% in bilateral trade by the time an agreement is fully implemented.

A strong rules-based trading system and efficiently regulated markets are key building blocks for economic growth and development. The reduction of trade barriers plays a key role in facilitating the exchange of environmentally friendly technologies and the establishment of investment rules that help create conditions for technology transfer. The identification of likely and important environmental effects of a proposed trade agreement enables negotiators to consider whether existing mechanisms, such as federal, provincial and territorial regulatory frameworks and environmental assessments of new development projects are sufficient to mitigate any identified impact as a result of a proposed agreement and to examine the need for additional mitigation. 

This Initial Environmental Assessment is part of the process designed to ensure that negotiations of trade agreements include appropriate consideration of environmental impacts.

The Initial Environmental Assessment is designed to scope out the main environmental issues likely to arise as a result of negotiations. To that end, this report assessed environmental impacts by performing both qualitative and quantitative analysis to help negotiators and the Canadian public to better understand potential economic and environmental impacts from an agreement. 

The qualitative analysis provided a brief overview of potential impacts in all negotiating areas, with a more detailed discussion of four key areas where impacts may be more likely.  Potential environmental impacts and corresponding opportunities for mitigation of negative impacts and enhancement of positive impacts were identified through the qualitative analysis with regards to trade in goods, services, government procurement, and investment. Opportunities for mitigation of negative impacts and enhancement of positive impacts were discussed.  The qualitative assessment noted Canada’s extensive environmental regulatory framework, which is expected to help mitigate potential impacts and seek to ensure that increased economic activity resulting from the agreement would not jeopardize its commitment to sustainable development. 

The quantitative analysis prepared by the Office of the Chief Economist at Foreign Affairs and International Trade Canada used economic modelling and environmental data to determine the potential effects of a Canada-EU CETA across the Canadian economy based on three environmental indicators: greenhouse gas emissions, energy use and water use.  The quantitative analysis identified that marginal increases in greenhouse gas emissions and use of water and energy would likely occur as the result of a CETA with the EU, and noted that a Canada-EU CETA would lead to a shift toward a more favourable Canadian industry composition in terms of emissions as net increases in emissions as well as energy and water uses as a result of a Canada-EU CETA are smaller than the corresponding increase in GDP and production output.

The quantitative analysis shows that the net impact of increased bilateral trade with the EU on Canada’s environment would be minor based on projected changes in GHG emissions, energy use and water use. 
Both qualitative and quantitative analysis of potential economic and environmental changes indicated that significant environmental impacts are unlikely as a result of a Comprehensive Economic and Trade Agreement with the European Union.

Pursuant to the Framework, the next phase of the environmental assessment process will be to conduct a Final Environmental Assessment. The Final Environmental Assessment will include a discussion of any subsequent analysis undertaken and  document comments received in response to the Initial Environmental Assessment concerning the anticipated environmental impacts of the agreement on Canada. The Final Environmental Assessment will be released after negotiations conclude.

Following the conclusion of the Final Environmental Assessment report, follow-up and monitoring could, if warranted, be undertaken in order to review any mitigation or enhancement measures ultimately recommended by the Final Environmental Assessment report. Monitoring and follow-up activities can be undertaken anytime during the implementation of a concluded trade agreement in order to gauge the performance of its provisions from an environmental perspective.

Appendix A – Economic and Environmental Analysis Tables

Table 1: Changes in Canada’s Exports to the EU in 2007 Prices

	Pre CETA Exports ($ millions)	Post CETA Exports ($ millions)	Changes in Exports ($ millions)	Percent Changes in Exports (%)
Primary agriculture	2,780	3,942	1,162	41.8
Processed foods	1,415	3,420	2,005	141.7
Forestry	88	91	3	3.7
Fishing	214	248	34	16.1
Coal	1,189	1,187	-1	-0.1
Oil & gas extraction	4,294	4,282	-12	-0.3
Minerals	5,392	5,278	-113	-2.1
Beverages & tobacco	97	115	18	17.8
Textiles	229	400	170	73.6
Wearing apparel	232	372	140	60.0
Leather products	24	31	7	33.3
Wood products	636	742	106	16.7
Paper product, publishing	2,431	2,669	238	9.7
Petroleum, coal products	1,476	2,365	889	60.2
Chemical products	2,365	3,179	814	34.5
Mineral products	175	210	35	19.7
Ferrous metals	356	420	65	18.1
Metals	4,312	5,575	1,263	29.3
Metal products	335	425	90	26.7
Motor vehicles & parts	1,300	1,675	375	28.8
Transport equipment	3,765	4,635	870	23.1
Electronic equipment	1,368	1,681	313	22.9
Machinery & equipment	3,758	4,610	852	22.7
Other manufactures	376	439	63	16.9
Utilities	495	594	98	19.8
Construction	97	141	44	45.7
Domestic trade	1,538	1,844	306	19.9
Transportation services	5,123	6,330	1,208	23.6
Comm. & info. Services	1,667	1,841	173	10.3
Financial services	978	1,125	147	14.9
Insurance services	1,714	2,023	309	18.1
Other business services	7,860	8,317	457	5.8
Consumer services	1,783	2,091	307	17.2
Public services	1,447	1,622	175	12.1
Total	61,310	73,918	12,608	20.6

