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Initial Environmental Assessment of the Canada-Ecuador Bilateral Trade Agreement negotiations

Table of contents

Executive summary

The Government of Canada is aware of the complex linkages between trade and environment. In light of this, the Government is committed to ensuring that trade and environmental protection are mutually supportive.

Since 2001, the Government of Canada has conducted environmental assessments of its international trade negotiations, in line with the Cabinet Directive on the Environmental Assessment of Policy, Plan and Program Proposals. This approach has allowed for the identification of potential environmental impacts of a trade agreement and the identification of ways to mitigate possible negative impacts, either through the course of negotiations or through domestic measures. The purpose of these assessments is to fully integrate environmental considerations into the negotiating process, contribute to informed decision-making, and improve overall policy coherence.

Bilateral merchandise trade between Canada and Ecuador has been steadily increasing in recent years, growing at an average annual rate of 8.4% and reaching nearly $1.4 billion in 2023, with significant growth, particularly in agricultural products. This outstanding growth outpaces Canada’s trade growth with all other major South American economies. Canada is the largest foreign investor in Ecuador, with Canadian direct investment in Ecuador totalling $4.4 billion in 2023, after growing by over 4 times since 2015.

To capitalize and build on this growth, exploratory discussions towards a potential FTA were launched in November 2022. Strong alignment in Canada’s and Ecuador’s respective approaches to trade policy have been identified which demonstrated potential for a high-standard FTA, particularly with respect to goods and inclusive trade, among other areas.

Given the large amount of duty-free trade, it is estimated that an FTA between Canada and Ecuador could generate positive but modest benefits for both countries. Canada’s GDP could increase by US$82.7 million (0.003%), and Ecuador’s GDP could increase by US$49.3 million (0.025%) by 2030. Bilateral trade between Canada and Ecuador could increase by US$404.4 million by 2030.

In light of these potential gains, this report presents the Initial Environmental Assessment (IEA) of bilateral trade agreement negotiations between Canada and Ecuador. Its purpose is to identify potential impacts on the environment in Canada, Ecuador and beyond that may result from an FTA, assess the significance of these impacts, and identify possible enhancement or mitigation options that may be addressed in the negotiations.

Based on the results of a broad review of environmental links and due to the relatively modest economic impacts of a potential FTA between Canada and Ecuador, this IEA concludes that the negotiation of a new bilateral free trade agreement with Ecuador is not likely to produce significant positive or negative environmental effects. The economic gains resulting from a potential FTA are expected to result in a very small increase in CO2 emissions of 0.03 megatonnes by 2030 for Canada and 0.01 megatonnes for Ecuador. This represents an increase of 0.005% and 0.012% relative to the baseline for Canada and Ecuador respectively. 

Furthermore, the majority of outcomes Canada may seek include updated rules to address existing bilateral irritants and inclusive trade provisions. Notably, Canada will seek to negotiate a trade and environment chapter that will bring bilateral obligations with Ecuador in line with Canada’s most recent and ambitious provisions in this area. The Government of Canada’s existing environmental legislative framework, including statutes, regulations, policies, and actions for the prevention and management of environmental risks, also suggests that Canada is well positioned to mitigate any potential environmental impacts of an agreement.

Talks held with Ecuadorian officials in the exploratory phase indicate that Ecuador shares Canada’s expectations in the approaches, objectives, and main provisions to be included in an ambitious potential Canada-Ecuador FTA environment chapter. The FTA also offers the opportunity to enhance positive impacts or mitigate negative effects from trade liberalization. In particular, the chapter-by-chapter review points to several areas for environmental collaboration and risk mitigation in the context of the FTA.

The Government of Canada is committed to advancing an inclusive approach to trade through a potential agreement, in recognition that trade policies must respond and contribute meaningfully to overall domestic economic, social and environmental policy priorities.

This report should be read in conjunction with the Summary of the initial Gender-Based Analysis Plus (GBA+) that presents the potential differentiated effects and opportunities of an agreement on diverse groups of women and men in Canada, with SMEs and Indigenous Peoples as priority considerations.

1. Background and study objectives

In negotiating an FTA with Ecuador, the government’s objective will be to create meaningful benefits for Canadian businesses, workers and families. Through an FTA, the government will seek to provide Canadians with increased preferential access to the Ecuadorian market, benefiting Canadian exporters. In addition to seeking improved preferential access, Canada will seek to conclude a modern, ambitious and inclusive trade agreement, reflecting the latest approaches, including in areas such as trade and gender, trade and Indigenous Peoples, Trade and SMEs, environment, and labour. In doing so, the Government recognizes that trade policies need to respond and contribute more meaningfully to overall economic, social and environmental policy priorities. As such, the Government will seek to ensure that the benefits and opportunities of trade with Ecuador are widely shared, including with traditionally underrepresented groups, as well as upholding labour and environmental standards to ensure protections are upheld and prevent parties from lowering their standards to promote trade or attract investment.

1.1 Economic relationship between Canada and Ecuador

Ecuador is Canada’s sixth-largest merchandise trading partner in South America. In 2023, bilateral merchandise trade between Canada and Ecuador totalled $1.4 billion. Canadian exports totalled $573.3 million (mainly cereals and mineral fuels). Canadian imports totalled $379.7 million (mainly fruits and nuts, live trees and plants, cocoa, fish and seafood, and vegetables).

Canadian investment into Ecuador has increased significantly in recent years: as of 2023, Canada has the largest stock of foreign direct investment in Ecuador at $4.4 billion and has had the most important investment flow into Ecuador three years running (2019-2021), led by investments into Ecuador’s mining sector. CDIA inflow to Ecuador remains low relative to other countries in the region due to problems such as corruption and frequent changes to economic, commercial and investment policies.

Minister Ng announced the launch of exploratory discussions in a joint statement with her then Ecuadorian counterpart, Minister Julio José Prado on November 24, 2022, following a bilateral meeting on the margins of Pacific Alliance Ministerial meetings in Mexico City.

Following Ecuador’s submission of a letter of interest to join the Global Trade and Gender Agreement (GTAGA), which is comprised of Canada, Chile, New Zealand, Colombia and Peru, the GTAGA/ITAG working group sent Ecuador an official welcome letter in December 2022.

1.2 Objectives of the proposed Free Trade Agreement

FTAs are binding treaties between countries that open markets for businesses by eliminating or reducing a variety of tariff and non-tariff barriers; establish the terms of market access in areas such as services, investment and government procurement; and set out rules for fair and transparent treatment. A Canada-Ecuador bilateral free trade agreement will aim to:

As mentioned above, the proposed bilateral trade agreement aims to address areas beyond the traditional focus such as, for example, liberalization of trade in goods, trade in services and investment, but to also include provisions related to the environment, trade and gender, and trade and Indigenous peoples. For a detailed description of the objectives of each proposed bilateral trade agreement chapter, please refer to Annex A.

1.3. Framework for environmental assessment of trade negotiations

In 2001, pursuant to the Cabinet Directive on the Environmental Assessment of Policy, Plan and Program Proposals, the Framework for the Environment Assessment (EA) of Trade Agreements (the "Framework"), was developed by Global Affairs Canada to evaluate the environmental impacts of Canada's trade policy initiatives.

