Introduction

Background

1.1 Climate change is widely regarded as one of the most significant concerns facing the economy, people’s health, and the natural environment. Failure to reduce greenhouse gas emissions and to adapt to the effects of climate change will increase risks and negative effects for Canadians because of, for example, the number of heat waves and forest fires.

1.2 The United Nations’ Conference of the Parties, held in Paris in 2015, brought Canada and 194 other countries together in signing the Paris Agreement, a historic international agreement to reduce greenhouse gas emissions. Signatories committed to strengthening the effort to limit the increase in global average temperatures to below 2 degrees Celsius (°C) and preferably to 1.5°C, compared with temperature levels in pre‑industrial times.

1.3 In July 2021, the Government of Canada committed to reducing emissions to 40% to 45% below 2005 levels by 2030. In March 2022, the government published the 2030 Emissions Reduction Plan: Canada’s Next Steps for Clean Air and a Strong Economy. This document outlined the measures that the government planned for meeting its 2030 target. To meet this target and its commitment to reach net‑zero emissions by 2050, Canada will have to make a variety of changes in many sectors. While Canada’s forests could help to reduce greenhouse gas concentrations in the atmosphere, this should not distract from the urgent need to reduce burning fossil fuels (Exhibit 1.1).

1.4 Canada has nearly 362 million hectares of forests, making it the third most‑forested country in the world. In 2020, the forest sector contributed more than $25 billion to Canada’s nominal gross domestic product (at current prices, without adjustment for inflation). For this reason, Canada is well positioned to demonstrate international leadership in nature-based solutions. Nature-based solutions are actions that protect, restore, and sustainably manage ecosystems to provide benefits such as increased carbon sequestration (the process that captures carbon dioxide from the atmosphere and stores it) and improved biodiversity. The government first committed to using nature-based solutions to address climate change in 2019.

1.5 As part of this commitment, the federal government announced the Natural Climate Solutions Fund in 2020. The largest component of this fund is the 2 Billion Trees Program. Over 10 years, from 2021 to 2031, the government plans to invest up to $3.2 billion on tree planting efforts, mainly through cost‑shared partnerships.

1.6 The program’s objectives are to capture carbon to reduce greenhouse gas emissions, enhance biodiversity, and support human well‑being. The trees will be planted across Canada, including on provincial, territorial, and federal Crown lands, Indigenous lands, in cities and communities, and on private lands, including farms.

1.7 Natural Resources Canada. This department is responsible for designing and leading the 2 Billion Trees Program, including developing and implementing calls for proposals, evaluating proposals, negotiating contribution agreements with partners, and monitoring and reporting on results. The department also develops estimates of greenhouse gas emissions and removals from the forest sector for Canada’s reporting on national greenhouse gas emissions.

1.8 Environment and Climate Change Canada. This is the lead department for coordinating and implementing the government’s climate change plan and reporting on national greenhouse gas emissions. The department also supports Natural Resources Canada in the 2 Billion Trees Program with activities related to biodiversity conservation, such as habitat restoration for species at risk and species of interest.

Focus of the audit

1.9 This audit focused on whether Natural Resources Canada, working with Environment and Climate Change Canada, adequately designed and implemented the 2 Billion Trees Program and estimated and reported on historical and future forest-sector carbon emissions and removals credibly and transparently.

1.10 This audit is important because there is no solution to climate change and terrestrial biodiversity loss that does not involve forests. For this reason, the role of forests in climate change is of interest to parliamentarians and Canadians. They need a clear picture—backed by rigorous measurement and reporting—of the forest sector’s effects on climate change and of the effects of the federal investments in nature-based solutions involving forests.

1.11 More details about the audit objective, scope, approach, and criteria are in About the Audit at the end of this report.

Findings and Recommendations

Natural Resources Canada is unlikely to plant 2 billion trees by 2031 or achieve expected emission reductions

1.12 This finding matters because Canada’s commitment to planting 2 billion trees is important to tackling the crises of climate change and biodiversity loss by capturing carbon, enhancing biodiversity, and supporting human well‑being.

1.13 The 2 Billion Trees Program was first announced in the 2019 Speech from the Throne. Natural Resources Canada received funding to establish the program in February 2021. To support its overall goal of planting 2 billion incremental trees, Natural Resources Canada provided estimates for the number of trees to be planted over each of the program’s 10 years. At the time of our audit, the program was in its second year.