Table 2: Changes in Canada’s Imports from the EU in 2007 Prices

	Pre CETA Imports ($ millions)	Post CETA Imports ($ millions)	Changes in Imports ($ millions)	Percent Changes in Imports (%)
Primary agriculture	536	570	34	6.3
Processed foods	2,509	10,694	8,184	326.2
Forestry	6	7	1	1.5
Fishing	100	91	-9	-9.2
Coal	19	19	0	0.0
Oil & gas extraction	2,734	2,772	38	1.4
Minerals	198	212	13	6.7
Beverages & tobacco	1,609	1,845	237	14.7
Textiles	782	1,330	548	70.2
Wearing apparel	632	1,027	395	62.5
Leather products	682	905	223	32.8
Wood products	1,122	1,468	345	30.7
Paper product, publishing	1,306	1,422	116	8.9
Petroleum, coal products	715	1,243	527	73.8
Chemical products	10,171	13,032	2,862	28.1
Mineral products	918	1,121	203	22.2
Ferrous metals	1,343	1,548	206	15.3
Metals	423	505	82	19.4
Metal products	1,258	1,656	398	31.6
Motor vehicles & parts	5,073	6,000	927	18.3
Transport equipment	3,426	3,695	269	7.9
Electronic equipment	927	1,071	144	15.5
Machinery & equipment	11,456	13,394	1,938	16.9
Other manufactures	1,219	1,518	298	24.4
Utilities	460	539	79	17.3
Construction	378	539	162	42.9
Domestic trade	4,657	5,634	977	21.0
Transportation services	8,214	9,862	1,648	20.1
Comm. & info. Services	2,237	2,452	214	9.6
Financial services	4,240	4,882	642	15.1
Insurance services	4,991	5,919	928	18.6
Other business services	20,954	22,280	1,327	6.3
Consumer services	5,888	6,724	836	14.2
Public services	2,010	2,292	282	14.0
Total	103,191	128,267	25,076	24.3

Table 3: Changes in Canadian Output – Pre and Post-CETA in 2007 prices

	Pre CETA Output ($ millions)	Post CETA Output ($ millions)	Changes in Output ($ millions)	Percent Changes in Output (%)
Primary agriculture	43,867.4	43,946.4	79.0	0.2
Processed foods	15,041.4	15,012.8	-28.6	-6.0
Forestry	3,600.5	3,594.4	-6.1	-0.2
Fishing	1,806.9	1,806.7	-0.2	-0.2
Coal	53,378.5	53,389.2	10.7	-0.0
Oil & gas extraction	20,152.5	20,406.4	253.9	0.0
Minerals	93,854.5	88,182.9	-5,671.6	1.3
Beverages & tobacco	17,036.0	16,906.6	-129.5	-0.8
Textiles	8,786.4	8,915.6	129.2	1.5
Wearing apparel	6,431.8	6,631.8	200.0	3.1
Leather products	981.6	933.8	-47.8	-4.9
Wood products	39,747.8	39,564.9	-182.8	-0.5
Paper products, publishing	69,414.0	69,518.1	104.1	0.2
Petroleum, coal products	38,640.6	38,961.4	320.7	0.8
Chemical products	101,368.7	101,977.0	608.2	0.6
Mineral products	22,186.8	22,175.7	-11.1	-0.1
Metals	76,169.7	82,012.0	5,842.2	7.7
Metal products	42,508.6	42,823.1	314.6	0.7
Motor vehicles & parts	111,935.7	117,745.1	5,809.5	5.2
Transport equipment	22,145.8	23,769.0	1,623.3	7.3
Electronic equipment	22,547.6	23,803.5	1,255.9	5.6
Machinery & equipment	66,063.4	67,239.3	1,175.9	1.8
Other manufactures	17,097.5	17,065.0	-32.5	-0.2
Utilities	35,912.1	36,260.4	348.3	1.0
Construction	230,372.5	231,892.9	1,520.5	0.7
Domestic trade	325,607.2	326,584.1	976.8	0.3
Transportation services	96,150.5	95,737.0	-413.4	-0.4
Comm. & info. Services	66,573.7	66,660.2	86.5	0.1
Financial services	114,970.2	114,763.3	-206.9	-0.2
Insurance services	33,087.1	32,620.6	-466.5	-1.4
Other business services	287,830.3	288,031.8	201.5	0.1
Consumer services	48,314.1	48,140.2	-173.9	-0.4
Public services	448,813.8	450,743.7	1,929.9	0.4
Total	2,582,395.4	2,597,815.1	15,419.7	0.6