In 2021, the Framework was renewed to take into account progress on methodologies in conducting EAs and provide updated guidance to trade negotiators to support the continued application of the Directive to future trade negotiations. Based on the principles of flexibility, timeliness, transparency and accountability, evidence-based, and continuous improvement, the objectives of the new Framework are to: 

To ensure that the new Framework is consistent with Canada's inclusive approach to trade which seeks to ensure that Canada’s trade policies more effectively support Canada’s economic, social and environmental priorities, and also is consistent with and advances Canada's Federal Sustainable Development Strategy (FSDS), the EA analysis has three complementary components: 

  1. Quantitative and qualitative assessments
    • Quantitative assessment based on the GTAP-e economic model which allows for the comparison of the baseline scenario to the post-liberalization scenario after the agreement's implementation. 
    • Qualitative assessment and case studies to assess aspects such as impacts outside of Canada or in specific sectors in cases where quantitative data is limited.
  2. Review of trade agreement provisions 
    • Generally conducted on a chapter-by-chapter analysis, the review of trade policy aims to provide an opportunity for the trade negotiators to effectively address the findings of the quantitative and qualitative analysis in trade policy to mainstream environmental considerations across the agreement. 
  3. Review of existing environmental legislation, policies, and actions in Canada 
    • The trade agreement is reviewed in the context of domestic laws, policies and actions at the federal level to prevent and manage environmental risks in Canada as well as to identify opportunities for additional domestic policy responses. 

The EA of trade negotiations benefits from the active support and advice from the following five critical actors: (1) federal departments and agencies, (2) provincial and territorial governments, (3) Indigenous peoples, (4) the Environmental Assessment Advisory Group (EAAG), and (5) the general public. 

The Framework follows 4 phases of assessment:

  1. Initial EA analysis and reporting: the EA process is initiated during exploratory discussions and focuses on: (1) activating communication channels with all players of the analysis and (2) establishing the methodological approach and scope of the analysis.
  2. Integration of environmental considerations: Consolidation of Phase 1 analysis through integration of environmental considerations into the preparation of Canadian positions. Informal consultations with environmental experts across the government are ongoing throughout negotiations. 
  3. Final EA analysis and reporting: Updates the analysis undertaken in phases 1 and 2 based on final outcomes of the concluded negotiations and reports on the provisions included in the final agreement to help mitigate potential negative impacts, enhance positive ones, and advance environmental protection objectives in Canada and partner economies.
  4. Monitoring and ex-post reporting: Implementation phase with follow-up and monitoring which may include ex-post environmental studies, ongoing reporting on cooperation activities, and continuous improvement of the EA process through regular consultations and strategic reviews. 

2. Stakeholder consultations

In conducting environmental assessments for trade agreements, Global Affairs Canada consults with other government departments and agencies, including Environment and Climate Change Canada (ECCC), the Impact Assessment Agency (IAA) and a number of federal government departments and agencies involvedFootnote 1 in the negotiation under review. This approach facilitates informed policy development and decision-making throughout the negotiations.

The IEA 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 18 persons drawn from the business sector, academia and non-governmental organizations. Each member provides advice in their own expert capacity on the EA undertaken by GAC. At the conclusion of each assessment phase (i.e. Initial and Final), EAs are shared with provincial and territorial representatives and the EAAG for feedback before being released for public comment.

This section presents the comments and input that were received from the public, provincial and territorial governments and the EAAG as part of the preliminary assessment of a Canada-Ecuador bilateral trade agreement negotiation.

2.1 Public consultations

A Notice of intent to conduct impact assessments, including an initial environmental assessment, on a possible Canada-Ecuador free trade agreement was published April 23, 2024. This notice invited interested individuals to submit their input for consideration in the drafting of the IEA in between the 60-day consultation period that lasted till June 26, 2024. During broad public consultations held to solicit general views of Canadians on a Canada-Ecuador FTA from January 6 to February 21, 2023, multiple inputs provided feedback on environmental matters, namely related to Canada’s mining activity in Ecuador. No other submissions related to environmental matters were received.

2.2 Other consultations and engagement

2.2.1 Provinces and territories

Consultations with provinces and territories form an integral part of the environmental assessments of trade negotiations. As such, the draft of this IEA was shared with provincial and territorial governments. The results of these consultations will be used to inform negotiations and will be reported on in the Final Environmental Assessment.

2.2.2 Environmental Assessment Advisory Group

The variety of expertise and approaches represented on the Environmental Assessment Advisory Group (EAAG) are instrumental in the environmental assessments of trade negotiations. As such, the IEA was also sent for consultations to the EAAG. The results of these consultations will be used to inform negotiations and will be reported on in the Final Environmental Assessment.

3. Preliminary Environmental Impact Assessment

The purpose of the IEA is to identify potential impacts on the Canadian environment that may result from an FTA between Canada and Ecuador, and to assess the significance of these impacts. The IEA first uses economic modelling and environmental data to estimate the potential effects of a Canada-Ecuador FTA on the Canadian and Ecuadorian environment. These effects are assessed in two steps: (1) the projected changes in the economy (the Economic Assessment); and (2) the expected impacts on climate change (through GHG emissions) (the Environmental Assessment).

3.1 Preliminary Economic Assessment

3.1.1. Model and data

The model results are derived from simulations using the Office of the Chief Economist’s custom in-house dynamic computable general equilibrium (CGE) model of global trade. The model follows the structure of the Global Trade Analysis Project (GTAP) model developed and supported by Purdue UniversityFootnote 2, but it has been improved over the years to introduce recursive dynamics, greenhouse gas emissions estimation, and a more robust labour market with occupation transition dynamics for both Canada and, for the first time in this analysis, Canada’s partner countries. This allows the model to simultaneously estimate the impact of an FTA on trade, the labour markets, and the environment, all at the same time, generating one consistent set of results at the macro-level. These improvements to the model allow for a better understanding of the distributional impacts of FTAs on workers by gender, age and occupation, as well as the impact to the environment.

The data used for this modelling exercise is based on the GTAP database version 11, which benchmarks all bilateral trade flows, trade protection and domestic support to 2017Footnote 3. The model has been further updated to update all bilateral trade flows and macroeconomic indicators to 2022, then projected to 2030 based on Oxford Economics macroeconomic projections. The underlying data are values in U.S. dollars at 2017 prices.

As a note of caution, the modelling results should be considered in the context of both the advantages and limitations of the CGE model being used. Specifically, the CGE model can reflect only the expansion of trade in products already traded in a given bilateral trading relationships (i.e., the intensive margin of trade); it cannot predict the creation of trade in new trading relationships such as introduction of new products that were not traded prior to the agreement regardless of tariffs (i.e., the extensive margin of trade). Further, the model only allows for analysis of gains from liberalization in goods and services trade and investment and does not include gains from liberalization and enhanced economic cooperation in other areas, such as trade facilitation. As a result, this assessment could be expected to underestimate the potential gains from liberalization.

3.1.2. Model scenario

One scenario is analyzed in this report:

  1. Canada and Ecuador are assumed to fully liberalize all tariffs on bilateral trade between the two countries. Both countries also are assumed to fully bind their existing regimes for services for all modes of supply.

The scenario of full liberalization is designed to not pre-judge the final negotiation outcomes. This scenario represents the maximum possible quantifiable benefits of a potential free trade agreement between Canada and Ecuador based on existing trade flow patterns. 

3.1.3. Impacts on GDP and trade

The results of the economic modelling suggest that an FTA between Canada and Ecuador could generate modest benefits for both countries. Both Canada and Ecuador are estimated to benefit modestly from the agreement, with Canada’s GDP expected to increase by US$82.7 million and Ecuador’s GDP expected to increase by US$49.3 million. These modest gains reflect the fact that a large portion of trade between Canada and Ecuador is already duty-free, and these economic benefits would be derived from liberalizing the remaining dutiable trade. Liberalizing the remaining dutiable trade is expected to increase bilateral trade between Canada and Ecuador by US$404.4 million.

3.2 Preliminary Environmental Assessment of a Bilateral Free Trade Agreement with Ecuador

Based on estimated changes in GDP and trade presented in section 3.1.3, the preliminary environmental assessment projects environmental impacts in terms of impacts on climate change (Greenhouse Gas (GHG) emissions). The analysis also includes a qualitative review of other environmental linkages that may affect the Canadian and global environments as a result of a Canada-Ecuador FTA.