1.14 The department dedicated its funding to 5 streams:

• provinces and territories—$1.35 billion to plant an estimated 1.34 billion trees
• private lands—$660 million to plant an estimated 500 million trees
• Indigenous‑led initiatives—$500 million to plant an estimated 180 million trees
• urban lands—$500 million to plant an estimated 5 to 7 million trees
• federal lands—$50 million to plant fewer than 1 million trees (estimated)

1.15 Through these streams, the department would support tree planting activities that are generally cost‑shared with partners. Indigenous partners could be supported with a higher cost‑share through any of these streams. Certain groups, such as Indigenous partners, non‑profits, and municipalities, could also be supported with grants focused on capacity building, with no cost‑sharing required. For most project funding, the department issued calls for proposals as its preferred approach for soliciting applications.

Tree planting estimate for 2021 nearly met

1.16 We found that in 2021, the first year of the 2 Billion Trees Program, Natural Resources Canada reviewed and approved projects in accordance with the program’s design. The department funded 72 projects, and program partners planted 28.9 million (96.3%) of the estimated 30 million trees (Exhibit 1.2). More than 150 species were planted at more than 500 sites across Canada, as many of the projects involved planting trees at multiple sites. However, this amounted to only 1.5% of the program’s 10‑year goal of 2 billion trees.

1.17 We found that in the first year, 9 of the 72 projects were Indigenous‑led, with an additional 4 Indigenous organizations supported through grants. Around 7.8 million trees (almost 27% of the total) were planted under these projects, covering over 5,000 hectares.

Tree planting estimate for 2022 unmet

1.18 We found that in the 2022–23 fiscal year, Natural Resources Canada was unlikely to plant 60 million trees, the figure it had estimated. The department received more than 200 applications for the 2 Billion Trees Program’s tree‑planting and capacity-building streams in response to its December 2021 call for proposals. The December 2021 call for proposal was not open to the provinces or territories. The department had originally planned to start signing agreements in May 2022.

1.19 We found that by the end of our audit period, the department had signed 23 agreements with partners from the December 2021 call for proposals, some of which were multi‑year agreements, covering 1.7 million trees, and 5 with federal partners, covering 424 thousand trees in 2022. An additional 71 agreements with partners were not yet signed by 31 October 2022. Moreover, the department had allowed 5 projects from 2021, covering 1.1 million trees, to carry over to 2022. The final number of trees planted in summer 2022 will be available after May 2023. We found that if all the signed agreements were implemented, partners would be expected to plant 16.5 million trees in 2022, for a total of 2.3% of the overall 2 billion tree goal in the first 2 years of the program (Exhibit 1.3).

1.20 Delays in signing agreements have not only significantly challenged Natural Resources Canada’s ability to plant the number of trees that it had estimated for 2022, but will also affect subsequent years, which already have much more ambitious planting estimates. As of October 2022, we found that if all signed agreements with all partners were implemented, the program would be projected to plant 76.2 million trees by the end of the program, or 3.8% of the overall 2 billion tree goal.

Expected emission reductions unlikely

1.21 We found that Natural Resources Canada’s projections as of September 2022 showed that it did not expect to achieve its annual or long‑term greenhouse gas emission reductions for the 2 Billion Trees Program. The department’s targets, set at the beginning of the program, were to reduce emissions by up to 2 megatonnes of carbon dioxide equivalent^{Definition 1} (Mt CO₂ eq) annually by 2030 and by up to 11 to 12 Mt CO₂ eq annually by 2050.

1.22 However, Natural Resources Canada projected that the program would be a net greenhouse gas source until 2031—generating 0.1 Mt CO₂ eq in 2030—and would capture 4.3 Mt CO₂ eq in 2050. This change is a result of the initial emissions caused by site preparation and planting activities, balanced by the increasing greenhouse gas capture capacity of trees as they grow (Exhibit 1.4).

1.23 Natural Resources Canada is considering whether to allow recipients to participate in greenhouse gas offset systems, which could further decrease the greenhouse gas benefits of the program. Under the department’s proposed approach, if a project were eligible under an offset system’s rules, the recipient of federal funding to plant trees for that project could also sell a credit for planting those same trees. A buyer, such as an industrial facility, could use this credit, for example, to comply with carbon pricing systems for large emitters, instead of reducing emissions at the facility. In our view, allowing participation in offset systems could give a false impression that progress has been achieved—as offset credits could be purchased to plant trees that would have been planted anyway—and could compromise Canada’s overall efforts to reduce emissions.