Table 4: Changes in GHG Emissions under a Canada-EU CETA

	Direct GHG intensity (kt/millions $)	Pre-CETA GHG emissions (kilo tonnes)	Post-CETA GHG emissions (kilo tonnes)	Scale effect (kilo tonnes)	Composition effect (kilo tonnes)	Change in GHG emissions (kilo tonnes)	Technique effect (kilo tonnes)	Technique effect (in %)
Primary agriculture	1.60	70,187.9	70,314.3	419.1	-292.7	126.4	-7.5	-5.9
Processed foods	0.07	6,569.8	6,172.8	39.2	-436.2	-397.0	-63.1	15.9
Forestry	0.28	4,211.6	4,203.6	25.1	-33.1	-8.0	-0.5	6.6
Fishing	0.42	1,512.2	1,509.7	9.0	-11.6	-2.6	-0.2	6.6
Coal	0.68	1,228.7	1,228.6	7.3	-7.5	-0.1	0.0	-7.6
Oil & gas extraction	0.95	50,709.5	50,719.7	302.8	-292.6	10.1	0.7	6.8
Minerals	0.29	5,844.2	5,917.9	34.9	38.7	73.6	-0.5	-0.7
Beverages & tobacco	0.07	1,192.5	1,183.5	7.1	-16.2	-9.1	-1.4	15.9
Textiles	0.07	615.1	624.1	3.7	5.4	9.0	-2.9	-31.9
Wearing apparel	0.01	64.3	66.3	0.4	1.6	2.0	-0.1	-5.4
Leather products	0.02	19.6	18.7	0.1	-1.1	-1.0	-0.1	9.6
Wood products	0.08	3,179.8	3,165.2	19.0	-33.6	-14.6	4.4	-29.7
Paper product, publish	0.28	19,435.9	19,465.1	116.0	-86.9	29.2	-10.9	-37.3
Petroleum, coal pro	0.38	14,683.4	14,805.3	87.7	34.2	121.9	-17.6	-14.4
Chemical products	0.68	68,930.7	69,344.3	411.6	2.0	413.6	-45.9	-11.1
Mineral products	0.79	17,527.6	17,518.8	104.7	-113.4	-8.8	1.2	-13.6
Metals	0.05	3,808.5	4,100.5	22.7	269.3	292.0	1.8	0.6
Metal products	0.39	16,578.4	16,701.0	99.0	23.7	122.7	-3.9	-3.2
Motor vehicles & parts	0.03	3,358.1	3,532.4	20.0	154.2	174.3	-12.6	-7.2
Transport equipment	0.02	442.9	475.4	2.6	29.8	32.5	-2.4	-7.2
Electronic equipment	0.01	225.5	238.0	1.3	11.2	12.6	0.1	0.6
Machinery & equip.	0.03	1,981.9	2,017.2	11.8	23.4	35.3	-0.9	-2.4
Other manufactures	0.03	512.9	512.0	3.1	-4.0	-1.0	-0.0	1.0
Utilities	2.72	97,680.8	98,628.3	583.2	364.3	947.5	-177.9	-18.8
Construction	0.27	62,200.6	62,611.1	371.4	39.1	410.5	-34.6	-8.4
Domestic trade	0.10	32,560.7	32,658.4	194.4	-96.7	97.7	-7.0	-7.1
Transportation services	0.76	73,074.4	72,760.2	436.3	-750.5	-314.2	-0.8	0.3
Comm. & info. Services	0.11	7,323.1	7,332.6	43.7	-34.2	9.5	-0.7	-7.1
Financial services	0.04	4,598.9	4,590.5	27.5	-35.7	-8.3	0.6	-7.1
Insurance services	0.01	330.9	326.2	2	-6.6	-4.7	0.3	-7.1
Other business services	0.03	8,634.9	8,641.0	51.6	-45.5	6.0	-0.4	-7.1
Consumer services	0.03	1,449.4	1,444.2	8.7	-13.9	-5.2	0.4	-7.1
Public services	0.08	35,905.1	36,059.5	214.4	-60.0	154.4	-11.0	-7.1
Total		616,579.8	618,886.2	3,681.4	-1,375.0	2,306.4	-393.2

Note: The scale and composition effects are measured using the 2007 GHG direct intensities from Statistics Canada. The technique effect is measured using the 2007 and 2014 GHG direct intensities provided by Environment Canada.

