Existential Threat from Canadian Regulations

Regulations can pose an existential threat when they impact the lives of Canadians in terms of their businesses, thus its productivity and jobs with a deleterious effect on living conditions. Several critical issues are being addressed by CPCA for the paint, coatings, adhesives, and sealants (CASE) industry in Canada that seem to fall into that category. These include:

1. Recent decisions regulating biocides used in the preservation of sustainable water-based coatings;
2. Proposed regulations for much stricter VOC limits in Architectural and Industrial Maintenance (AIM) coatings, which represents 60% of the volume of coatings sold in Canada. Current VOC limits in architectural coatings led to a 93% reduction in VOC emissions (42 kilotonnes) over the past 15 years in Canada; and
3. Impacts from new regulations flowing from amendments to Bill S-5 updating the Canadian Environmental Protection Act (CEPA).

The three new regulatory initiatives noted above signal a new regulatory ‘tipping point’ as they will impact the industry significantly in the coming months and years. However, the fact that items 2) and 3) are still at the ‘proposed’ stage may indicate a willingness by the Federal Government to reconsider the potential for negative ‘impacts’ on industry versus the minimal ‘benefits’ realized. That is the definition of ‘regulatory efficiency’ followed by previous Governments in Canada.

Preserving More Sustainable Water-based Paint

A cluster of biocide preservatives for paint, regulated by the Pest Management Regulatory Agency (PMRA), were re-evaluated over the past two years, and final decisions taken to ban several and severely restrict effective use rates for the others and thus still a ban. These biocides are used for preserving paint and coatings in the can, in storage, during distribution, at retail, and on the substrate or surfaces to which they are applied. The data and risk assessment methodology on which those decisions were taken is still unclear and not based on ‘all’ the available data.?For example, the same available data, and likely more, was used by the US EPA to assess these very same biocides. The result was no restrictions were imposed in the United States. In fact, the US EPA still permits the same use levels for these?very same active ingredients in the United States. When asked about the discrepancy industry is told it is a ‘matter of policy’ or a matter of not using the toxicity reference values as a starting point in Canada. One might conclude that it is not just a matter of science as it should be. This means the Canadian CASE industry will not be aligned with its largest trading partner from which 50% of all paint products sold in Canada are now imported.

To be clear, these lower use rates for critical preservative ingredients are essential in controlling microbial contamination in water-based products. Furthermore, these rates will also have negative impacts on treated articles in other products imported into Canada, from other countries. This reduces product performance with more product spoilage from less effective preservation.??Potential alternative biocides in other countries are not approved in Canada and/or not on the Domestic Substances List, thus not available. This means there will be reduced microbial control for the more sustainable and lower VOC-emitting water-based paint, thus reducing consumer choice and contributing to inflationary pressures and lost sales. Ultimately it means less trade between Canada and the United States.

NEW Lower VOC Limits

The newly proposed VOC limits for the 49 architectural coatings categories are also problematic. The consultation and surveys conducted leading up to the proposed lower VOC limits, specifically related to adopting the CARB limits in Canada, noted the new limits would reduce VOC emissions by 7 kilotonnes and would cost the coatings industry $15?million in total. Thus, the cost-benefit scenario seemed promising. However, we now know such an estimate was hugely understated. Recent calculations by CPCA on behalf of the coatings industry in Canada revealed that the expected benefit of a 7 kilotonne reduction in emissions was highly over-stated. One obvious example is the need for more frequent re-painting required on surfaces due to reduced product performance and degradation of the coating.?In fact, if the 7 kilotonne reduction is achieved it could have collateral damage for the industry in other ways such as key product categories being abandoned due to the lack of product performance per stringent technical specifications in Canada and by consumers broadly speaking. The obvious reason those targets are difficult for some categories, especially for exterior coatings in a harsh Canadian climate, is there is little room left for VOC emissions reduction in both solvent-based and water-based coating formulations, which already deliver a 93% reduction in VOC emissions.

A case in point relates to several?products?in a small number of categories for one company for a VOC reduction limit of 250 kg/L down from 500 kg/L. Cutting those limits in half would require a significant investment in R&D c to reformulate, field testing product performance over several years, new production protocols,?recurring work related to new product development and processes, etc. Those new approximate costs for ‘one’ company would is estimated at a minimum of $17 million. This is for several products only and not the 49 product categories targeted. The negative impact for just ‘one’ company exceeds the government’s ‘estimated’ total cost of $15 million for all categories.

