Environment Committee on Dec. 9th, 2020

[The Chair, Liberal, Francis Scarpaleggia]

Good afternoon. Welcome to our meeting, which begins the study on Canadian Environmental Protection Act, CEPA, enforcement.

Before we start, I would just like to read out the second report of the subcommittee on agenda and procedure of our committee and have the committee adopt it, because it essentially lays the groundwork for today's meeting.

Your subcommittee met on Thursday, December 3, 2020, to consider the business of the committee and agreed to make the following recommendations:

That, for its meeting of Wednesday, December 9, 2020, in relation to the enforcement of the Canadian Environmental Protection Act study, the committee invite Mr. Amir Attaran from the University of Ottawa, Mr. Muhannad Malas from Environmental Defence and a third witness at the discretion of the Chair.

We have today with us three witnesses. I'm told Mr. Attaran was not able to make it, but we have David Wright, retired Crown prosecutor in Ontario. We have Muhannad Malas, program manager, toxics, from Environmental Defence Canada; and Ben Sharpe, senior researcher and Canada lead at the International Council on Clean Transportation.

As per our usual procedure, you may of course use the official language you prefer.

When you are not addressing the committee, please put your mike on mute.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

I have a point of order, Mr. Chair.

Have we not ratified the subcommittee report so we can have the hearings today?

[The Chair, Liberal, Francis Scarpaleggia]

Yes, sure. I sense that there's consensus, but—

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

If so, I'll move it.

[The Chair, Liberal, Francis Scarpaleggia]

Okay, yes, my mistake. I apologize for that.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

If you ask for unanimous consent, I'm sure we'll get it.

[The Chair, Liberal, Francis Scarpaleggia]

Yes. Is there unanimous consent?

Some hon. members: Agreed.

Seeing no objections, the second report is adopted.

Thank you, Mr. Albas.

We'll start with Mr. Wright for five minutes, please.

[David Wright, Retired Crown Prosecutor in Ontario, As an Individual]

Good afternoon, honourable Chair and committee members.

My name is David Wright. I'm a recently retired assistant Crown attorney employed by the Ministry of the Attorney General for 32 years. I am currently litigating for Ecojustice, an environmental organization based in Vancouver.

On March 10, 2017, in Detroit, Michigan, Volkswagen pleaded guilty to three criminal felony counts and was fined $2.8 billion for cheating on emissions tests mandated by the U.S. Environmental Protection Agency in regard to 590,000 diesel-engined vehicles. It was a fine of $4,745 per vehicle.

On January 22, 2020, Volkswagen pleaded guilty to violations under the Canadian Environmental Protection Act and was fined $196.5 million related to the installation of illegal emission software in 128,000 vehicles. This equals a fine of $1,535 per vehicle.

Volkswagen received special procedural treatment in court.

Let me explain briefly what normally happens when federal charges are laid. I’d like to note that the Criminal Code rules apply to environmental prosecutions.

Once a charge is laid, the accused attends court for a first appearance, normally within three to four weeks, allowing time for the Crown to prepare disclosure. On this first appearance, disclosure is then provided to the defence lawyer.

The next step is a formal meeting between the Crown and the defence, called a Crown pretrial. In serious cases, a judicial pretrial, or JPT, must be held. This is a meeting between a judge, the Crown and the defence to determine if the case can be resolved or whether the trial issues can be narrowed to save court time. Then either the case is resolved or a trial date is set. If a case is resolved, the victim will be advised before the plea proceeds. Resolution for these types of offences normally takes between three and five months.

What happened with Volkswagen?

Sixty charges under the Canadian Environmental Protection Act were laid on December 9, 2019. The first appearance was December 13, 2019. In other words, it was four days later.

The agreement between the Crown and the defence was for Volkswagen to enter a guilty plea and be sentenced on that same day, as acknowledged in the court transcript of December 13, 2019.

Differing from any usual prosecution, Volkswagen did not have to repeatedly attend court, publicly obtain disclosure, publicly set a Crown pretrial and publicly set a judicial pretrial, like every other accused in Canada has to.