Table 5: Changes in Energy Use under a Canada-EU CETA

	Direct energy intensity (terajoules/millions $)	Baseline Scenario energy use (terajoules)	Post-simulation energy use (terajoules)	Scale effect (tera-joules)	Composition effect (terajoules)	Change from baseline scenario (terajoules)	Technique effect (terajoules)	Technique effect (in %)
Primary agriculture	4.05	177,663.0	177,983.0	1,060.8	-740.8	319.9	-27.7	-8.7
Processed foods	1.84	172,692.3	162,256.9	1,031.1	-11,466.6	-10,435.5	1,800.2	-17.3
Forestry	2.65	39,859.7	39,784.0	238.0	-313.7	-75.7	-4.3	5.7
Fishing	5.68	20,451.1	20,416.3	122.1	-156.9	-34.8	-2.0	5.7
Coal	5.98	10,805.7	10,804.6	64.5	-65.6	-1.1	0.1	-9.2
Oil & gas extraction	9.48	503,359.0	503,459.7	3,005.4	-2,904.7	100.7	23.8	23.6
Minerals	6.30	126,960.7	128,560.4	758.0	841.7	1,599.7	35.2	2.2
Beverages & tobacco	4.30	73,254.7	72,698.0	437.4	-994.1	-556.7	96.1	-17.3
Textiles	2.17	19,066.6	19,346.9	113.8	166.4	280.3	-62.0	-22.0
Wearing apparel	0.42	2,701.4	2,785.4	16.1	67.9	84.0	-2.2	-2.6
Leather products	0.68	667.5	634.9	4.0	-36.5	-32.5	-3.0	9.2
Wood products	2.45	97,382.0	96,934.0	581.4	-1,029.4	-448.0	-126.4	28.2
Paper product, publis	13.00	902,382.2	903,735.8	5,387.8	-4,034.2	1,353.6	-8.3	-0.6
Petroleum, coal prod.	5.96	230,298.2	232,209.7	1,375.0	536.5	1,911.5	-210.4	-11.0
Chemical products	8.13	824,127.7	829,072.4	4,920.5	24.2	4,944.8	-806.6	-16.3
Mineral products	9.55	211,884.3	211,778.3	1,265.1	-1,371.0	-105.9	21.5	-20.3
Metals	1.25	95,212.2	102,513.2	568.5	6,732.5	7,301.0	995.0	13.6
Metal products	8.43	358,347.7	360,999.5	2,139.5	512.2	2,651.8	207.2	7.8
Motor vehicle & part	0.69	77,235.6	81,244.1	461.1	3,547.4	4,008.5	288.0	7.2
Transport equipment	1.03	22,810.2	24,482.2	136.2	1,535.8	1,672.0	120.1	7.2
Electronic equipment	0.36	8,117.1	8,569.3	48.5	403.7	452.1	115.0	25.4
Machinery & equip.	0.67	44,262.5	45,050.3	264.3	523.6	787.9	-31.9	-4.0
Other manufactures	0.71	12,139.3	12,116.2	72.5	-95.5	-23.0	0.4	-1.8
Utilities	37.74	1,355,248.6	1,368,394.5	8,091.6	5,054.3	13,145.9	-2,849.0	-21.7
Construction	0.58	133,616.0	134,497.9	797.8	84.1	881.9	-80.7	-9.1
Domestic trade	1.79	582,836.9	584,585.4	3,479.9	-1,731.4	1,748.5	-27.1	-1.6
Transportation serv.	10.61	1,020,156.7	1,015,770.1	6,090.9	-10,477.6	-4,386.7	-79.4	1.8
Com. & info. Service	1.81	120,498.4	120,655.0	719.4	-562.8	156.6	-2.4	-1.6
Financial services	0.94	108,072.0	107,877.4	645.3	-839.8	-194.5	3.0	-1.6
Insurance services	0.09	2,977.8	2,935.9	17.8	-59.8	-42.0	0.7	-1.6
Other business serv.	0.86	247,534.0	247,707.3	1,477.9	-1,304.7	173.3	-2.7	-1.6
Consumer services	2.31	111,605.6	111,203.9	666.4	-1,068.1	-401.8	6.2	-1.6
Public services	2.15	964,949.8	969,099.1	5,761.3	-1,612.0	4,149.3	-64.4	-1.6
Total		8,679,176.6	8,710,161.5	51,819.9	-20,834.9	30,984.9	-677.2

Note: The technique effect is measured using the 2007 and 2014 Energy direct intensities provided by Environment Canada whereas both the scale and composition effects are measured using the 2007 energy data from Statistics Canada