Program design could be improved

1.24 This finding matters because as designed, the 2 Billion Trees Program relies on strong partnerships across Canada to meet its tree-planting goal. Furthermore, knowing whether the program’s objectives have been met depends on long‑term monitoring of the survival or health of planted trees. It is important that Natural Resources Canada monitor and report holistically on tree planting to ensure that all of the program’s benefits are realized for future generations.

1.25 In addition to reducing greenhouse gases, planting trees can

• enhance biodiversity—for example, by providing critical habitat for many species, including species at risk
• contribute to human physical and mental health
• increase forests’ resilience to climate change

1.26 To estimate and report on the greenhouse gas effects of planting 2 billion trees, Natural Resources Canada stated that it would monitor and verify tree planting and that it would establish processes to verify its partners’ activities and monitor outcomes. Such verification is key to ensuring that estimates of carbon removal consider tree survival and to identifying where replacement planting may be necessary.

Engagement undertaken and risks identified

1.27 We found that Natural Resources Canada held engagement sessions and sought information from stakeholders and potential partners at the start of the 2 Billion Trees Program. This shaped the program’s design because it allowed the department to better understand partners’ needs and concerns and to identify risks. We found that the department undertook a gender-based analysis plus,^{Definition 2} which also informed the program’s design. The department included diversity and inclusion criteria in the application process and had considered Indigenous representation in the design.

1.28 We also found that the department adjusted the program in response to lessons that it had learned in the first year of the program. The department identified gaps, such as the lack of clear guidance on specific elements of the application and the short timeline to apply for proposals. The department adjusted the program to address some of these gaps.

Long-term partnerships lacking or delayed

1.29 We found that Natural Resources Canada had not yet signed any long‑term project agreements with provinces or territories. As the department had designed the 2 Billion Trees Program with the expectation that 67.5% of all program funds would be used by provinces and territories (to plant 1.34 billon trees), this constituted a major program risk.

1.30 Natural Resources Canada has emphasized the importance of establishing long‑term agreements, which would allow for long‑term planning, provide assurance to the nurseries that are growing seedlings, and allow partners to attract and retain staff. The department designed the program to rely on project proposals for its understanding of the partners’ capacities, expected project risks, and proposed mitigation measures. We found that this design affected the department’s ability to plan for the long term, particularly in the absence of long‑term agreements.

1.31 For example, we found that there was a risk that not enough seedlings would be available to plant 2 billion trees. The program will require increasing the demand of seedlings by up to 350 million seedlings per year. Canadian nurseries that were surveyed by the department indicated that they would require up to 2 years of preparation before planting seeds and 1 to 8 more years before seedlings would be available for planting. Nurseries also indicated that they would not invest in seedling production without a commitment to purchase the seedlings. The department was relying on establishing long‑term agreements with large partners early in the program to provide the assurance nurseries needed. However, no such agreements with provinces and territories have been signed.

1.32 In December 2021, the department created a new requirement for provinces and territories to sign an “agreement in principle” before submitting project proposals, partly to demonstrate a joint long‑term commitment to planting trees and enhancing biodiversity. This requirement led to provincial and territorial project proposals being put on hold for a full planting year in 2022. By the end of our audit period, Natural Resources Canada had signed 4 agreements in principle, and 1 province had indicated that it would not sign.

1.33 Although Natural Resources Canada has notionally allocated the funds for provinces and territories over the 10 years of the program, some jurisdictions have suggested they may limit agreements to a few years, depending on their ability to match the funding. Although the department can reallocate funds to different project streams, it does not have a documented strategy for mitigating the absence of provincial and territorial participation.

1.34 We found that Natural Resources Canada had developed detailed planning to 2023, but it did not have a long‑term strategic plan that detailed how the program would be operationalized to meet its planting goals or its 2031 and 2050 greenhouse gas emission reduction targets.

