In 2018, Parliament enacted the Greenhouse Gas Pollution Pricing Act, S.C. 2018, c. 12, s. 186  (“GGPPA ”).

Parliament passed the GGPPA based on an international consensus that greenhouse gas emissions contribute to global climate change. Countries around the world committed to drastically reduce their greenhouse gas emissions under the 2015 Paris Agreement. In Canada, the federal government passed the Act to implement its commitments.

Specifically, the law required provinces and territories to implement carbon gas pricing systems by January 1, 2019 or adopt one imposed by the federal government.

Three provinces challenged the constitutionality of the GGPPA  by references to their respective courts of appeal. The question divided the courts.

In split decisions, the courts of appeal for Saskatchewan and Ontario held that the GGPPA  is constitutional, while the Court of Appeal of Alberta held that it is unconstitutional. Those decisions were appealed to the Supreme Court of Canada (“SCC”).

Climate Change Is Real

Climate change has proved to be a political “hot potato” in large part because of those who would deny that climate change is real.

That debate did not feature in this hearing.The SCC noted that the factual background to the appeal was not contested among the parties. Global climate change is real; caused by greenhouse gas emissions resulting from human activities. It poses a grave threat to the future of humanity.

The SCC decision focussed instead on the question whether carbon pricing, as enacted by the GPPA, is constitutional. The SCC decided that it is.

The Federal Carbon Pricing Law Is Constitutional.

Federalism

Canada’s Constitution divides federal and provincial powers and allots jurisdiction to each in specified areas. The court noted that Canada, which has a federal system of governance, requires a balance between federal and provincial powers. This concept, known as federalism, is a foundational principle of Canada’s Constitution.

The provinces said they had their own climate policies, tailored to their own circumstances. They also argued that they have constitutional jurisdiction over natural resources.

The federal government argued that it has the authority to address issues that are national in scope. It also maintained that the law was a backstop (or safety net) to ensure minimum carbon pricing standards across the country. 

National Concern as a head of federal constitutional jurisdiction

The SCC found the Act to be constitutional. Global warming causes harm beyond provincial boundaries. It is a matter of national concern under the “peace, order and good government” clause of the Constitution.

The majority noted the Act would only apply where provincial or territorial pricing systems are not strict enough to reduce global warming.

A rarely applied doctrine of Canadian constitutional law

The Chief Justice noted that national concern is a well-established but rarely applied doctrine of Canadian constitutional law. The application of this doctrine is strictly limited in order to maintain the autonomy of the provinces and respect the diversity of confederation. However, the federal government has the authority to act in appropriate cases, where there is a matter of genuine national concern and where the recognition of that matter is consistent with the division of powers.

The Federal Carbon Pricing Scheme Is Not A Tax

The term “carbon tax” is often used, particularly by its detractors, to describe the pricing of carbon emissions. However, the SCC held this has nothing to do with the concept of taxation, as understood in the constitutional context. The fuel and excess emission charges imposed by the Act were constitutionally valid regulatory charges and not taxes.

To be a regulatory charge, as opposed to a tax, a governmental levy with the characteristics of a tax must be connected to a regulatory scheme. Influencing behaviour is a valid purpose for a regulatory charge and regulatory charges need not reflect the cost of the scheme. The amount of a regulatory charge whose purpose is to alter behaviour is set at a level designed to proscribe, prohibit, or lend preference to a behaviour.

Limiting such a charge to the recovery of costs is incompatible with the design of a scheme of this nature. Nor must the regulatory charges be used to further the purposes of the regulatory scheme. The required connection to the scheme will exist where the charges themselves have a regulatory purpose.

There is ample evidence that the fuel and excess emission charges imposed by Parts 1 and 2 of the GGPPA  have a regulatory purpose. They cannot be characterized as taxes; rather, they are regulatory charges whose purpose is to advance the GGPPA ’s regulatory purpose by altering behaviour.

Not All Judges Agreed

Chief Justice Richard Wagner wrote the court’s decision for the majority of the judges, (Justices Abella, Moldaver, Karikatsanis, Martin and Kasirer agreed)

Justice Suzanne Côté agreed with the majority’s analysis that the subject matter of the Act could be of national concern and within Parliament’s authority, but found the Act as drafted to be unconstitutional because the breadth of the discretion that it confers on the Governor in Council results in no meaningful limits on the power of the executive.

Justice Russell Brown found that Parliament did not have the authority to pass the legislation and found it unconstitutional; he agreed with Justice Rowe’s reasons

Justice Malcolm Rowe said the national concern doctrine refers to a residual power of last resort of Parliament and agreed with Justice Brown’s reasons; he found the Act unconstitutional

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Manning Environmental Law is a Canadian law firm based in Toronto, Ontario. Our practice is focussed on environmental law, energy law and aboriginal law. 

Paul Manning is a certified specialist in environmental law. He has been named as one of the World’s Leading Environmental Lawyers and one of the World’s Leading Climate Change Lawyers by Who’s Who Legal. Paul is also ranked by Lexpert as one of Canada’s Leading Practitioners in Environmental Law.

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