Table 6: Changes in Water Use under a Canada-EU CETA

	Direct water use intensity (m3/$)	Baseline scenario water use (thousands of m3)	Post-simulation water use (thousands of m3)	Scale effect (thousands of m3)	Composition effect (thousands of m3)	Change from baseline scenario (thousands of m3)
Primary agriculture	0.0842	3,692,802.6	3,699,452.8	22,048.2	-15,398.1	6,650.2
Processed foods	0.0040	376,450.5	353,702.3	2,247.6	-24,995.8	-22,748.2
Forestry
Fishing
Coal
Oil & gas extraction	0.0018	97,042.1	97,061.5	579.4	-560.0	19.4
Minerals	0.0161	324,394.7	328,482.1	1,936.8	2,150.5	4,087.4
Beverages & tobacco	0.0050	84,600.7	83,957.7	505.2	-1,148.1	-643.0
Textiles	0.0016	14,480.1	14,692.9	86.5	126.4	212.9
Wearing apparel
Leather products
Wood products	0.0031	124,609.2	124,035.9	743.9	-1,317.2	-573.2
Paper products, publish	0.0630	4,372,111.3	4,378,669.5	26,104.1	-19,546.0	6,558.2
Petroleum, coal product	0.0061	234,200.9	236,144.8	1,398.3	545.6	1,943.9
Chemical products	0.0092	935,126.4	940,737.2	5,583.3	27.5	5,610.8
Mineral products	0.0026	57,219.8	57,191.2	341.6	-370.2	-28.6
Metals	0.0280	2,134,201.4	2,297,854.4	12,742.5	150,910.5	163,653.0
Metal products	0.0007	30,478.7	30,704.2	182.0	43.6	225.5
Motor vehicles & parts
Transport equipment	0.0002	4,340.6	4,658.7	25.9	292.3	318.2
Electronic equipment
Machinery & equip.	0.0001	9,711.3	9,884.2	57.9	114.9	172.9
Other manufactures	0.0005	9,164.3	9,146.9	54.7	-72.1	-17.4
Utilities	0.6366	22,861,737.9	23,083,496.8	136,498.2	85,260.6	221,758.9
Construction
Domestic trade
Transportation services
Comm. & info Services
Financial services
Insurance services
Other business services	0.0006	181,333.1	181,460.0	1,082.7	-955.7	126.9
Consumer services	0.0006	30,437.9	30,328.3	181.7	-291.3	-109.6
Public services
Total		35,574,443.4	35,961,661.5	212,400.7	174,817.3	387,218.0

Note: Data were not available for some sectors due to the detail of the source information. The technique effect could not be calculated since there are no data on water use projected to the year 2014. Both the scale and composition effects are measured using the 2007 water use data from Statistics Canada.

Appendix B – Glossary and Acronyms

• AAFC – Agriculture and Agri-Food Canada
• AQMS – Air Quality Management System
• ASEAN – Association of Southeast Asian Nations
• BMP – Beneficial Management Practices
• CCME – Canadian Council of Ministers of the Environment
• CETA – Canada-EU Comprehensive Economic and Trade Agreement
• CDIA – Canadian Direct Investment Abroad
• CEPA – Canadian Environmental Protection Act, 1999
• CESI – Canadian Environmental Sustainability Indicators
• CGE – Computable General Equilibrium Model
• CH₄ – Methane
• CITES – Convention on International Trade in Endangered Species of Wild Flora and Fauna
• CMP – Canada’s Chemicals Management Plan
• CO₂ – Carbon Dioxide
• DFAIT – Foreign Affairs and International Trade Canada
• DG Environment – Directorate General for the Environment
• EA – Environmental Assessment
• EAAG – Environmental Assessment Advisory Group
• EC – European Commission
• E3MC – The Energy-Economy-Environment Model for Canada, which is Environment Canada’s emission forecasting model. Essentially the model consists of the Energy 2020 and TIM models linked together.
• EU – European Union
• E-Waste – Electronic Waste
• FDI – Foreign Direct Investment
• FIPA – Foreign Investment Promotion and Protection Agreement
• FP7 – Framework Programme 7
• FSDS – Federal Sustainable Development Strategy
• FTA – Free Trade Agreement
• GATS – General Agreement on Trade in Services
• GATT – General Agreement on Tariffs and Trade
• GDP – Gross Domestic Product
• GHG – Greenhouse Gases
• GPA – Agreement on Government Procurement
• GTAP – Global Trade Analysis Project
• ICT – Information and Communications Technology
• IP – Intellectual Property
• IT – Information Technology
• kt – Kilo Tonne
• LDC – Least Developed Country
• MFN – Most Favoured Nation
• NAFTA – North American Free Trade Agreement
• NAHARP -- National Agri-Environmental Health Analysis and Reporting Program
• NAMA – Non-Agricultural Market Access
• NCGAVS – National Carbon and Greenhouse Gas Accounting and Verification System
• NPRI – National Pollutant Release Inventory
• NRCAN – Natural Resources Canada
• N₂O – Nitrous Oxide
• PM – Particulate Matter
• R&D – Research and Development
• SO_x – Sulphur Dioxide
• SPS – WTO Agreement on the Application of Sanitary and Phytosanitary Measures
• S&T – Science and Technology
• TAC – Total Allowable Catch
• TBS – Treasury Board Secretariat
• TJ – Terajoule
• TRS – Total Reduced Sulphur
• TRQ – Tariff Rate Quota
• UNFA – United Nations Fisheries Agreement
• WEB – Watershed Evaluation of Beneficial Management Practices
• WTO – World Trade Organization

