NAFTA and climate

PDF Download the NAFTA 2.0: For People or Polluters? report

ReportAs NAFTA negotiations close in on an agreement in principle, a new tri-national report by leading Canadian, Mexican and American economists has found that NAFTA’s existing regulations prevent Canada from reducing almost 1500 megatonnes of greenhouse gas emissions. This would nix any chance Canada has of meeting its Paris Agreement commitments on climate change. 

The report, NAFTA 2.0: For People or Polluters?, is published by the Council of Canadians, Sierra Club U.S. and Greenpeace Mexico. It details how the existing NAFTA binds all three countries to fossil fuel futures, and how current negotiations make the problems worse.

For example, NAFTA’s energy proportionality rules require that Canada make available for export to the U.S. the same percentage of oil and gas as it has in the past three years.

What does that mean for Canada’s climate? The report’s economic modelling shows that NAFTA’s energy proportionality rules would lock in 1488 megatonnes more greenhouse gas emissions by 2050. This is double Canada’s yearly emissions and more than 12 times greater than its 2050 climate pollution target.

More key findings from the report are outlined below. And if you haven’t seen it yet, you can watch the Council’s helpful video on energy proportionality:

Key findings from our new report NAFTA 2.0: For People or Polluters?

NAFTA’s Obstacles to Climate Progress

  • NAFTA’s “proportionality” rule locks in tar sands oil extraction and fracking in Canada, while giving investors a permanent green light to finance new tar sands oil pipelines to the U.S. If Canada tries to meet its climate goals but remains bound by this NAFTA rule, the country will produce nearly 1,500 metric megatons more climate pollution by 2050 than if it ditched the rule. This cumulative NAFTA climate pollution penalty is twice Canada’s current annual emissions and more than 12 times greater than its 2050 climate pollution target.
  • NAFTA has facilitated a fivefold increase in U.S. gas exports to Mexico by requiring those exports to be automatically approved. This has fueled increased fracking in the U.S., expansion of cross-border gas pipelines, and a crowding out of solar and wind power in Mexico. Only 1 percent of Mexico’s electricity comes from solar and wind while half now comes from gas, which has contributed more than any other fuel type to Mexico’s increased climate pollution.
  • NAFTA could prolong the climate damage from the Trump administration’s regulatory rollbacks if NAFTA’s private legal system for corporate polluters remains intact. If “investor-state dispute settlement” (ISDS) remains in NAFTA, it could delay or weaken the re-establishment of U.S. climate policies after the Trump administration leaves.
  • NAFTA allows corporations to evade climate policies by offshoring their production, pollution, and jobs to countries with weaker climate standards. Policymakers across North America regularly cite this climate pollution loophole as a reason not to enact stronger climate policies, for fear that doing so would spell job loss and a mere exporting of emissions.

New Climate Threats in NAFTA 2.0?

  • NAFTA negotiators have explicitly stated that they intend for NAFTA 2.0 to lock in the recent deregulation of oil and gas in Mexico, which has encouraged increased offshore drilling, fracking, and other fossil fuel extraction. A future Mexican government may want to restrict such activities to reduce climate, air, and water pollution. However, NAFTA 2.0 could bar such changes with a “standstill” rule that requires the current oil and gas deregulation to persist indefinitely, even as the climate crisis worsens and demands for climate action crescendo.
  • NAFTA 2.0 includes expansive rules concerning “regulatory cooperation” that could require Canada, the U.S., and Mexico to use burdensome and industry-dominated procedures for forming new regulations, which could delay, weaken, or halt new climate policies. These rules also could be used to pressure Canada and Mexico to adopt climate standards weakened by the Trump administration, making it harder to resume climate progress in the post-Trump era.

A Climate-Friendly NAFTA Replacement

  • To allow governments to take climate action without fearing the offshoring of jobs and pollution, NAFTA’s replacement must require each country to enforce robust climate, labor, and human rights protections, in line with the Paris accord and other international agreements. In contrast, the Trump administration is proposing that NAFTA 2.0 replicate the weak environmental text of the Trans-Pacific Partnership, which did not even mention climate change.
  • To prevent climate and other public interest policies from being challenged in trade tribunals, NAFTA’s replacement must include a broad “carve-out” that shields such policies from challenge, while eliminating ISDS and other overreaching rules. The Trump administration has proposed an opt-out for ISDS, but negotiators have given no indication that they plan to curtail other overreaching rules or exempt climate and other public interest policies from those rules.
  • To support a just transition to a clean energy economy, NAFTA’s replacement must allow governments to swiftly phase out fossil fuel exports. The deal must eliminate NAFTA’s proportionality rule and the rule that requires automatic U.S. approval of gas exports. Instead, negotiators are reportedly contemplating either maintaining or even expanding these rules.

The report is available here.