3.2.2. Impact on greenhouse gas emissions

The model estimates changes in carbon dioxide (CO2) emissions resulting from changes in the economy as a result of a potential FTA relative to the baseline scenario. As economic activity shifts in the presence of an FTA to take advantage of new preferential access to the Canadian and Ecuadorian markets, some industries might emit less emissions while others might emit more emissions relative to the status quo.

For Canada, the increased manufacturing output is expected to result in a very small increase in CO2 emissions of 0.03 megatonnes by 2030, representing a change of 0.005% relative to the baseline. For Ecuador, changes in economic activity are expected to increase Ecuador’s CO2 emissions by 0.01 megatonnes by 2030, an increase of 0.012%.

Overall, the modest economic changes resulting from a potential FTA are expected to have a negligible effect on CO2 emissions in both Canada and Ecuador.

3.3 Preliminary qualitative assessments

The potential environmental impacts of a Canada-Ecuador free trade agreement extend beyond those captured by the environmental indicators above. To capture a broad view, it is necessary to expand the analysis beyond the economic and environmental modelling, to scan other potential environmental impacts that may result from increased commercial and investment flows between Canada and Ecuador.

This section is intended to provide an overview of some of the additional risks and benefits that were not captured in the previous modeling. This analysis provides a qualitative analysis of the possible effects of a trade agreement on the environment by observing the linkages of a possible Canada-Ecuador FTA and climate change. Beyond GHG emissions, the qualitative assessment extends to other areas of possible environmental concerns and benefits, including transboundary air pollution, deforestation, biodiversity loss, water quantity and quality, mining waste management, and harmful chemicals management. The analysis is conducted at the national level, except otherwise indicated.

3.3.1 Climate change

Canada

As is the case with all FTAs, an FTA with Ecuador is expected to increase domestic production leading to a corresponding increase in carbon emissions from sectors such as agriculture and agri-food with wheat expected to be Canada’s largest increase in exports, followed by vegetables, fruit and nuts – primarily lentils. These modest gains stand to benefit Canadian agricultural producers and can support reductions in global emissions given the low-carbon intensity of Canadian-produced agricultural products. There are also a variety of other gains in manufactured and industrial products. These gains are, however, very modest due to the largely duty-free nature of Canada’s trade with Ecuador. Nonetheless, an increase in international trade associated with incremental growth in the production of goods and services and an increase in investment are associated with or contribute directly to changes (both increases or decreases) of greenhouse gas (GHG) emissions and other pollutants.

These changes are in part due to transportation services, since traded goods would need to be transported between Canada and Ecuador via shipping and/or aviation. An increase in trade in goods would cause increased emissions due to higher activity in the transportation sector. This would result in an increase of climate-warming agents such as carbon dioxide and black carbon, a short-lived climate pollutant that contributes to warming, particularly near the Arctic. The international shipping industry already accounts for a significant amount of global GHG emissions and produces significant amounts of black carbon.

Over the past five years, an intensive national effort has been made to put in place the measures needed to put Canada on a path to significantly reduce emissions in a way that ensures all sectors and parts of the country can participate and thrive in the increasingly low-carbon economy. This effort has been guided by the 2016 Pan‑Canadian Framework on Clean Growth and Climate Change, Canada’s first‑ever national climate plan. With the rapidly accelerating climate crisis, and in light of the scale of the clean growth opportunity, however, the Government committed to meet and exceed its previous 2030 goal and, delivered on that commitment in December of 2020 through Canada’s strengthened climate plan — A Healthy Environment and A Healthy Economy. Canada’s Nationally Determined Contribution, submitted in July 2021, confirmed Canada’s new and ambitious 2030 GHG target of 40-45% below 2005 levels, and Canada’s commitment to achieve net-zero emissions by 2050.

Furthermore, Canada is an active participant in discussions on GHG emissions reductions at the International Maritime Organization (IMO), and supports the implementation of the initial IMO strategy on reduction of greenhouse gas emissions from ships. 

Ultimately, for Canada, a combination of existing mitigation measures and modest economic changes resulting from a potential FTA with Ecuador could result in a negligible increase in CO2 emissions that have an impact on climate change. However, the Government of Canada, and the provincial and territorial governments in parallel, will still actively maintain mitigation measures.

Ecuador

Ecuador is currently developing its Long-Term Climate Strategy, which is expected to align with the 1.5C goal of the Paris Agreement and its respective 2030 and 2050 targets. Ecuador’s National Strategy on Climate Change (2012-2025) has seven main principles: regional and international cooperation; consistency with international principles; priority to local implementation; environmental integrity; citizen participation; protection of vulnerable groups and ecosystems; and inter-generational responsibility.

Ecuador is also a country with strong environmental protections embedded in its constitution. The Organic Code is the country’s main environmental regulatory law, which contains environmental rules, including rules related to implementing and upholding the constitutional rights of nature. This code was further expended in a 2021 reform.

For Ecuador, the increased economic activity changes, mostly lead by gains in exports of fresh-cut flowers to Canada, are expected to increase Ecuador’s CO2 emissions by only 0.01 megatonnes (by 2030), representing a small increase of 0.003%. This negligible increase in CO2 emissions is due to the modest economic gains expected to result from a potential FTA due to the largely duty-free nature of trade between Canada and Ecuador.

3.3.2 Transboundary air pollution

Canada

Industries, including the transportation industry, are also responsible for the emission of air pollutants other than carbon dioxide, such as nitrogen oxide, sulphur oxides, volatile organic compounds and particulate matter. Anthropogenic sources of transboundary air pollution also include emissions from energy production and use, and heavy industry. Forest fires, sometimes anthropogenic but most often naturally-occurring, are an increasing source of domestic and transboundary air pollution in Canada. Transboundary air pollution is an ongoing concern as the world’s factories grow and cluster in manufacturing and resource-intensive regions, including in both Canada and Ecuador.

However, any impact would be marginal in Canada due to the implementation of policies that seek to mitigate transboundary air pollution. In Canada, addressing air pollution is a shared responsibility among the federal, provincial and territorial governments, as well as the municipalities. The federal government collaborates with provincial and territorial governments to implement Canada’s Air Quality Management System (AQMS), which includes Canadian Ambient Air Quality Standards (CAAQS)Footnote 4, industrial emissions requirements, provincial air zones and interprovincial airsheds, as well as reporting to Canadians. In addition, the federal government has put in place regulatory and non-regulatory measures to address air pollutant emissions from industrial sources, as well as from transportation sources and consumer and commercial products.

Additionally, through the Canada-U.S. Air Quality Agreement, Canada has also made efforts domestically to reduce emissions of sulphur dioxide (SO2) and nitrogen oxides (NOx), pollutants, which lead to acid rain; and ground-level ozone, and particulate matter (PM), which leads to smog.  All of these pollutants negatively affect human health. Between 1990 and 2021, Canada’s total SO2 emissions decreased by 79 percent, total NOx emissions decreased by 41 percent and total PM2.5 emissions by 12.5 percent in the area covered by the AgreementFootnote 5.

Ecuador

While not a major emitter of greenhouse gas (GHG) emissions, Ecuador was the world’s 65th largest producer of yearly carbon dioxide emissions (2020) stemming primarily from its energy industryFootnote 6. Other contributing factors include land use change and forestry.

An FTA could also lead to a reduction in the environmental footprint of certain sectors in Ecuador through increased trade and investment in clean technology products and professional services such as environmental consulting. In addition, measures to address climate change often have spinoff benefits in reducing toxic air emissions.

3.3.3 Deforestation

Canada

DeforestationFootnote 7 is a significant environmental issue due to its linkages to loss of biodiversity, soil and water quality, habitat degradation, and climate change. Deforestation is often a direct result of unsustainable industrial activity (i.e., logging, agriculture, mining, energy development and production, and infrastructure development), which can be associated with increases in international trade and investment.