Appendix C – Illustrative list of treaties signed by Canada and European Organizations

European Community

• Exchange of Letters concerning the amendment of Annex V to the Agreement between the European Community and the Government of Canada on sanitary measures to protect public and animal health in respect of trade in live animals and animal products
  Signed: 22 March and 16 April 2010
• Agreement on Air Transport between Canada and the European Community and its Member States
  Signed: 17 and 18 December 2009
• Agreement on Civil Aviation Safety between Canada and the European Community
  Entry into force: 26 July 2011
• Agreement between the Government of Canada and the European Community on the conclusion of GATT Article XXIV: 6 Negotiations
  Entry into force: 25 June 2007
• Agreement between the Government of Canada and the European Community establishing a Framework for Cooperation in Higher Education, Training and Youth
  Entry into force: 01 March 2007
• Agreement between the Government of Canada and the European Community on the Processing of Advance Passenger Information and Passenger Name Record Data
  Entry into force: 22 March 2006
• Exchange of Letters constituting an Agreement between the Government of Canada and the European Community amending Annex V and Annex VIII to the Agreement between the Government of Canada and the European Community on Sanitary Measures to Protect Public and Animal Health in respect of Trade in Live Animals and Animal Products, done at Ottawa on 17 December 1998
  Entry into force: 15 March 2005
• Agreement between Canada and the European Community on Trade in Wine and Spirits Drinks
  Entry into force: 01 June 2004
• Agreement in the form of an exchange of letters between the European Community and Canada pursuant to Article XXVIII of GATT 1994 for the modification of concessions with respect to cereals provided for in EC Schedule CXL annexed to the GATT 1994
  Entry into force: 11 July 2005
• Agreement between the Government of Canada and the European Community Renewing a Cooperation Programme in Higher Education and Training Entry into force: 01 March 2001
  Status: Terminated
• Agreement between the Government of Canada and the European Community on Sanitary Measures to Protect Public and Animal Health in respect of Trade in Live Animals and Animal Products
  Entry into force: 17 December 1998
• Agreement amending the Agreement for Scientific and Technological Cooperation between Canada and the European Community
  Entry into force: 30 April 1999
• Agreement on Mutual Recognition between the European Community and Canada
  Entry into force: 01 November 1998
• Agreement between Canada and the European Community on Customs Cooperation and Mutual Assistance in Customs Matters
  Entry into force: 01 January 1998
• Agreement for the Conclusion of Negotiations between Canada and the European Community under Article XXIV:6
  Entry into force: 25 July 1996
• Exchange of Letters constituting an Agreement between Canada and the European Community on the Conclusion of Negotiations Under Article XXIV:6
  Entry into force: 25 July 1996
• Agreement for Scientific and Technological Cooperation between Canada and the European Community
  Entry into force: 27 February 1996