There is nothing on the court record or information to show that Volkswagen ever received disclosure. There is nothing on the record to show that Volkswagen ever attended a JPT. As required, the court record or information would record these events to maintain an official accounting of all that happens once a charge is laid.

It is inconceivable that Volkswagen pleaded guilty and agreed to a $196-million fine without receiving disclosure. With just five days between the laying of the charge and the scheduling of the plea, the only explanation is that Volkswagen received disclosure before the charges were laid on December 9. This is a major breach of protocol.

The reason this is significant is that prior to December 9, the Crown still had the discretion to determine which charges, if any, should proceed. To be clear, it was in the Crown's discretion to lay Criminal Code conspiracy charges against Volkswagen, as was done in the United States, not the less serious charges found in the Canadian Environmental Protection Act.

It is also inconceivable that the plea went ahead without any pretrials. While there is no written court record of either a Crown pretrial or a judicial pretrial taking place, both had to have occurred, as it would be negligent on both parties not to hold these meetings. Given the timing, the judicial pretrial may have occurred before the charges were laid.

The 60-count plea was scheduled for December 13. However, the plea stalled when Ecojustice asked that victims be allowed to provide a community impact statement, pursuant to section 722.2 of the Criminal Code.

The case adjourned to January 22, 2020, for submission of the impact statements, the plea and the sentence.

What is a community impact statement?

Even though Environment Canada had been locked in litigation with Ecojustice for years regarding Volkswagen’s unlawful conduct, it told no interested parties of the date the charges were laid or that a plea was pending December 13, 2019. No environmental or health organization had time to prepare any type of response, including a community impact statement.

On January 22, 2020, contrary to the mandatory provisions of the Criminal Code, the Crown unilaterally disallowed community impact statements presented by Ecojustice, saying it was “untested” expert evidence—

[The Chair, Liberal, Francis Scarpaleggia]

Thank you, Mr. Wright.

We're a bit over time, but there's a lot of material in your presentation for the questions. I'm sure your presentation will elicit many questions.

Before we go on to the second witness, I would just like to mention to members that at around 5:15 or so I'm going to ask the committee to go in camera to consider the third report from the steering committee regarding the work outline for the report on zero-emission vehicles.

Mr. Malas, you have five minutes.

[Muhannad Malas, Program Manager, Toxics, Environmental Defence Canada]

Good afternoon.

Thank you, Mr. Chair, for the invitation to speak to you about this important matter today.

My name is Muhannad Malas. I'm the toxics program manager at Environmental Defence.

Environmental Defence is a leading Canadian environmental advocacy organization that has for over 30 years worked with government, industry and communities to safeguard our fresh water, decrease Canadians’ exposure to toxic chemicals and build a clean economy.

Environmental laws are only as effective as their enforcement. In the case of the Canadian Environmental Protection Act, proper enforcement means holding accountable polluters who put the health of Canadians and their environment in harm's way.

In 2015, Volkswagen was caught installing a cheat device in more than 11 million diesel cars worldwide. That device lowered emissions when the vehicle was operating in test mode, but once on the road, they emitted up to 35 to 40 times the permitted levels of harmful nitrogen oxides, a pollutant associated with many deaths, according to Health Canada, as well as cancer and other illnesses.

In Canada, 128,000 of these rigged vehicles were imported and sold during a period of seven years.

For what is arguably one of the worst environmental crimes ever committed in Canada, the government’s enforcement, by any reasonable measure, was hesitant, weak and inadequate.

After launching its investigation in September 2015, it took more than four years for the federal government to charge and prosecute the company. This is despite a guilty plea agreement between Volkswagen with the U.S. federal authorities in January 2017 that precluded the company from retracting its admission of guilt in other jurisdictions. This is also despite testing done in Canadian government labs in Ottawa being used as evidence by the U.S. government.