Canada has a low annual rate of deforestation (0.02%). According to laws, regulations and policies in place across Canada, all areas harvested on public land must be reforested, either by replanting or through natural regeneration. Over 90% of Canada’s forests are on public land. The modest gains from an increase in trade and investment with Ecuador, mainly in the agricultural sector where Canada is expected to see its largest increase in exports driven by wheat, should not affect Canada’s deforestation rate. Furthermore, the Government of Canada has committed to planting 2 billion trees over the next 10 years.

Ecuador

With an average annual deforestation rate of 1.12% between 1990 and 2018Footnote 8 (deforestation of only seasonal dry forests, excluding other forests such as tropical rainforests), Ecuador has maintained high rates of deforestation. Primary drivers of deforestation include the expansion of pastures for livestock and agricultural land, such as corn, palm oil and cacao, as well as the expansion of shrimp farms into mangrove forests. Other contributing factors to deforestation in Ecuador include logging, infrastructure, corruption, oil-based extractive industries and mining industriesFootnote 9, the latter being the main recipient of Canada’s foreign investment in the country. While an FTA with Ecuador would result in modest gains for both Ecuador and Canada, gains for Ecuador will be driven by an increase in Canada’s imports in the agro-industrial sector, more specifically fresh-cut flowers. Canada’s import of fresh-cut flowers is already high despite the existing high tariff rates and is likely to increase if the tariff rates decrease as a result of the potential FTA. However, this specific sector is not a main cause of deforestation in the country and Canada’s imports are unlikely to drive deforestation.

Canada imports deforestation-associated agricultural commodities and products from Ecuador. In 2023, cocoa (CAD 67M) and frozen shrimp (CAD 49M) were amongst the top five goods (by value) that Canada imports from Ecuador, and Canada’s imports of these products have more than doubled in value since 2020. However, given that the existing tariffs on most cocoa products and frozen shrimp are zero, with some exceptions such as chocolate products with a tariff rate of 6%, the reduction or elimination of the tariffs due to the potential FTA is unlikely to significantly increase Canada’s importation of cocoa and shrimp products. Canada’s total annual imports of corn, beef and palm oil from Ecuador are very low (CAD 2.5 M) even though the tariffs on these commodities and products are already low or zero. This potential FTA is not expected to significantly increase Canada’s imports of these deforestation-associated commodities and products. Nevertheless, Canada’s import of the preceding commodities and products, such as cocoa, shrimp, corn, beef, and palm oil, should be monitored.

Canada is a large foreign investor in Ecuador’s mining sector and has several significant investments in mining operations. Public consultations in Canada on the potential FTA between Canada and Ecuador note concerns that the potential FTA may exacerbate deforestation and violation of rights of forest-dependent Indigenous and campesino communities in Ecuador, largely related to mining activities, if not adequately safeguarded.

Ecuador has protections in its recently reformed Organic Code of the Environment embedded in its constitution against industrial, corporate and other types of projects in areas with fragile ecosystems. Moreover, Ecuador launched its national certification scheme for deforestation-free cocoa production in 2022 as a bridge between Ecuador’s foreign commodity trade and its national climate actionFootnote 10. Similar to Canada, Ecuador endorsed the Glasgow Leaders Declaration on Forests and Land Use (2021), which commits collective action to halt and reverse forest loss and land degradation by 2030 while delivering sustainable development and promoting an inclusive rural transformation. Furthermore, the potential FTA between Canada and Ecuador would also provide Canada with the opportunity to positively influence sustainable forest management in Ecuador (e.g., to reduce deforestation and potential illegal logging issues in Ecuador), which can contribute to reductions in global deforestation, promote Canada’s strong environmental reputation, and maintain the international market access.

3.3.4 Biodiversity and wildlife loss

Canada

Both Canada and Ecuador rely on the biodiversity of their ecosystems to maintain their access to domestic ecological goods and services (EG&S), on which their economies rely. Although Canada and Ecuador face different pressures, as is the case globally, similar factors contribute to biodiversity loss in both countries. These include habitat degradation and fragmentation, landscape and land-use changes, overexploitation, illegal fishing, illegal logging, illegal wildlife trade, pollution, climate change, and invasive alien species.

Although Canada has implemented policies to mitigate biodiversity loss, populations of species at risk continue to decrease. Loss of biodiversity in Canada continues to be driven by the cascading effects of habitat loss, climate change, pollution, invasive alien species, and in some cases unsustainable natural resource management. As a result, the Government of Canada and the provinces and territories continue to monitor the harvesting and trade of, for example, wood products, fish and seafood in order to maintain biodiversity and sustainable harvest levels and prevent the overexploitation of resources.

The trade of wildlife is also a contributing factor to biodiversity loss. Canada is party to the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES), which is a treaty protecting wild plants or animals from the threat of international trade. However, pressures on wild populations of species in other countries can lead to decimation, which, in turn, can lead to the poaching and illegal trade of Canadian species, such as turtles, black bear and eels.

Ecuador

There are 4 major biogeographic regions in Ecuador, centred on the major forests and islands. Ecuador is considered one of the 17 “megadiverse” countries. Certain critically endangered species in Ecuador such as the black-headed spider monkey, bare-tailed armored tree rat, and giant otter are threatened by loss of habitatFootnote 11.

To combat biodiversity loss, Ecuador not only has multiple layers of protection through its national laws, but also through its international commitments.  Ecuador is a party to the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES) and the High Ambition Coalition (HAC) for Nature and People. Furthermore, Ecuador is an active member of the Convention on Biological Diversity (CBD) where they joined the call to advocate for the creation of a new Global Biodiversity Fund to help developing countries.

Ecuador`s conservation efforts are divided between Continental Ecuador and the Galapagos Islands. The National Strategy of Biodiversity (2015-2030) and its Action Plan (2016-2021) aim to meet the objectives of knowing, valuing, protecting, restoring, and using biodiversity in a sustainable way in the country. The previous Lasso administration also put forward a decree creating an additional 60,000 km² of marine reserve space in the northern area of the Galapagos Islands, offering protection for migratory species against fishing and extractive activities while also improving control over unreported and non-regulated fishing activities.

In the context of a Canada-Ecuador FTA, further biodiversity loss could be associated with an increase in trade and investments. Other risks include the expansion of the agro-industry made at the expense of natural ecosystems. However, considering the modest gains expected to result from an FTA with Canada, the latter should not have a considerable impact on biodiversity loss, which would be managed through the above-noted frameworks.

3.3.5 Water quantity and quality

Canada

International trade and the expansion of industry can have negative effects on water quantity and water quality. Key drivers in the decrease in water quantity and quality include climate change, infrastructure development, agricultural land use, and water demand for commercial use. Additionally, toxic industrial waste can contaminate freshwater sources when dumped intentionally or accidentally.

Although Canada is a water-rich country with a supply far exceeding the population, its freshwater sources are not evenly distributed and there are regional water quantity and water quality issues. About 60% of fresh water in Canada flows to the north, away from the majority of the population. Because northern communities – both Indigenous and non-Indigenous – are often downstream, they are particularly affected by water issues. Flooding and drought can lead to negative economic impacts such as crop failure and damage to infrastructure (i.e., roads, bridges, and buildings). Additionally, low water levels could impact Canadian seaways (i.e., Great Lakes-St. Lawrence system), which are integral to Canada’s participation in international trade.

An FTA resulting in increased trade could increase water pollution from sectors such as agriculture (e.g. harmful algal blooms); mining/heavy industry (e.g. waste rock, acidic drainage, leaching of minerals), and forestry (e.g. pulp and paper effluents released into rivers). Industry is a major water user and an increase in international trade could place greater pressure on Canada’s fresh water supply. International trade would generate revenue that could lead to the adoption of new technologies and innovations to address key freshwater issues, including those related to improving water quality, water use efficiency, water recycling, and water monitoring.