1.35 Natural Resources Canada officials told us that the department would assess further gaps and adjust its delivery after receiving multi-year project proposals. In December 2022, to ramp up the signing of long‑term agreements, the department began accepting proposals on an ongoing basis rather than having annual calls for proposals. However, in our view, if the continued delays in establishing long‑term agreements persist, and no other specific measures are identified, the department will not meet its objective of planting 2 billion trees by 2031.

1.36 To ensure that it can meet the planting objectives of the 2 Billion Trees Program, Natural Resources Canada should

• clearly document how the program will be operationalized to meet its planting goals and its 2031 and 2050 targets for reducing greenhouse gas emissions
• promptly develop specific measures to address the lack of long‑term agreements with project partners

Natural Resources Canada’s response. Agreed.

See Recommendations and Responses at the end of this report for detailed responses.

No requirement for long‑term monitoring of planted trees

1.37 Permanence of planted trees. We found that Natural Resources Canada had not required that the trees planted through the 2 Billion Trees Program remain in the ground over the long term. This was due to several factors, including the consideration that seeking long‑term control on partners’ land could reduce participation rates in the program and because the department did not have a mechanism in place to enforce permanence of any activity on land it does not own. Permanence was a contentious issue raised by stakeholders and partners, with some advocating a requirement and others opposing one.

1.38 Long-term monitoring. We found that for the first year of planting in 2021, the department did not clearly state its expectations for monitoring the health and survival of the planted trees. As a result, 43% of project partners (31 of 72) in 2021 did not commit to a specific time frame for monitoring (Exhibit 1.5). Since then, the department has asked all applicants to provide monitoring plans for an unspecified period beyond the scope of their agreements.

1.39 For projects that began in the 2021 planting year, Natural Resources Canada indicated that it would not follow up with partners for monitoring beyond the end of the contract. Without monitoring the trees for health and survival, at least until the end of the program, it is unclear how the department can report comprehensively on the program’s results, which are supposed to contribute to meeting Canada’s 2050 net‑zero emission commitment.

1.40 We found that Natural Resources Canada set out verification processes (such as verifying partners’ reporting and conducting site visits) in its agreements with private and provincial and territorial partners but not for the federal partners. We found that the department did not have a documented plan as to how it would conduct on‑site visits to verify results and had not yet taken any action to verify partners’ work on site. While the department collected information to facilitate future monitoring of results through remote sensing or other means, it did not yet have a plan for this monitoring.

1.41 Performance measurement. We found that Natural Resources Canada developed a total of 19 indicators for all 3 program outcomes: reducing greenhouse gas emissions, achieving environmental benefits, and supporting human well‑being. The department planned to report against most of these indicators in its departmental results report, starting in 2022. However, we found that the department had not yet developed final targets for 7 of the 19 indicators, including its biodiversity and environment indicators, and it had no interim targets for 3 of its indicators.

1.42 We also found that for 12 of the 16 indicators with interim targets, Natural Resources Canada did not have quantitative annual targets required to meet the final targets. For example, the annual target to reach the goal of planting 2 billion trees is to be “annually increasing.” In our view, without quantitative annual targets, the department cannot be held to account for annual progress toward planting 2 billion trees.

1.43 To ensure that Natural Resources Canada is meeting the objectives of the 2 Billion Trees Program, including its 2031 and 2050 targets for reducing greenhouse gas emissions, the department should have

• a long‑term monitoring plan to assess the health and survival of the trees planted through the program
• clear quantitative interim and final targets for the program’s performance indicators

Natural Resources Canada’s response. Agreed.

See Recommendations and Responses at the end of this report for detailed responses.

Opportunities to improve biodiversity benefits

1.44 We found that in the 2021 planting season, Natural Resources Canada funded more than 270 monoculture sites (that is, sites with plantings of only 1 species), covering 3,136 hectares. Of these sites, 78 had more than 10,000 trees. These monoculture plantings accounted for 14.4% of the total trees planted in 2021 as part of the 2 Billion Trees Program. Monoculture plantings do sequester carbon, and may be appropriate in certain habitats. However, in the vast majority of circumstances, they do not support biodiversity and other benefits related to environmental and human well‑being as much as more diverse plantings do. We found that the department did not have any specific guidance or limitations for applicants on monoculture planting.