Troubled by the lack of public progress made by the government, in July 2017, just less than two years after the investigation launched, I submitted a CEPA section 17 request to the Minister of the Environment and Climate Change to open a transparent investigation of Volkswagen’s violations. Citing the government’s ongoing investigation, the minister refused to investigate three of the violations I outlined in my request, including the import and sale of rigged vehicles. This essentially meant that the government was able to continue its investigation without the obligation to provide progress updates.

For the investigation that the minister agreed to open, which covered the continued sale of 2015 model cars that received a half-fix, I received 12 progress update reports over the following three years that offered little to no meaningful information about the government’s progress.

In the end, after more than four years, Canada reached a plea deal with Volkswagen that appeared to be pre-negotiated prior to any charges being laid and fined the company $196.5 million. While this is the largest fine ever levied in Canada, the amount pales in comparison to what the company paid in the U.S. and could have been much higher had the charges not been packaged in a way to reduce the maximum penalty. By contrast, the U.S. charged, prosecuted and fined Volkswagen more than $10 billion within 20 months.

In our view, the federal government’s failure to provide updates about its progress within the four plus years of its investigation reflects a failure to respect the spirit and intent of CEPA and the public participation rights it grants Canadians.

The Volkswagen investigation underscored a number of glaring problems in the enforcement of CEPA that were highlighted in this committee’s 2017 review of the act.

One key problem, for example, is that CEPA's citizen enforcement provisions, which allow concerned citizens to bring an environmental protection action, EPA, against a person or company that has committed an offence, are overly onerous and ridden with barriers that are effectively insurmountable.

For example, in order for a citizen to bring an EPA, they must first request an investigation by the minister and then demonstrate that the minister failed to conduct the investigation or that their response was unreasonable. Additionally, a concerned citizen must demonstrate that a violation is responsible for “significant harm to the environment” and run the risk of having to pay substantial cost awards if they are unsuccessful. As a result of these barriers, no citizen suits have been commenced or completed since the enactment of CEPA in 1999.

As the government proceeds with developing a bill to modernize CEPA, as promised in the government’s Speech from the Throne, we urge Parliament to adopt the committee’s 2017 recommendations to strengthen CEPA in a manner that removes these barriers and improves public participation in the enforcement of the act.

Thank you very much for your time. I look forward to your questions.

[The Chair, Liberal, Francis Scarpaleggia]

Thank you, Mr. Malas.

We will now hear from Mr. Sharpe.

Mr. Sharpe, you have five minutes.

[Ben Sharpe, Senior Researcher and Canada Lead, International Council on Clean Transportation]

Thank you very much, Mr. Chairman.

To the Standing Committee on Environment and Sustainable Development, good afternoon. Thank you very much for the opportunity to provide remarks regarding charges brought against Volkswagen in December 2019 under the Canadian Environmental Protection Act.

My name is Ben Sharpe, and I am a senior researcher and Canada lead for the International Council on Clean Transportation, ICCT. We are a research organization that is focused on providing technical information to support government decision-making on policies for leading vehicle markets around the world.

Today, I'll make comments regarding the essential elements of the robust vehicle emissions regulatory program and the breakdowns that led to the Dieselgate scandal. Then, I'll highlight the large discrepancy between the Volkswagen penalties in Canada as compared to the United States, and how this represents a significant detriment to Canada. Finally, I'll summarize some of the ways in which Dieselgate has fundamentally altered the course of the global auto sector, and has been a significant contributing factor in the accelerated transition to vehicle electrification.

A strong vehicle emissions regulatory program requires that vehicles are tested under a wide range of operating conditions and that there are specific protections against cheating, so how did Volkswagen and so many other manufacturers cheat the system? Well, simply put, they designed vehicles that tricked regulators by performing well in the laboratory and meeting all of the required emissions levels. However, as soon as these vehicles sensed that they were in actual real-world driving conditions, their control algorithms drastically ratcheted up nitrogen oxide, or NOx, emission levels so that the vehicles would get better fuel economy. These so-called “defeat devices” were at the heart of the Dieselgate scandal.