In 2023, the Government of Canada created the Canada Water Agency within Environment and Climate Change Canada. It is the federal focal point for fresh water, working in partnership with Indigenous Peoples, provinces and territories, and stakeholders to strengthen collaboration on fresh water. This Agency would complement the existing provincial/territorial agencies that provide consistent, practical, and responsible oversight of freshwater resources in their jurisdictions.

Ecuador

Ecuador struggles with water scarcity due to several factors including land and forest management challenges, pesticides, human waste, and desertificationFootnote 12. This particularly impacts Ecuador’s Indigenous populations, who face complications of water quality due to oil spills in water sources which is a recurring issue due to poor regulationsFootnote 13.

Another source of pressure on Ecuador’s water quantity and quality is the mining industry and expanding mining projects, which have led to recurring tensions between the government, investors and certain local communities, namely indigenous groups and farmers worried about depletion and contamination of local water sources.

3.3.6 Mining waste management

Canada

In Canada, an increase in mining waste could create negative environmental and social effects. Each stage of the mineral/non-mineral production process (exploration, extraction, processing, closure and post-closure) carries a risk of negative environmental impacts, including increased GHG emissions, land and water usage, water contamination and sedimentation, soil contamination and habitat destruction. Waste rock, process effluent and mine waste tailings can result in releases of contaminants to water and soil, causing pollution to the neighbouring environment. Acidic drainage and the leaching of metals from the mine workings and mine wastes may occur at certain types of mines. 

Significant progress in mine waste management strategies has been made in the last 25 years.  However, there remain significant concerns about the long-term stability of human-made impoundments and the negative perception of using natural bodies of water for disposing of mine waste. New methods to safely and effectively manage and reclaim mine waste are needed to stabilize tailings and limit metal mobilization.

Additionally, in Canada, all mining projects are subject to regulatory review. Mining regulations across the country include federal, provincial, and territorial environmental and regulatory processes to ensure that all mining projects are scrutinized by the appropriate authority and in the best interest of CanadiansFootnote 14.

Ecuador

As previously mentioned, it is important to recognize that environmental risks as a result of a Canada-Ecuador FTA are not limited to Canada’s borders. This is particularly true when it comes to Canadian foreign direct investments which can benefit from a modest increase in the context of investment treaties or investment provisions under free trade agreements. Canadian companies have been investing in Ecuador for the past few decades and have more than doubled their investments since 2015, jumping from $976 million (2015) to $2.6 billion in 2022. The mining sector is the largest recipient of these investments with Canada being the largest foreign investor in Ecuador’s mining sector with several significant investments in mining operations in the country.

As previously mentioned, Ecuador is a country with strong environmental protections embedded in its constitution through the Organic Code which is the country’s main environmental regulatory law containing environmental rules, including rules related to implementing and upholding the constitutional rights of nature. It is due to this code that, in August 2023, Ecuadorians were able to vote in favor of a total ban on oil drilling in protected land in Yasuní National Park from their state oil company. However, concerns remain regarding the capacity of the local populations to express their opposition to mining endeavors that can potentially impact waterways, local ecosystems, forests, and Indigenous Peoples. Additionally, illegal and unregulated mining operations remain a significant issue for the country, particularly gold which, along with lithium and other minerals, experienced sustained market growth since the COVID-19 pandemicFootnote 15.

3.3.7 Harmful chemicals management

Canada

Chemical management is a longstanding core function of the federal government. In Canada, chemicals in particular are managed under the Canadian Environmental Protection Act (CEPA), 1999, and other federal statutes such as the Fisheries Act, the Pest Control Products Act (PCPA), the Food and Drugs Act (FDA), the Hazardous Products Act (HPA), and the Canada Consumer Product Safety Act (CCPSA). Several provinces also have their own framework for this purpose, including Quebec with, in particular, the Loi sur la qualité de l`environment and the Règlement sur les matières dangereuses.

Launched in 2006, Canada has a robust Chemicals Management Plan to assess and manage risks associated with harmful chemicals as defined in Annex 1 of CEPA. Thousands of substances have been assessed to identify environmental or health risks, with action taken by Canada on over 500 toxic chemicals. More than 400 risk management measures are in place, such as regulations, pollution prevention plans, and voluntary measures.

Despite strong domestic actions, Canada remains a recipient of harmful chemicals from international sources and imported products.

Ecuador

The Government of Ecuador established the Fund for Investments in Environmental Sustainability (2018) to promote the sustainable sound management of chemicals and wasteFootnote 16.  The objective is to reinforce national environmental management and actions for mitigation and adaptation to climate change. The National Environmental Authority issued regulations and established a system for the management of hazardous materials, but there is a lack of regulation and communication. The project under the Chemicals and Waste Programme (or the Special Programme), is entitled “Strengthening of the National Control System for the Management of Dangerous Materials in Ecuador” and is set to enforce environmental regulations and control mechanisms in the technical and legal aspects.

3.4 Conclusion of the Preliminary Environmental Assessment

As a scoping exercise, this IEA focused on identifying the likelihood of significant positive or negative effects of a Canada-Ecuador FTA on the Canadian environment. According to the modelling analysis, both Canada and Ecuador are estimated to benefit modestly from an FTA, with Canada’s GDP expected to increase by US$82.7 million and Ecuador’s GDP expected to increase by US$49.3 million. These modest gains reflect the fact that a large portion of trade between Canada and Ecuador is already duty-free, and these economic benefits would be derived from liberalizing the remaining dutiable trade. Liberalizing the remaining dutiable trade is expected to increase bilateral trade between Canada and Ecuador by US$404.4 million. Based on these economic projections, this analysis concluded that GHG emissions are expected to marginally increase by 0.03 megatonnes of CO2 emissions by 2030 for Canada, representing a change of 0.005% relative to the baseline. For Ecuador, changes in economic activity are expected to increase Ecuador’s CO2 emissions by 0.01 megatonnes by 2030, an increase of 0.012%. Overall, the modest economic changes resulting from a potential FTA are expected to have a negligible effect on CO2 emissions in both Canada and Ecuador.

Complementary to this analysis, the qualitative review of other environmental linkages aims to broaden the analysis of potential risks related to an FTA with Ecuador. While this review does not identify any significant positive or negative impacts on the environment within or outside Canada from such an agreement, it did highlight general environmental considerations related to deforestation, biodiversity loss, water quantity and quality, mining waste management, and managing harmful chemicals, which are being considered by the Government of Canada when negotiating a Canada-Ecuador FTA.

Considering these limited risks, the next sections review the enhancement and mitigation options that could be considered more specifically in the context of a Canada-Ecuador FTA (Chapter 4), as well as the existing environmental legislative framework at the federal level in Canada (Chapter 5).

4. Chapter-by-chapter review of enhancement and mitigation options

As the final analytical stage of the initial environmental impact assessment, this section identifies areas for environmental enhancement and risk mitigation that may be addressed in a potential Canada-Ecuador free trade agreement. This preliminary analysis aims to respond to the risks identified in section 3, as well as broader environmental considerations, in trade policy terms, with a view to inform negotiations. For more information on the purpose of each of the chapters mentioned below, please see Annex A.

For the purposes of this report, the assessment has been broken down into five groups of related chapters/provisions with potential environmental impacts:

Chapters not included in the above groupings are not expected to significantly enhance or mitigate the environmental impacts of the agreement.

4.1 Environment

Canada seeks to advance an ambitious and comprehensive Environment chapter in all of its FTA negotiations. This includes obligations to ensure that high levels of environmental protection are maintained as trade and investment are liberalized, as well as commitments to address a range of global environmental issues. In addition, Canada includes environment-related provisions in other areas of its FTAs as appropriate, including in the broader initial provisions and general exceptions articles.

In the context of the Canada-Ecuador FTA, there are opportunities to use the Environment chapter to improve general environmental governance and address global environmental challenges beyond the risk areas identified in section 3 of this report.