Euratom

• Agreement between Canada and the European Atomic Energy Community for Co-operation in the Area of Nuclear Research
  Entry into force: 29 January 1999
• Exchange of Letters between the Government of Canada and the European Atomic Energy Community (EURATOM) amending the Agreement for Co-operation in the Peaceful Uses of Atomic Energy signed October 6, 1959
  Entry into force: 15 July 1991
• Exchange of Letters between the Government of Canada and the European Atomic Energy Community (EURATOM) constituting an Agreement for Co-operation in the Peaceful Uses of Atomic Energy
  Entry into force: 21 June 1985
• Agreement in the form of Exchange of Letters between the Government of Canada and the European Atomic Energy Community giving effect to the Requirement, as set out in Paragraph 5 of the Exchange of Letters initialled on November 20, 1984
  Entry into force: 20 June 1985
• Agreement in the form of an Exchange of Letters between the European Atomic Energy Community (EURATOM) and the Government of Canada intended to replace the ''Interim Arrangement concerning Enrichment, Reprocessing and Subsequent Storage of Nuclear Material within the Community and Canada'' constituting Annex C of the Agreement in the form of an Exchange of Letters of 16 January 1978 between EURATOM and the Government of Canada
  Entry into force: 18 December 1981
• Exchange of Letters between the Government of Canada and the European Atomic Energy Community (EURATOM) to amend the Agreement between the Government of Canada and the European Atomic Energy Community for Co-operation in the Peaceful Uses of Atomic Energy of October 6, 1959, particularly insofar as it relates to Safeguards
  Entry into force: 16 January 1978
• Exchange of Notes between Canada and EURATOM bringing into force the Agreement signed at Brussels on October 6, 1959 for Co-operation in the Peaceful Uses of Atomic Energy
  Entry into force: 18 November 1959
• Agreement between the Government of Canada and the European Atomic Energy Community (EURATOM) for co-operation in the Peaceful Uses in Atomic Energy
  Entry into force: 18 November 1959

European Coal and Steel Community

• Protocol concerning Commercial and Economic Co-operation between Canada and the European Coal and Steel Community (ECSC)
  Entry into force: 01 February 1982

European Communities

• Agreement between the Government of Canada and the European Communities regarding the Application of their Competition Laws
  Entry into force: 17 June 1999
• Exchange of Letters between the Government of Canada and the European Communities constituting an Agreement on the terms of settlement of the World Trade Organization dispute (EC - Trade Description of Scallops) (WT/DS7)
  Entry into force: 25 June 1996
• Framework Agreement for Commercial and Economic Cooperation between Canada and the European Communities
  Entry into force: 01 October 1976

European Economic Community

• Agreement between Canada and the European Economic Community concerning Trade and Commerce in Alcoholic Beverages
  Entry into force: 28 February 1989
• Agreement in the form of an Exchange of Letters between the European Economic Community and the Government of Canada concerning their Fisheries Relations
  Entry into force: 01 January 1984
• Agreement on Fisheries between the Government of Canada and the European Economic Community
  Entry into force: 30 December 1981
• Agreement in the form of an Exchange of Letters between the Government of Canada and the European Economic Community concerning their Fisheries Relations
  Entry into force: 30 December 1981
• Agreement in the form of an Exchange of Letters providing for the Provisional Application of two Agreements concerning Fisheries in the form of Exchanges of Letters between the European Economic Community and the Government of Canada
  Entry into force: 14 April 1980
• Agreement with respect to Quality Wheat
  Entry into force: 29 March 1962
• Agreement with Respect to Ordinary Wheat
  Entry into force: 29 March 1962

European Police Office

• Co-operation Agreement between the Government of Canada and the European Police Office
  Entry into force: 21 November 2005

European Space Agency

• Cooperation Agreement between the Government of Canada and the European Space Agency
  Signed: 15 December 2010
• Arrangement between the Government of Canada and the European Space Agency concerning participation by the Government of Canada in the development and validation activities of the GalileoSat programme
  Entry into force: 06 October 2003
• Arrangement between the Government of Canada and the European Space Agency concerning participation by the Government of Canada in the InfoTerra/TerraSAR Element of the European Earth Watch Programme
  Entry into force: 22 September 2003
• Cooperation Agreement between the Government of Canada and the European Space Agency
  Entry into force: 21 June 2000
• Exchange of Notes constituting an Agreement between the Government of Canada and the European Space Agency to extend until 31 December 1999 the Cooperation Agreement signed in Montreal on May 31, 1989
  Entry into force: 22 October 1998
• Agreement between Government of Canada and the European Space Agency concerning the Participation of Canada in the Development and Exploitation Phases of the ERS-1 Programme
  Entry into force: 08 January 1985

European Union

• Agreement between Canada and the European Union establishing a framework for the participation of Canada in the European Union crisis management operations
  Entry into force: 01 December 2005

Appendix D – Illustrative list of non-legally binding instruments signed by Canada and European Organizations

European Atomic Energy Community

• Memorandum of Understanding for Cooperation between the Government of Canada and the European Atomic Energy Community (EURATOM) in the field of controlled nuclear fusion 1995, July 25
• Implementing Agreement between the European Atomic Energy Community represented by the Commission of the European Communities and Atomic Energy of Canada Limited designated as implementing agent by the Government of Canada on the involvement of Canada in the European Atomic Energy Community contribution to the engineering design activities (EDA) for the international thermonuclear experimental reactor (ITER) 1995, July 25
• Memorandum of Understanding between the European Atomic Energy Community and the Government of Canada on the involvement of Canada in the European Atomic Energy Community contribution to the International thermonuclear experimental reactor (ITER) conceptual design activities 1988, October 3
• Memorandum of Understanding between the Government of Canada and the European Atomic Energy Community represented by the Commission of the European Communities concerning co-operation in the field of fusion research and development 1986, March 6
• Cooperation Agreement between the Atomic Energy of Canada Limited and the European Atomic Energy Community in the field of nuclear waste management research
  In English only 1980, November 3