Extrapolating one company’s estimate puts the total amount for these few categories at $50-100?million or more. There are?still 49 categories to be considered in terms of cost versus benefit, some can be more easily dealt with than others. Thus, the estimated $15 million in total costs for the proposed new VOC regulation in all categories is highly understated.

More Chemical Regulations

Then we come to the impacts that could evolve from Bill S-5 amending existing regulations under CEPA, which regulates chemical assessment and risk management in Canada. The coatings industry is highly impacted by those assessments. Many of the hastily proposed amendments added by the unelected Senate were thankfully removed by the House of Commons Environment Committee. If the Bill is passed in its current form by the House of Commons, it could bring some relief for industry generally. However, the devil is always in the details in terms of the administration and/or interpretation of several clauses in the regulations. One of those clauses is the ‘watch list’ for chemicals in products, which only have the “potential to become harmful in the future,” not harmful now.

Many industry sectors have noted the ‘watch list’ could cover a vast array of chemicals in a huge array of products. It will also be at the Minister’s full discretion which ones are put on the list. And, the Minister makes that decision based on what members of civil society bring forward to him and it is not yet clear on what basis that political decision will be made. Many have suggested this could become a long list of chemicals that are already ‘regulated’ for ‘safe’ use in many products in Canada. Again, this was never part of any ‘regulatory efficiency’ test related to risk management of anything, including chemical substances.

These ‘watch-list’ chemicals are of ‘no concern’ today in terms of human health or the environment. They are also not prioritized for assessment today, nor planned to be assessed in the foreseeable future, and may never be assessed. Yet, they can be arbitrarily put on a watch list, thus inevitably viewed as chemicals of concern because the Minister of Environment put them on the list. Therefore, it is logical to conclude that these safe, regulated substances will very likely be viewed as a ‘bad’ list of substances creating concern for the many products containing them. The question is: how many of those ‘watch-list’ products will be left on the shelf by consumers? No amount of advertising the benefits of such products containing ‘watch-list’ chemicals will win over fatalistic comments attributed to the safe products containing them. They will view them as ‘potentially toxic’ as per the definition of the list. Yet, the chemical was never on the Government’s own list of chemical priorities for assessment and regulation in the past, today, or in the future.

There are other concerns that ‘could’ become problematic, which include the “Right to a Healthy Environment” in Bill S-5, which is laudable, and many in the industry support it. But again, it will depend on how it is interpreted. As we have seen with the proposed VOC limits and recent decisions on biocides noted above, interpretation matters. The question then becomes: Will more regulation however well-intended, not based on the usual, rigorous scientific data achieve the intended outcomes related to human health and the environment, or the economic growth Canada seeks?

Regulatory Efficiency?

A critical challenge for new regulations is the need to have fair, evidenced-based regulations that seek to align with our largest trading partners.?Canada’s Regulation Efficiency Act requires a regulatory impact test be conducted and the application of a ‘valid’ risk assessment to address three simple questions:?

1. Is it affordable?
2. Is it acceptable?
3. Will it work?

There are even more concerns when those regulations are going beyond the point where products can actually remain in commerce. At a certain point without active ingredients in products, the product will cease to exist without the efficacy provided by the active ingredient. Yes, more biobased products are being pursued and the coatings industry has come a long way with new R&D initiatives and innovative solutions leading to more sustainably sourced products and a strong commitment to achieving net-zero goals. However, more conventional ingredients need to remain in formulations until then, while they continue delivering health and environmental and economic benefits such as in the case of the 42-kilotonne reduction in VOC emissions in water-based coatings. Leftover waste paint is also recycled via an Extended Producer Responsibility (EPR) approach across Canada, paid for by manufacturers (100%).??Last year more than 20 million kilograms of paint were recycled in Canada by paint manufacturers, enough to paint 500,000 homes.

The bottom line is these very positive outcomes achieved in the coatings industry in Canada over many years may now be in the proverbial “Catch-22” position: Move forward and remove necessary active ingredients in products to a point where products are no longer functional or in commerce; or ‘potentially’ achieve more environmental benefits for Canada at a price, yet to be determined.