Since we first uncovered the defeat device issue in 2014, the ICCT has been at the forefront of research and policy analysis to identify the full extent of the cheating issue and to present concrete solutions to policy-makers to strengthen vehicle regulations and improve real-world emissions performance.

The ICCT has developed step-by-step guidance for helping regulators identify vehicles with defeat devices, which can be challenging since the devices are embedded with sophisticated computer code.

The ICCT is the world's leading research organization with regard to vehicle compliance and enforcement and real-world emissions evaluation. As an addendum to my testimony, I've included a list of roughly 30 papers, consultant reports and blog posts that we have published on these topic areas.

In addition to designing vehicle emission regulations to explicitly close software algorithm loopholes, it's equally important to have sufficient enforcement provisions and penalties in place to deter manufacturer malfeasance. The discrepancy between the fines collected from Volkswagen by the U.S. and by Canada is significant and deserves further scrutiny, which is why we applaud the committee for taking up this investigation.

Altogether, Volkswagen's fines and penalties in the U.S. total roughly $32 billion Canadian, as compared to $196 million Canadian in Canada.

With roughly 580,000 and 128,000 guilty vehicles sold in the U.S. and Canada, respectively, this works out to about $55,000 per vehicle in the U.S. versus $1,500 per vehicle in Canada. More transparency is needed to determine how Canada came to a settlement that has resulted in significantly lower penalties on a per-vehicle basis versus the U.S.

In response to the Dieselgate fallout over the past five years, diesels are now much less attractive to both consumers and manufacturers. For example, in Europe, the diesel market share has fallen over 40% since 2015. Given the additional costs associated with re-engineering diesel vehicles to comply with increasingly stringent emissions requirements, several manufacturers have divested from diesel technology and have instead made aggressive pivots towards electrification. Not coincidentally, Volkswagen is leading this rapid transition to electric drive, and it announced in 2016 that electric vehicles will make up 25% of its global annual sales by 2025.

Another way in which Dieselgate has turbocharged the transition to electrification is that a significant portion of the Volkswagen settlement funds, nearly $3 billion U.S., are specifically earmarked to support U.S. states with programs that accelerate electric vehicle development.

In summary, Dieselgate has illuminated the critical importance of having well-designed regulations as well as robust compliance enforcement and penalty provisions to ensure that emission reductions are achieved in the real world and not just in the laboratory.

While the Canadian government's action against Volkswagen represents the largest environmental fine in the country's history, this committee is very well justified to probe the manner in which the settlement was reached.

Thank you very much for the opportunity to provide comments.

[The Chair, Liberal, Francis Scarpaleggia]

Thank you, Mr. Sharpe.

Your testimony is related to the study we just concluded. I congratulate the committee for organizing its meetings around related topics.

We will now begin a round of six-minute questions.

Mr. Albas, you have the floor.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Thank you very much, Mr. Chair.

I would like to thank our witnesses for taking the time to be here to discuss this important issue with us today.

I'm going to ask a general question of each witness. Maybe we will go from Mr. Wright to Mr. Malas to Mr. Sharpe. I would like to have a fairly succinct answer with just maybe a little bit of follow-up.

Do the witnesses here today believe that the penalties were commensurate with the crime, and if not, was that the fault of the way the law is currently structured or how the government executed this?

[David Wright]

I haven't looked closely at the environmental legislation with this issue in mind, so I don't think I could properly advise the committee with respect to this question.

[Muhannad Malas]

From our perspective, the perspective of Environmental Defence, I think, as I outlined in my statement, is that there are a number of gaps within the legislation, CEPA, that have enabled the investigation to proceed in the way that it did. These issues were highlighted and underscored in the review by the ENVI committee in 2017 that resulted in a number of recommendations on how the enforcement provisions could be improved.

From our perspective, the legislative framework is a key problem, and the fact is that we weren't able to get much information from the government when the investigation was happening, which was due to the fact that the legislation did not compel the government to provide that information to us. I'm not able to answer the second part of the question about whether there were other factors at play, because I don't have the information at hand.

[Ben Sharpe]

I will certainly defer to Mr. Wright and Mr. Malas in terms of the legal procedure and legislative structure of the Canadian Environmental Protection Act.