1.45 We found that in March 2022, Environment and Climate Change Canada provided Natural Resources Canada with information to guide discussions among the federal, provincial, and territorial governments about potential sites for tree planting activities that would maximize conservation benefits. This included information on Canada’s priority places and priority species, critical habitat for species at risk and birds. However, this information was not provided to partners under other funding streams (such as the urban or private streams), even though it might be useful to all program partners to best target their planting activities.

1.46 Natural Resources Canada considered habitat restoration to be more expensive than typical tree planting, mostly because of remote access, challenging growing conditions, and resource-intensive site preparation. The department set out a higher cost‑share ratio (60% from the federal government) for habitat restoration for species at risk and species of interest for provinces and territories. However, the department did not design the program with specific funding considerations for habitat restoration for other funding streams, which might have encouraged all partners to undertake habitat restoration.

1.47 To enhance biodiversity and habitat-related benefits of the 2 Billion Trees Program over the long term and to contribute to Canada’s biodiversity goals, Natural Resources Canada should

• develop criteria for monoculture planting projects to ensure that these projects do not hinder biodiversity goals
• make specific guidance and support about biodiversity and habitat needs available to all partners
• provide incentives to habitat restoration work for all project streams
• leverage information provided by Environment and Climate Change Canada to enhance reporting on biodiversity benefits

Natural Resources Canada’s response. Partially agreed.

See Recommendations and Responses at the end of this report for detailed responses.

Greenhouse gas effects of forests were not effectively communicated to support decision making and accountability

1.48 This finding matters because accurate and consistent information on forest-related greenhouse gas emissions can support the development of policies, allow stakeholders and decision makers to assess progress, and determine whether any adjustments or further actions are needed.

1.49 Natural Resources Canada developed a system, which uses models that integrate data from many sources, to estimate greenhouse gas emissions and removals in Canada’s forests. The models and resulting estimates are used to support Canada’s domestic and international reporting. The work to develop carbon estimates for Canadian forests is highly complex and specialized.

1.50 Environment and Climate Change Canada reports on national greenhouse gas emissions to Canadians and to the United Nations Framework Convention on Climate Change. One of the intended purposes of modelling and the associated reports is to support understanding of how human activities, such as tree planting programs or changes in forest management, are affecting emissions. However, other factors that might not be directly related to human activities can obscure the results.

1.51 For example, because of climate change, forest fires in Canada are expected to get bigger and happen more often. Canada’s forests are becoming a net source of emissions because of forest fires and disturbances caused by insect outbreaks, such as the mountain pine beetle. In some recent years, forest fires and insect disturbances have released over 200 Mt CO₂ eq per year to the atmosphere. For example, in 2018, emissions from these disturbances would have added 26% to the national total. The large variations in emissions from forest fires and other disturbances year over year make it difficult to clarify the role of human activities in the overall data. The guidance from the United Nations’ Intergovernmental Panel on Climate Change allows for countries to exclude forest fires and insect disturbances, to better clarify trends resulting from human activity. As a result, Canada excludes these emissions from its national reporting (Exhibit 1.6).

1.52 Environment and Climate Change Canada develops 2 types of reports:

• historical emissions and removals reports, known as the national inventory reports, which provide estimates of annual emissions and removals dating back to 1990
• projected emissions reports, published as either emissions projection reports or biennial reports, which provide expected emissions to 2030

Environment and Climate Change Canada uses Natural Resources Canada’s estimates of emissions and removals from forests and harvested wood products in these reports.

1.53 Additionally, under the Canadian Net‑Zero Emissions Accountability Act, the Minister of Environment and Climate Change is responsible for publishing plans to achieve emission reduction targets, such as the 2030 Emissions Reduction Plan published in March 2022. The minister must also publish interim progress reports and assessment reports on how the measures and strategies described in the plans, including nature-based solutions, have contributed to meeting the relevant emission targets.

Lack of transparency about the effects of human activities on forest emissions

1.54 We found that the information produced by Environment and Climate Change Canada and Natural Resources Canada was primarily focused on meeting international reporting obligations and was not aimed at other critical public and private sector decision makers. For example, although Natural Resources Canada provided support to users of the information, such as provinces and environmental organizations, to help them assess the effectiveness of measures or to evaluate mitigation options, this information was not made widely available. The results of these assessments were generally uniquely tailored to the users or limited to the scientific literature.