European Commission

• Memorandum of Understanding between the Government of Canada and the European Commission regarding the Importation of Beef from Animals not Treated with Certain Growth-Promoting Hormones and Increased Duties Applied by Canada to Certain Products of the European Union 2011, March 17
• Memorandum of understanding between the Department of Health of Canada and the Health Consumers Directorate General of the European Commission in the area of tobacco control 2009, June 16

European Communities

• Agreed Minute between Canada and the European Community concerning the signing of the Agreement on International Humane Trapping Standards 1997, December 15
• Convention entre la Communauté européenne et les conseillers d'entreprises et/ou intermédiaires membres du BC-NET au Canada 1993, July 2
• Memorandum of Understanding between the Commission of the European Communities and the Government of Canada with regard to cooperation in the field of waste water research 1983, March 16
• Agreed Minute (dated March 31, 1981) and exchange of letters to extend the safeguard action on imports of certain type of footwear. 1981, May 5 and 8
• Memorandum of Understanding between Canada and the Commission of the European Communities with regard to cooperation in the field of energy bus systems 1979, December 17

European Economic Communities (EEC)

• Exchanges of Letters with regard to mark-up differentials on beer and wines 1989, November 28
• Agreement in the form of an Exchange of Letters between the European Economic Community and the Government of Canada relating to the claim by the EEC for compensation arising from the extension of quotas on imports into Canada of women's and girl's footwear for the period 1 Dec 1985 to 30 November 1988 1986, April 10
• Exchange of Letters between the European Economic Community and the Government of Canada concerning exports of boneless manufacturing beef from the community to Canada 1986, February 26
• Exchange of Letters between the European Economic Community and the Government of Canada concerning imports of beef and veal from the community into Canada in 1985 1985, June 6
• Arrangement in the form of an exchange of letters between the European Economic Community and the Government of Canada on the establishment of a scientific observation programme in the regulatory area of the NAFO Convention.  This arrangement becomes effective on the date of an exchange of notifications 1984, November 14\
• Arrangement between Canada and the EEC concerning Cheese. This arrangement supersedes Canada and the EEC of February 28, 1975 effected negotiations under GATT Article XXIV 6 1979, May 22
• Provincial Statement of Intentions with Respect to Sales of alcoholic beverages by Provincial Marketing agencies in Canada 1979, April 12
• Exchange of Letters between Canada and Mission of Canada to the European Communities, regarding an arrangement of environmental cooperation 1975, November 6
• Arrangement between Canada and the EEC concerning negotiations under Article XVIII para 4 of the GATT 1968, September 30

European Space Agency

• Arrangement between the Government of Canada (represented by the Canadian Space Agency) and the European Space Agency concerning participation by the Government of Canada in the Earth Observation Envelope Programme 2000, June 21
• Arrangement between the Government of Canada (represented by the Canadian Space Agency) and the European Space Agency concerning participation by the Government of Canada in the definition activities of the Galileosat Programme 2000, June 21
• Arrangement concerning the participation of Canada in the data relay and technology mission programme 1991, March 21
• Arrangement concerning the participation of Canada in the preparatory programme of the first polar orbit earth observation mission using the polar platform 1991, March 21
• Arrangement between the Government of Canada and the European Space Agency on participation by Canada in the HERMES development programme of the Agency 1991, March 21
• Arrangement concerning the Participation of Canada in the advanced systems and technology programme (Phase 4) 1991, March 21
• Arrangement considering the participation of Canada in the development and exploitation phases of the ERS-2 programme 1991, March 21
• Arrangement between the Government of Canada and the European Space Agency concerning the participation of the Government of Canada in the HERMES preparatory programme of the Agency 1987, November 23
• Arrangement between the Government of Canada and the European Space Agency concerning the participation of the Government of Canada in the earth observation preparatory programme of the European Space Agency 1987, May 15

European Space Research Organization (ESRO)

• Arrangement concerning the participation of the Government of Canada in the preparatory European Remote-Sensing Satellite Programme 1980, March 31

European Union

• Declaration regarding a comprehensive Economic Partnership Agreement between Canada and the European Union 2009, May 6
• Joint Declaration concerning the Agreement on Air Transport between Canada and the European Community and its Members States 2009, May 6
• Joint Political Declaration on Canada-EU Relations 1996, December 17