From the ICTT's perspective, looking at the penalties that were determined in the U.S. in California and looking at the magnitude of the fines that were levied for Canada, it's certainly a very large discrepancy, and at least to us points to a breakdown in the procedural way in which these fines were determined. For Mr. Wright and Mr. Malas, it seems like there has been a lack of transparency throughout the process.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Thank you.

I think I will go back to Mr. Malas, because you do seem to have a lot of track on exactly how these investigations are done.

The info we received from our analyst shows that CEPA investigations totalled 4,915 in the final year of the last Conservative government. Since then, it has declined every single year while the current government's in power. I think last year it was only around 1,600.

Why do think these investigations have declined so considerably in the last few years?

[Muhannad Malas]

To answer this question, I would point to a number of reports that were published by the Auditor General's office, by the commissioner of the environment and sustainable development, which highlighted that. So far, there have been three reports that looked into enforcement: a 2009 report, a 2011 report and a 2018 report. Some of the findings have been consistent in terms of the way that Environment and Climate Change Canada has invested resources and capacity in enforcing its regulations.

The last report that came out in 2018 showed that 2,000 of the 10,000 inspections and enforcement actions conducted by the department were targeting dry cleaning businesses. These are mostly small to medium-sized businesses and the audit showed that there was no prioritization of risk in terms of how the department allocated its resources. Many very important regulations, such as the prohibition of toxic substances regulations that prohibit 26 substances, did not receive one inspection in 2018.

Once again, I want to emphasize that some of these findings have been consistent throughout the audits that were done by the environment commissioner. There's also an issue of resources and funding, and we have provided recommendations over the years in terms of increasing the funding going towards the enforcement department within ECCC.

[The Chair, Liberal, Francis Scarpaleggia]

Mr. Albas, you have time for a comment.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Thank you. I'm glad you raised that about the Auditor General and the environment commissioner. Do you believe the government is adequately funding these areas?

It seems to be something you've referenced a few times.

[Muhannad Malas]

I don't believe the government is funding these areas and enforcement actions adequately.

[The Chair, Liberal, Francis Scarpaleggia]

Thank you.

We'll go to Mr. Schiefke, for six minutes.

[Peter Schiefke, Liberal, Vaudreuil—Soulanges, QC]

Thank you very much, Mr. Chair.

I add my thanks to all our witnesses for being here today and for their work in helping to protect Canadians from environmental challenges and issues that might be consequential to them.

This is a broad study on how we can improve upon enforcement mechanisms within CEPA and give more powers to the government to be able to better protect Canadians. Given that we haven't had a briefing by officials yet on the full scope of enforcement operations, I guess I'll ask my questions more broadly.

My first question would be for Mr. Sharpe.

We know that countries around the world have a wide range of enforcement regimes to ensure the safety of their populations. Based on your experience, could you point to a few examples of success stories across the world where innovative enforcement practices led to greater protection against harmful substances, for example, or greater protections to the population in general?

[Ben Sharpe]

That's an excellent question. This has become a huge part of our focus as an organization since 2014 and 2015, when all these revelations started to come to the fore. We've been working very closely primarily with regulators in the European Union. As you might know, the definition and use of defeat devices is technically not illegal in the European Union. One of the biggest efforts that we've put in over the past few years is to ensure that these devices cannot be used in that jurisdiction.

In terms of innovative ways to catch vehicles that might be cheating, we've developed several methods, including remote sensing. We have several documents that I've shared with the committee that provide additional details as to how those methods can be employed. We're very excited to see many of the governments that we work with start to use these remote-sensing methodologies to be able to test a very large number of vehicles, very cost effectively.

In the past, it was very expensive to gather data from vehicles in the real world, given the need to put expensive equipment on the vehicles. That's no longer the case when doing remote sensing. We, as an organization, are very optimistic that remote sensing is going to be the primary method by which governments can collect a very large amount of vehicle real-world emissions data and then link that to actual compliance and enforcement regimes.