1.55 We found that the government had several opportunities to improve information about forest emissions to support accountability and decision making and thus improve the value for money of the government’s modelling of emissions.

1.56 Emissions Reduction Plan. We found that Environment and Climate Change Canada was not transparent in its reporting on the effects that human activities on forest land have on greenhouse gas emissions. For example, we found that the 2030 Emissions Reduction Plan lacked transparency and consistency in reporting on nature-based solutions, which often include actions related to forests. The plan stated that the expected contribution of nature-based solutions toward Canada’s 2030 target is 30 Mt CO₂ eq, but elsewhere in the plan, this value can be calculated as 6 Mt CO₂ eq. The plan did not detail how the department had estimated these contributions. We found that these estimates were largely based on literature reviews or analyses that relied on assumptions that were either overly optimistic or had no rationale.

1.57 We also found that the projection reports and emissions plan provided scant information on the changes in reported values, in comparison with those of previous reports. For example, although the estimate of the effect of nature-based solutions and agricultural measures increased from 10 Mt CO₂ eq in the 2020 emissions plan to 19 Mt CO₂ eq in the 2022 emissions plan, the reason for the change was not explained in the plan.

1.58 Forest management practices. We found that the departments’ reporting on how changes in forest management affected emissions was incomplete. Forest management activities include clear-cutting, partial harvesting, burning of post‑harvest residuals (slash burning), creating reserves for biodiversity, and managing areas for non‑timber use, but these were not clearly or separately reported on (Exhibit 1.7).

1.59 Furthermore, historical emission reports noted that forested lands have been influenced by recent management trends. However, we found that the reports described neither what the trends were nor the trends’ effects on emissions. While Natural Resources Canada used modelling to assess the effects of specific forest management activities or mitigation options, the results were often published in academic articles only, making them difficult for the public and many stakeholders to access or understand.

1.60 Forestry sector emissions. We found that Environment and Climate Change Canada did not separately report total emissions from the forestry sector in Canada. Instead, these emissions were dispersed throughout the national inventory reports, making it impractical to determine their aggregate effects. For example, some emissions were included under the land‑use category, but emissions from equipment used in forestry operations and logging were included under a different category.

1.61 Many stakeholders, such as academics and environmental and health groups, have expressed concern about the lack of transparency about greenhouse gas emissions from logging. One stakeholder report estimated that net emissions from logging accounted for approximately 10% (75 Mt CO₂ eq) of Canada’s total in 2020. This estimate was largely based on information reported publicly by the departments. Natural Resources Canada and Environment and Climate Change Canada disagreed with this estimate but provided no alternative estimate that was specific to logging. They also indicated that producing a logging estimate would be outside of international reporting obligations.

1.62 In our view, sector-specific reporting, as is done for the oil and gas industry, would support the development of effective policy measures to reduce emissions from the forestry sector.

1.63 Provinces and territories. We also found that forest emissions were not presented publicly by province and territory, even though the information was available. Trends in emissions related to forests and their expected contributions toward Canada’s 2030 target vary considerably across provinces and territories. For example, some provinces have planned to expand their forestry industries, which would add to projected emissions, while others expected harvest rates to decline. According to Natural Resources Canada and Environment and Climate Change Canada, provincially disaggregated data is not reported because 1 province prefers it to remain confidential. Providing this information publicly would help users to better understand trends.

1.64 Given the importance of forests to greenhouse gas emissions and removals, and in consideration of Canada’s unique national circumstances, Natural Resources Canada and Environment and Climate Change Canada should commission and publish an independent expert review and take action to address any gaps or opportunity for improvements. This review should

• consider Canada’s approach to estimating and reporting emissions related to forests and specifically to logging
• include a formal engagement process with users, such as researchers and environmental and industry groups, on how to better meet their needs and support accountability and decision making

The departments’ response. Agreed.

See Recommendations and Responses at the end of this report for detailed responses.

1.65 To inform policy decisions that support emission reductions and improve transparency, Environment and Climate Change Canada, working with Natural Resources Canada, should, in its reports on historical and projected emissions,

• state the greenhouse gas effects of changes in forest management
• work with provinces and territories to report data by province and territory, so that the effects of forest management practices are more evident
• present information in ways that the public can readily access and easily understand

and, in its projection reports,

• more clearly state which policies and measures are included and their greenhouse gas effects
• more clearly describe the methods, information, and assumptions it uses to estimate and account for emissions and removals

Environment and Climate Change Canada’s and Natural Resources Canada’s response. Agreed.

