After having been reviewed by three appellate courts, the Supreme Court of Canada has now had its opportunity to resolve the hotly debated issue of whether the federal Greenhouse Gas Pollution Pricing Act (the Act) is constitutional. The majority of the Court (six of nine judges) held that it was.
As with our prior post summarizing the three appellate decisions, this post is intended to provide a brief summary to help our readers understand this important decision. A further, more comprehensive, Dentons Insight will be published in the coming weeks in which we will delve deeper into the decision and consider its potential implications on the division of federal and provincial jurisdiction in Canada and impacts for businesses, climate change policy, and environmental laws.
Only the first two of four parts of the Act were at issue before the Court. For completeness:
- Part 1 – establishes a fuel charge applicable to producers, distributors and importers of various carbon-based fuels.
- Part 2 – creates a pricing mechanism for industrial Greenhouse Gas (GHG) emissions.
- Part 3 – authorizes the Governor in Council to make regulations providing for the application of provincial law concerning GHG emissions to federal works and undertakings.
- Part 4 – requires the Minister of the Environment to prepare an annual report on the administration of the Act and have it tabled in Parliament.
Both parts at issue – Parts 1 and 2 – were found to be constitutional by the majority.
1. The essential character of the Act: to create a minimum national standard of GHG price stringency to reduce GHG emissions
The majority held that the essential character of the Act (otherwise known as its pith and substance) “is establishing minimum national standards of GHG price stringency to reduce GHG emissions”. The majority clarified that the pith and substance of a challenged statute or provision must be described as precisely (which is not the same as narrowly) as possible.
The purpose of this Act is to create a consistent pricing floor for GHG emissions throughout Canada. Accordingly, the Act was found to have an inherently national focus. How such minimum standards are actuated remains in the discretion of each province and territory (subject to the monitoring of the Governor in Council, as will be described below).
This characterization of the Act goes hand-in-hand with the Court’s analysis of the “provincial inability” component of the national concern doctrine. By establishing a minimum pricing system (or a “backstop”) all provinces are required to not only implement a pricing system but a sufficiently stringent pricing system in accordance with the Act. The majority notes that GHG emissions are predominantly extra provincial (and even international) in effect – looking at the GHG emissions themselves as opposed to the causes of emissions, such as industry.
The Court noted that the provinces and territories are constitutionally incapable of establishing a binding outcome-based minimum legal standard — a national GHG pricing floor — that applies in all provinces and territories at all times. The provincial inability to establish such minimum standards would be inconsistent with Canada’s international and national commitments and efforts at reducing GHG emissions. Further, the Court expressed concern that without a cohesive national effort there would be a risk of “carbon leakage” which would have consequences for extra-provincial interests and undermine the efficacy of province based GHG pricing.
2. Applications of the National Concern Doctrine
The provinces and territories are afforded certain exclusive jurisdiction over subject matters enumerated in s. 92 of the Constitution. Pursuant to the national concern doctrine, the federal government has jurisdiction over matters found to be inherently national and not falling within the subjects already enumerated in the Constitution. A principal point of difference between the majority and the minority was focussed on the availability of the doctrine when the matter already falls within the scope of enumerated provincial powers – the majority left room for the application of the doctrine whereas two of the dissenting justices found that this precluded recourse to the doctrine.
The national concern doctrine, under s. 91 of the Constitution, empowers Parliament to make laws for the peace, order, and good government (POGG) of Canada. It has seldom been used by the courts because, once applied, it provides the federal government with exclusive jurisdiction over a given subject matter. For that reason, how the subject of the Act is defined for the purposes of the doctrine is critical so as to not step on the metaphorical toes of the provinces/territories. As such, finding that the doctrine applies is only one step, the second is ensuring it adequately constrains the exercise of federal power in accordance with the principle of federalism.
In determining whether establishing minimum national standards of GHG pricing to reduce GHG emissions is of sufficient concern to Canada as a whole, the majority considered historical efforts to address climate change in Canada and the overall international consensus as to the looming threat of climate change to life around the world.
3. Applicability of the double aspect doctrine to the “backstop”
The double aspect doctrine recognizes that the same matter may in certain situations relate to both provincial and federal powers. This doctrine is aligned with the modern approach to federalism which favours flexibility and overlapping jurisdiction between provinces and the federal government. The majority opined that the double aspect doctrine could apply just the same in the context of POGG.
The Act was found by the majority to constitute a minimum national standard that operates as a “backstop”, or in other words, sets a pricing floor. The majority found that the double aspect doctrine is particularly significant in situations where the federal government asserts a minimum national standard. As a result, there is an overlap in jurisdiction, with the federal law being paramount in the narrowly defined scope of setting a pricing floor.
Two of the dissenting judges took issue with the backstop model noting that by definition if the provinces have the jurisdiction to do what the Act sets out to do, then the Act cannot be constitutional under the national branch of POGG. The reason for this position is that POGG is intended to capture matters falling outside the enumerated heads of power.
4. Authority of the Governor in Counsel
Because Parts 1 and 2 of the Act function as a backstop, these parts only apply to a province or territory if listed by the Governor in Council. In other words, if the provincial pricing systems are insufficiently stringent to meet either (or both) Parts, the Governor in Councel has the power to list such province or territory; therefore, making the Act applicable only to those provinces/territories.
The majority noted that this authority gives effect to the federal government’s commitment to give the provinces and territories flexibility to design their own policies to meet emission reduction targets and recognize carbon pricing policies already implemented.
The dissenting justices took issue with this discretion. Justice Côté, in particular, found that the Act vests inordinate discretion in the executive with no meaningful checks. She expressed grave concern regarding the vast discretion of the Governor in Counsel, in particular to determine what fuels are covered by the Act (pursuant to Part 1) and set standards on an industry-by-industry basis.
5. The emission charges are not taxes but rather constitutionally valid regulatory charges
The majority held that the charges were sufficiently connected to a regulatory scheme as opposed to a tax and therefore were held to be constitutional.
The charge was found to have the purpose of altering behaviour. The Court upheld the Ontario Court of Appeal’s majority reasoning in that the regulatory charges need not reflect the cost of the scheme. Rather, the charges are set at a level to proscribe, prohibit or lend preference to certain behaviours.
6. What does this decision mean for businesses, environmental law, and our constitution?
The Court’s majority decision brings new elements and analyses into the national concern doctrine that will have major implications on constitutional law in Canada, and have the potential to expand the exercise of federal jurisdiction. However, while creating new scope for the application of the doctrine in Canada, the majority was careful to underline the specificity of the Act and circumstances under consideration as the basis for its decision upholding the constitutionality of the Act. This is likely intended as a message to the federal and provincial governments that the Court was not intending to create a new framework that would give the federal government carte blanche to invoke the doctrine in areas of provincial jurisdiction. To the contrary, the Court emphasized that the national concern doctrine would continue to have rare application.