In particular, an FTA with Ecuador can advance four key objectives:

  1. Strengthen environmental governance by pursuing core obligations to maintain high levels of environmental protection, including commitments to effectively enforce environmental laws, to not derogate from such laws to encourage trade or investment, and to promote transparency, accountability and public participation. In the context of an FTA with Ecuador, commitments by Parties to maintain high levels of environmental protection and improve their respective laws and policies may help mitigate any negative environmental impacts.
  2. Support efforts to address a range of global environmental challenges in areas that affect Canada’s environment, economy and health. In addition to potentially helping address specific risk areas identified in section 3, environment provisions in an FTA with Ecuador provide an opportunity to enhance efforts related to global environmental challenges as illegal wildlife trade, and conservation of biodiversity and habitat. An agreement could also include a binding commitment on climate change, which would support broader climate change objectives and align with the 2022-2026 Federal Sustainable Development Strategy (FSDS) goal of promoting substantive climate change provisions in Canada’s FTAs. Further, Parties could use the FTA to reaffirm their respective commitments to multilateral environment agreements. Overall, these provisions would support each Party’s respective national, bilateral and international commitments to strengthen environmental protection and help advance solutions to current and future global environmental challenges.
  3. Promote mutually supportive trade and environment objectives through, for example, commitments to promote best practices of corporate social responsibility and responsible business conduct, voluntary measures to enhance environmental performance, and trade and investment in environmental goods and services. In particular, and subject to a willing partner, such provisions could encourage the promotion of trade in environmental goods and services, including those of particular relevance to the risk areas identified earlier in this report, and to broader climate change mitigation and adaptation goals. Overall, this could also contribute to sustainable growth and the creation of jobs and would align with the 2022-2026 FSDS goal to grow Canada’s clean technology industry and exports.
  4. Support sustainable management of natural resources by pursuing provisions related to a resource-efficient and circular economy and, sustainable fisheries, agriculture and forest management. Given the importance of natural resources and their significant role in the national economy of Parties, these provisions would reinforce the importance of sustainable resource management. These provisions may also help mitigate negative impacts, notably in relation to the agricultural practices highlighted earlier, as well as the generation of waste, illegal logging, overfishing of limited fish stocks, or illegal, unreported and unregulated (IUU) fishing.

In addition to the above objectives, the Environment chapter may complement existing cooperation activities between Canada and Ecuador on environmental issues by establishing an appropriate framework for cooperation on matters of mutual interest.

Canada’s international assistance in Ecuador totalled $17.3 million in 2021-2022 and focused on key thematic areas such as protecting the environment and biodiversity through climate actionFootnote 17. Existing environmental cooperation activities between Canada and Ecuador cover a range of areas. For example, the Department of Fisheries and Oceans of Canada signed a cooperation agreement with the Ecuadorian National Direction of Aquatic Spaces (DIRNEA) to detect dark vessels involved in unreported, unregulated and illegal fishing activities in the Galapagos Island marine reserve.

Since 2019, through Canada's Development Finance Institute, Canada supported three financial institutions in Ecuador with loans totaling USD $26M for micro, small and medium enterprises, focused on empowering women entrepreneurs and fighting climate change. Canada also announced in 2024 at the Global Methane Forum that one of the methane mitigation projects selected to received funding from the $2 million Canada will provide from 2023 to 2026 will support the development of technology to improve the monitoring of surface landfill methane emissions in Ecuador.

In support of Ecuador’s goal of reducing its greenhouse gas emissions in the energy sector under the Paris Agreement, Canada also announced on March 4, 2024, its intention to provide the Government of Ecuador with a sovereign loan of up to $120 million over 10 years in collaboration with a policy-based lending program from the Inter-American Development Bank. This loan – which would be provided under the Sovereign Loans Program announced in Budget 2018 - would include a climate-resilient debt clause which could be made available in the event of a natural disaster, freeing up critical resources required to respond to immediate crises. It aims to support Ecuador's just energy transition, promote investments in renewable energy, and facilitate access to clean and reliable energy. It will also affect positively isolated Indigenous communities, women and people with disabilities. This loan is expected to include technical assistance of up to CAD$6.5 million to support the Government of Ecuador in promoting an inclusive energy sector and universal access to clean energy.

4.2 Goods and services

Provisions on goods and services include the following chapters: National Treatment and Market Access (NTMA); Cross-Border Trade in Services and Temporary Movement of Business Persons; Financial Services; Sanitary and Phyto-sanitary Measures; Technical Barriers to Trade; Rules of Origin; Origin Procedures; and Customs and Trade Facilitation. The purpose of these chapters is to help Canadian traders, services providers and investors gain market access and to ensure that the regulatory systems in Ecuador are predictable and transparent. Please refer to Annex A for more details.

An FTA with Ecuador provides an opportunity to enhance positive impacts and/or mitigate impacts of increased trade in goods and services as follows:

Regarding Temporary Movement of Business Persons, this Chapter will support the temporary movement of business persons, including highly-skilled workers, in support of bilateral trade in goods, the supply of services and the conduct of investment activities. This has the potential to support the growth of a broad range of environmentally-focused economic activities. For example, this includes supporting the cross-border movement of Canadian or Ecuadorian engineers to temporarily provide services in the clean technology industry. It can also include supporting entry for Canadian or Ecuadorian business persons seeking to negotiate contracts, including for the sale of environmental goods and services. These provisions can foster innovation and sustainable practices in support of the goals identified in the 2022 to 2026 Federal Sustainable Development Strategy.

A trade agreement with Ecuador that includes financial services commitments could change the quality, geographic coverage and cost of financial services. Increasing the supply of financial services suppliers could increase the funding options available for companies. This could have a positive impact on sustainability efforts if financial institutions are building environmental risk assessments into their credit decisions. It could also have a negative impact if financial institutions provide more funding options for companies that cause environmental damage.

Canada’s trade agreements generally include provisions that can mitigate the risk that trade liberalization in financial services can pose to Parties’ environmental policies. In particular, provisions allow Parties to adopt measures that treat financial service suppliers differently based on legitimate public welfare objectives, including environmental objectives. Canada will target the inclusion of this language in the Canada-Ecuador trade agreement. 

Furthermore, Canada generally seeks the establishment of a Financial Services Committee with its trading partners. This Committee provides an opportunity for financial regulators to cooperate and engage in a dialogue on a range of financial regulatory issues such as financing sustainable growth. For example, Canada is a member to the International Platform on Sustainable Finance and in 2020, Ecuador launched a sustainable finance initiativeFootnote 18, both of which demonstrate a shared interest in sustainable finance and a commitment to exchanging information around best practices in this space. We expect this will facilitate collaboration between Canada and Ecuador as sustainable growth and environmental considerations become increasingly important in the financial sector. 

More generally, chapters in this grouping could help improve trade processes and mechanisms through more predictable and transparent procedures as well as specific provisions to facilitate online trade in goods and services. This applies in particular to the Customs and Trade Facilitation and Origin Procedures chapters, which could streamline customs processes and facilitate the movement of goods more efficiently. This would deliver commercial and environmental benefits by reducing delays to traders, while minimizing the environmental impacts relating to the movement of goods through transportation efficiencies, promoting a paperless environment, and other mitigating factors.

4.3 Investment and dispute resolution

The purpose of an investment chapter under an FTA with Ecuador would be to help protect Canadian investors and their investments from discrimination and arbitrary treatment and ensure that the regulatory system in Ecuador is predictable and transparent. The investment chapter does not impose any changes to the regulatory framework of either Canada or Ecuador with respect to the environment and climate change, which applies to all foreign investors as it applies to domestic investors, including the Impact Assessment Act and provincial environmental assessment regulatory regimes. As such, although the FTA may result in increased investments, these investments would need to meet the same standards of environmental protections as investments of domestic origin. The investment chapter could also contain a number of additional provisions to further address the risks noted in this study in relation to large-scale projects, including:

Some stakeholders have expressed concern that the inclusion of provisions for the settlement of disputes between an investor and a Party to the agreement grants rights to investors without binding them to any obligations, including obligations to protect the environment. The investor-state settlement mechanism is designed to preserve the government’s right to regulate in the public interest, including with respect to the environment.