See Recommendations and Responses at the end of this report for detailed responses.

Inconsistent progress reporting

1.66 We found several inconsistencies in the reporting about forest-related emissions that made results more difficult to access and understand, both by the public and decision makers.

1.67 Recalculations. We found that continuing recalculations, in response to updates in data or methods, could change whether forests were reported as sources or sinks (when forests absorb more carbon from the atmosphere than they release): The value for the same year changed significantly from report to report (Exhibit 1.8). The national inventory report identified the most important changes, but it did not describe the effects of these changes. While improving information is important, this continuous and significant changing of values makes it difficult for decision makers to rely on the reporting for designing and planning measures.

1.68 Approaches to accounting. We found that Canada’s approach for calculating the effects of forests on Canada’s national emission target was different than for other sectors, such as electricity or oil and gas. According to policy guidance developed by the Intergovernmental Panel on Climate Change, countries can use different sets of rules to report on the contributions of forests toward emission targets.

1.69 The rules that Canada uses, known as reference-level accounting, are intended to better reflect a change from a business‑as‑usual management of forests. Projected emissions are compared against a scenario (the reference level), which assumes that historical harvest rates would continue. Under reference-level accounting, the difference between the projection and the scenario is reported as the contribution that forests provide toward the climate target.

1.70 By 2026, reference-level accounting will be used by few other developed countries. Some other countries, such as the United States, use a “net‑net” approach, which is similar to what Canada uses for the rest of its economy. Under the net‑net approach, when assessing whether an emissions target was met, emissions in 2030 are compared against actual emissions in a base year, such as 2005. Natural Resources Canada developed the reference-level approach, which Canada proposed internationally in 2008. Department officials told us that the department chose the reference-level approach to remove the effect of the age of its forests, because older trees capture less carbon annually than younger trees do.

1.71 By comparing against a scenario that assumes that historical harvest rates would continue, in our view, Canada’s approach presented an artificial emission reduction that counted toward its 2030 target without any mitigation action or policy changes in the forestry sector. Moreover, reference-level accounting is difficult to understand and lacks transparency.

1.72 Recently, the European Union announced that as of 2026, it would no longer use reference-level accounting to report its progress. After that announcement, the Canadian government initiated an internal review of its accounting approach.

1.73 Moreover, we found that while Canada used reference-level accounting to estimate the effects of forests toward its 2030 target, it had not used this approach in its historical reports. The information was available only in the projection reports, which are less timely and are published in several report types that are hard to compare. Canada’s historical reports are commonly used to assess whether progress is being made toward national targets. Furthermore, Canada’s legislation to improve accountability on climate action names the historical reports as the source for assessing whether Canada has met its targets.

1.74 The departments disagree that the accounting approach for estimating the contribution of forests toward meeting the 2030 target should be reported in Canada’s historical reports. According to Natural Resources Canada, the choice of accounting approaches is a policy decision, and the resulting information should not be published in historical reports. However, other countries, such as Australia and the United Kingdom, include this information in their historical reports for tracking progress. In our view, the inconsistency between historical and projection reporting on the effect of forests on emissions, which is unlike other sectors, creates confusion and limits Canadians’ ability to hold the government to account.

1.75 Performance indicators and targets. The United Nations’ Sustainable Development Goal 13 (Climate Action) commits to taking urgent action to combat climate change and its impacts. We found that Environment and Climate Change Canada did not include forests in other key greenhouse gas indicators—such as indicators under the Sustainable Development Goals and the Federal Sustainable Development Strategy—even though those frameworks have the same 2030 target. Calculating greenhouse gas indicators differently or excluding different components create inconsistencies that can hinder the monitoring and reporting of progress and the identification of needed adjustments.

1.76 For its reporting to better support the limiting of greenhouse gas emissions and global temperature rise, Environment and Climate Change Canada should

• consider and report publicly on which accounting approach best meets criteria related to supporting better-informed policy decisions and actual emission reductions
• provide additional estimates in the historical reports that use the same accounting approach for estimating the effects of forests that it plans to use for meeting its 2030 target
• consistently include forested land in the relevant greenhouse gas indicators for frameworks that report against Canada’s greenhouse gas emission targets, such as the Canadian Indicator Framework for the Sustainable Development Goals and the Federal Sustainable Development Strategy

Environment and Climate Change Canada’s response. Agreed.

See Recommendations and Responses at the end of this report for detailed responses.

Natural Resources Canada’s quality control and review for estimating the future effects of forests were limited

1.77 This finding matters because complete and accurate data is fundamental to developing credible emission reduction plans to help Canada meet its greenhouse gas emission targets. This, in turn, depends on rigorous modelling, supported by a comprehensive quality control^{Definition 3} framework.

1.78 The Commissioner of the Environment and Sustainable Development’s 2014 report, Mitigating Climate Change, identified issues with clarity and consistency in the government’s estimates and reporting on greenhouse gas emissions and carbon removals by the forest sector. Other recent reports by the Commissioner, such as the 2022 report, Hydrogen’s Potential to Reduce Greenhouse Gas Emissions, identified issues with the transparency, assumptions, external review, and reporting of Canada’s emission modelling for other sectors.

Weak quality control and review for projected estimates

1.79 We found that Natural Resources Canada and Environment and Climate Change Canada’s quality control system was more comprehensive for historical estimates than for projected estimates. For example, the departments did not have detailed documentation of steps taken with the quality checks for their projected estimates. Furthermore, Natural Resources Canada did not document the outcomes of these checks and the resolution of potential errors for its projected estimates. Natural Resources Canada told us that processes and procedures for the projected estimates analysis are less mature and are carried out with fewer dedicated resources than the historical estimates.

1.80 We found that a formal continuous improvement plan was in place to track progress in addressing recommendations from internal and external reviews of historical estimates. We found that all of the recommendations from the United Nations Framework Convention on Climate Change expert reviews of the historical estimates were addressed or in the process of being addressed. We found that while projected estimates had some continuous improvement measures, no formal plan was in place.

1.81 We found that many of the departments’ quality control checks were completed manually and relied on specific individuals’ technical expertise and judgment. In 2015, Natural Resources Canada performed an internal audit that recommended identifying key and critical scientific research positions and undertaking succession planning. Seven years later, we found no adequate evidence that these critical positions had been identified and that corresponding succession plans had been developed. In our view, this posed a risk that it would not meet international reporting obligations because retirements for some individuals were imminent.

1.82 During our audit period, we found that external review of the historical and projected estimates was limited to the international expert reviews required under the United Nations Framework Convention on Climate Change. Formal consultations with stakeholders were limited, as was public scrutiny. For example, the departments convened an international expert panel in 2016 to review methodological changes. However, the departments have not undertaken consultations with outside experts in recent years as part of their quality assurance related to estimates of forest emissions and removals.

1.83 The United Nations’ Intergovernmental Panel on Climate Change’s guidance on external reviews notes that for important categories of emission sources, there should be expert peer review beyond that of the convention’s review team. According to Canada’s national inventory reports, emissions from forested land have the strongest influence on the national trend, more than emissions from road transportation. Therefore, additional external review procedures, such as more extensive peer reviews or audits, would bolster confidence in the estimates.

1.84 To improve quality, transparency, and trust in climate change modelling, Natural Resources Canada, working with Environment and Climate Change Canada, should strengthen the quality control and review process for its projected estimates by increasing

• documentation of the control processes in place
• knowledge transfer and succession planning for key and critical positions
• periodic external review, especially following significant methodological change

Natural Resources Canada’s response. Agreed.

See Recommendations and Responses at the end of this report for detailed responses.

Conclusion

1.85 We concluded that Natural Resources Canada, working with Environment and Climate Change Canada, did not adequately design and implement the 2 Billion Trees Program. Given the early trends and issues establishing partnerships, it is unlikely that the program will meet its objectives unless significant changes are made.

1.86 We also concluded that Natural Resources Canada, working with Environment and Climate Change Canada, did not provide a full and transparent picture of how Canada’s forests remove carbon from the atmosphere or contribute carbon to it. Natural Resources Canada developed a system to estimate greenhouse gas emissions and removals in Canada’s forests, and the departments’ reporting answered to international obligations. However, there were several opportunities to make the estimates and the resulting reporting more consistent, easier to understand, and more accessible and useful to decision makers and the public.