4.4 Government procurement

Canada’s objective on Government Procurement (GP) in trade negotiations is to ensure that covered procurements are conducted in a fair, open and transparent manner and that Canadian suppliers receive non-discriminatory treatment when bidding on such contracts.

While advancing this objective, Canada seeks to include in its GP chapters provisions that reinforce the Parties’ ability to apply technical specifications to promote the conservation of natural resources or the protection of the environment in its GP activities.Footnote 19 Canada also seeks to include language that emphasizes the Parties’ flexibility to include environmental characteristics in the evaluation criteria set out in the notice of intended procurement or the tender documentation. The inclusion of such provisions is consistent with the Government’s Policy on Green ProcurementFootnote 20 and supports the 2022-2026 Federal Sustainable Development Strategy’s goal for the Government of Canada’s procurement of goods and services to reach net-zero emissions by 2050. The implementation of this goal includes developing criteria that address greenhouse gas emissions reduction for goods and services that have a high environmental impact, and ensuring these criteria are included in procurements.

Overall, these provisions likely have an indirect but positive impact on the environment through the reinforcement of green GP practices and a potential increase in governmental spending on environmentally friendly goods and services.

At the same time, since Canada’s existing procurement market is generally open to foreign suppliers, the extent to which a GP Chapter in a potential trade agreement between Ecuador and Canada would have an impact on the environment is dependent on the value of the market access commitments provided by Ecuador.

4.5 Trade and Indigenous Peoples

As part of its inclusive approach to trade, Canada is advancing Trade and Indigenous Peoples provisions that seek to acknowledge the importance of enhancing the ability of Indigenous Peoples and Indigenous businesses to benefit from the opportunities created by an FTA with Ecuador. This also includes provisions with linkages to the environment:

Overall, Trade and Indigenous Peoples provisions would likely have an indirect, positive impact on the environment through cooperation activities between the Parties. These activities would highlight the importance the environment has on Indigenous Peoples economic and cultural well-being and the role that Indigenous businesses play internationally in innovative and environmentally sustainable economic development.  Furthermore, the inclusion of Canada’s traditional chapter-specific Indigenous reservations and exceptions throughout the Agreement as well as the Indigenous General Exception, would preserve Canada’s ability to adopt or maintain policy measures and programs to protect the rights or economic interests of Indigenous Peoples in Canada. A potential dedicated chapter on Trade and Indigenous Peoples could include the establishment of committee with ad-hoc participation of Indigenous groups to discuss any issue of interest, including, but not limited to issues within the Agreement that intersect with trade, environment, and the rights and economic interests of Indigenous Peoples.

5. Existing environmental legislation, policies and actions

Expected impacts identified by the environmental analysis should be considered in the context of Canada’s existing statutes, regulations, and federal policies and actions that help prevent and manage environmental risks in Canada. The federal environmental legislative framework focuses on minimizing threats to Canadians and their environment from pollution; equipping Canadians to make informed decisions on weather, water and climate conditions; and conserving and restoring Canada's natural environment. This robust environmental framework positions Canada well to mitigate the potential environmental effects of a Canada-Ecuador bilateral free trade agreement. A potential bilateral trade agreement would also be informed by multiple United Nations Sustainable Development Goals (SDGs) such as SDG 6 (Ensure availability and sustainable management of water and sanitation for all), SDG 14 (Conserve and sustainably use the oceans, seas and marine resources for sustainable development) and SDG 12 (Ensure sustainable consumption and production patterns).

This section provides an overview of the Government of Canada’s environmental legislative framework, both at the broad and sector-specific levels. While this overview focuses on the statutes, regulations, policies and actions implemented by the federal government, it is understood that the constitutional competency on the environment is shared between the federal and provincial levels in Canada, and as such provincial and territorial governments also have important roles and responsibilities in the prevention and management of environmental risks and implement environmental legislation and regulations within their jurisdictions. As a result of these roles, there is extensive cooperation taking place between federal, provincial and territorial governments in these areas.

5.1 Canada’s environmental sustainability strategy and framework

Under our constitution, the management of environmental issues is an area of shared jurisdiction among federal and provincial governments. The federal government collaborates with provinces and territories, within their jurisdictions, and with Indigenous Peoples and others to protect species and spaces, to develop and administer environmental standards, guidelines, regulations and risk management instruments to reduce releases and monitor levels of contaminants in air, water and soil, and promote and enforce compliance with environmental laws and regulations.

Monitoring and reporting on changes in the environment on a regular basis are essential for assessing the impact of risks and the effectiveness of measures to prevent or minimize those risks, and is an important component of the scientific work supporting the implementation of Canada’s environmental framework. The environmental standards set by these instruments will remain in place irrespective of changes in economic activity or international trade, including as a result of a Canada-Ecuador free trade agreement.

5.2 Key pieces of federal environmental legislation in Canada

The main federal statutes dealing with the protection of the environment are as follows:

  1. Canadian Environmental Protection Act (CEPA)
    • Aims at preventing pollution and protecting the environment and human health.
    • Prevents and manages risks posed by toxic and other harmful substances. It also manages environmental and human health impacts of products of biotechnology, disposals at sea, vehicle, engine and equipment emissions, fuels, hazardous wastes, environmental emergencies and other sources of pollution.
  2. Greenhouse Gas Pollution Pricing Act (GGPPA)
    • Helps reduce Canada’s GHG emissions by establishing minimum standards according to a greenhouse gas emissions pollution pricing system with respect to fossil fuels and trade-exposed industrial facilities.
  3. Canadian Net-Zero Emissions Accountability Act
    • Enshrines the Government of Canada’s objective to achieve net-zero GHG emissions by 2050 and provides transparency and accountability in Canada’s efforts to achieve this objective by:
      • Requiring the Minister of ECC to prepare, table and publish a GHG reduction target, emissions reduction plan, progress report and assessment report for each milestone year leading to 2050 (2030, 2035, 2040, 2045); and
      • Establishing the Net-Zero Advisory Body as a statutory body to provide advice to the Minister on ways to achieve net-zero emissions by 2050.
  4. Federal Sustainable Development Act
    • Provides the legal framework for developing and implementing a Federal Sustainable Development Strategy (FSDS) that makes decision making related to sustainable development more transparent and subject to accountability to Parliament.
  5. Fisheries Act
    • Addresses the protection of fish and fish habitats in both oceans and inland waterways.
    • Prohibits the deposit of harmful substances into water frequented by fish, unless authorized through regulation.
  6. Canada Water Act
    • Sets out the framework for collaboration between the federal government and one or more provincial and territorial governments where they wish to act together on matters related to the conservation, development and use of Canada’s water resources that they consider to be of common interest.
  7. Transportation of Dangerous Goods Act
    • Promotes public safety in the transportation of dangerous goods.
  8. Migratory Birds Convention Act, 1994
    • Protects migratory birds, their nests and eggs anywhere they are found in Canada, including ocean waters.
    • Prohibits the deposit of substances harmful to migratory birds in waters or areas frequented by them, unless authorized by other federal legislation or by the Minister for scientific purposes.
    • Prohibits the purchase, sale, or possession of any migratory bird, including parts, nests or eggs, unless authorized by regulation.
  9. Nuclear Safety and Control Act
    • Regulates the development, production and use of nuclear energy and the production, possession and use of nuclear substances, prescribed equipment and prescribed information in Canada.
  10. Canada Shipping Act
    • Deals principally with controlling the discharge of pollutants from shipping vessels.
  11. Species at Risk Act (SARA)
    • Designed to meet one of Canada's key commitments under the Convention on Biological Diversity (CBD).
    • Its purposes are preventing wildlife species in Canada from becoming extirpated (no longer exist in the wild in Canada) or extinct, providing for the recovery of wildlife species that are extirpated, endangered, or threatened as a result of human activity, and managing species of special concern to prevent them from becoming endangered or threatened.
    • Encourages the various governments in Canada to cooperate to protect wildlife species.
    • Meaningful engagement and cooperation with Indigenous Peoples are essential to the successful implementation of SARA.
  12. Wild Animal and Plant Protection and Regulation of International and Interprovincial Trade Act (WAPPRIITA)
    • Implements the Convention on International Trade in Endangered Species (CITES) by regulating trade in wild animals and plants.
    • Prohibits the import, export and interprovincial transportation of designated species unless the specimens are accompanied by the appropriate documents (licences and permits).
  13. Impact Assessment Act (IAA)
    • The Act and its regulations establish the legislative basis for federal impact assessment.
    • The impact assessment is a planning and decision-making tool used to assess positive and negative environmental, economic, health and social effects of proposed projects as well as impacts on Indigenous groups and rights of Indigenous Peoples.
    • The provinces and territories also have their own legislative and regulatory frameworks for environmental assessments and approvals for projects within their constitutional jurisdictions.

5.3 Canada’s Federal Sustainable Development Strategy and The Pan-Canadian Framework on clean growth and climate change

The 2022 to 2026 Federal Sustainable Development Strategy (FSDS)Footnote 21  is Canada’s fifth whole-of-government strategy that brings the Government of Canada’s sustainability activities together in one place and the first developed under a strengthened Federal Sustainable Development Act.  It is the first FSDS to be oriented toward the 17 Sustainable Development Goals (SDGs) of the United Nations 2030 Agenda for Sustainable Development, and outlines what the Government is doing across 101 federal organizations, including departments, agencies, and selected Crown corporations. The strategy includes 50 targets supported by 114 milestones and 162 implementation strategies to reflect the Government’s sustainable development priorities.

The following are of particular interest in the context of environmental impacts projected as a result of a Canada-Ecuador free trade agreement:

The 2016 Pan-Canadian Framework on Clean Growth and Climate Change (PCF)Footnote 22, the first Canada-wide climate plan, is the result of a joint commitment by federal, provincial, and territorial governments, and in consultation with Indigenous Peoples. In December 2020, the Government of Canada introduced its strengthened climate plan, A Healthy Environment and a Healthy EconomyFootnote 23. This federal plan aims to further reduce pollution, create more quality jobs, and support a healthier economy and environment. It includes 64 strengthened and new measures, through five pillars: make the place we live and gather more affordable by cutting energy waste; make clean, affordable transportation and power available in every community; continue to ensure pollution isn’t free and households get more money back; build Canada’s clean industrial advantage; and, embrace the power of nature to support healthier families and more resilient communities.

Among the key areas defined in these plans, those of specific relevance in the context of expected impacts from a Canada-Ecuador free trade agreement include plans to:

The Government of Canada is investing heavily to meet these targets and has recognized the importance of mobilizing financial sector capital and ingenuity to help meet Canada’s climate objectives. The current focus is to support building the critical financial sector infrastructure needed to increase the sustainable finance market in Canada. To obtain financial sector views on sustainable finance issues, the Government established the Sustainable Finance Action Council in May 2021, comprised of representatives from major Canadian banks, insurance companies, and pension funds.

5.4 Sector-specific laws, policies and action

Canada also leverages bilateral and multilateral engagement in key international fora to support wider global efforts to address climate change and manage environmental risks.  For example, the Canadian Net-Zero Emissions Accountability Act enshrines the 2030 GHG emissions target as being Canada’s Nationally Determined Contribution (NDC) under the Paris Agreement. Canada submitted a new NDC in July 2021, committing to reduce GHG emissions by 40-45% below 2005 levels by 2030. Canada also provides climate finance to support developing countries’ transition to low-carbon, climate-resilient economies. Canada is delivering $2.65B in climate financing to developing countries, between 2015-16 to 2020-21 and announced in June 2021 a doubling of its international climate finance commitment, to $5.3 billion over the next five years (2021-22 to 2025-26).  

Specific policies and regulations are also of relevance given the environmental risks identified in the initial environmental assessment of a possible Canada-Ecuador free trade agreement. At the sector level, these may help control the limited risks related to the manufacturing, transportation, and mining and extractives sectors, as identified in section 3.3.

5.5 Conclusion

The Government of Canada’s existing environmental legislative framework is well positioned to mitigate any environmental effects from a Canada-Ecuador free trade agreement. As new statutes, regulations, policies and actions are developed and implemented in the future, improvements in the environmental performance of Canadian economic sectors may further help mitigate environmental impacts of an agreement going forward.

6. Conclusion and next steps

The environmental impact analysis uses economic modelling and environmental data to estimate the potential effects of a Canada-Ecuador FTA on the Canadian and Ecuadorian environments. The economic modelling of environmental impacts identifies that increased trade between the two countries would lead to negligible increases in GHG emissions. The analysis also explores broader environmental considerations related to GHG emissions, transboundary air pollution, deforestation, biodiversity loss, water quality and quantity, mining waste, and managing harmful chemicals.  Overall, the modest economic changes resulting from a potential FTA are expected to have a negligible effect on the Canadian environment.

In addition, the chapter-by-chapter review points to several areas for environmental collaboration and risk mitigation in the context of the FTA, including through provisions in the environment chapter, expanded market access for environmentally-friendly products, services and technologies, mechanisms to increase sectoral, technological and institutional cooperation between Canada and Ecuador in key areas, and various Investment and Government Procurement-related provisions.

Further, the overview of the Government of Canada’s existing environmental legislative framework, including statues, regulations, policies and actions for the prevention and management of environmental risks, suggests that Canada is well positioned to mitigate the potential environmental impacts of an agreement, including through improvements in the environmental performance of Canadian economic sectors going forward.

The next phase of the EA process will be the publication of the initial draft Environmental Assessment (EA) followed by conducting a Final EA. This Final EA will take into account the final negotiated outcomes to assess the scope and nature of environmental effects that could arise from the proposed Canada-Ecuador FTA.  The Final EA will be published following the conclusion of negotiations.

Until then, the Government of Canada welcomes input and comments on this IEA. Any comments received will be used to inform subsequent EA analysis of a Canada-Ecuador FTA, as well as EAs of other trade negotiations more broadly. Suggestions for enhancement of mitigation measures regarding potential negative environmental impacts and augmentation of positive effects identified at this stage are also encouraged.

Comments and inputs can be sent until to:

E-mail: EAconsultationsEE@international.gc.ca

Mail: Environmental Assessment of the Canada-ECUADOR Bilateral Trade Negotiations
Trade Agreements Secretariat
Global Affairs Canada
111 Sussex Drive, Ottawa (Ontario), K1N 1J1

Annex

Annex A - Overview of Canada-Ecuador FTA Chapters’ objectivesFootnote 24

Trade in goods

National treatment and market access for goods

Rules of origin

Origin procedures

Customs and trade facilitation

Trade remedies

Sanitary and phytosanitary measures

Technical barriers to trade

Investment and trade in services

Investment

Cross-border trade in services and domestic regulation

Financial services

Temporary movement of business persons

Telecommunications

** Notwithstanding the above negotiating objectives, in light of ongoing consideration in Ecuador of the legal compatibility between investment agreements and its domestic legal framework, it is possible that investment and services provisions may be set aside, in part or entirely, from an agreement if necessary during the negotiation process.**

Other areas

Digital trade

Government procurement

Intellectual property

Competition policy

State-owned enterprises and designated monopolies

Labour

Environment

Transparency and anti-corruption

Trade and responsible business conduct

Good regulatory practices

Trade and gender

Trade and Indigenous Peoples

Small and medium-sized enterprises

Administrative

Dispute settlement

Institutional and general exceptions

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