Ottawa's carbon tax is constitutional, Supreme Court rules

The federal Greenhouse Gas Pollution Pricing Act is constitutional in its entirety, and Parliament has jurisdiction to enact this law as a matter of national concern under the peace, order, and good government clause of the Constitution, the Supreme Court of Canada has ruled.

The issue before the Supreme Court was whether Parliament had the constitutional authority to enact the Act; the majority found that it did.

In a 6/3 decision in Reference re Greenhouse Gas Pollution Pricing Act, Chief Justice Richard Wagner, writing for the majority, outlined a three-step analysis for deciding whether a matter is one of “national concern,” in which case Parliament may take charge of matters that might otherwise fall under provincial jurisdiction.

Parliament enacted the Greenhouse Gas Pollution Pricing Act (GGPPA) in 2018, which imposed a minimum “carbon tax” on polluters.

In dismissing the appeals by the Attorney General of Saskatchewan and the Attorney General of Ontario, which challenged the constitutionality of the Act -- and in allowing the appeal of the Attorney General of British Columbia v. the Attorney General of Alberta -- the majority held that the federal government had the right to do so because reducing greenhouse gas emissions is a matter of national concern under the “peace, order and good government” section of the Constitution.

“Climate change is real,” Chief Justice Wagner wrote in his reasons for the majority. “It is caused by greenhouse gas emissions resulting from human activities, and it poses a grave threat to humanity’s future. The only way to address the threat of climate change is to reduce greenhouse gas emissions.”

The GGPPA “sets minimum national standards of greenhouse gas price stringency to reduce greenhouse gas emissions, pollutants that cause serious extraprovincial harm,” he continued. “Parliament has jurisdiction to enact this law as a matter of national concern under the ‘Peace, Order, and good Government’ clause of s. 91  of the Constitution. National concern is a well-established but rarely applied doctrine of Canadian constitutional law.”

In considering Parliament’s authority to enact the GGPPA, “the Court must give effect to the principle of federalism, a foundational principle of the Canadian Constitution, which requires that an appropriate balance be maintained between the powers of the federal government and those of the provinces.”

“The decision is an example of what the court called cooperative federalism, which is a flexible approach to federalism,” says Rebecca Jones, a partner in Lenczner Slaght Royce Smith Griffin LLP in Toronto and leader of the firm’s public law practice group.

Although several of the many interveners in the GGPPA reference had addressed how federalism rights intersect with Charter rights, she says, Thursday’s decision was “a more traditional federalism analysis,” and not unexpected.

“It’s an interesting case study on how federalism can work to address grave national issues,” Jones says. “The issue with federalism is that there’ll always be overlapping jurisdictions; there's a push-and-pull … that always exists.”

The GGPPA comprises four parts and four schedules:

• Part 1 establishes a fuel charge that applies to producers, distributors and importers of various types of carbon-based fuel;
• Part 2 sets out a pricing mechanism for industrial greenhouse gas (GHG) emissions by large emissions-intensive industrial facilities
• Part 3 authorizes the Governor in Council – i.e., the Governor General acting on the advice of Cabinet -- to make regulations providing for the application of provincial law concerning GHG emissions to federal works and undertakings, federal land and Indigenous land located in that province, as well as to internal waters located in or contiguous with the province
• Part 4 requires the Minister of the Environment to prepare an annual report on the administration of the GGPPA  and have it tabled in Parliament.

Three provinces -- Saskatchewan, Ontario and Alberta -- challenged the constitutionality of the first two parts and the four schedules of the GGPPA by references to their respective courts of appeal. In split decisions, the appellate courts for Saskatchewan and Ontario held that the GGPPA  is constitutional, while Alberta’s court found it to be unconstitutional.

The Attorney General of British Columbia, who intervened in the Court of Appeal of Alberta, the Attorney General of Saskatchewan and the Attorney General of Ontario appealed as of right to the Supreme Court.

Three-step analysis to determine matters of national concern

Determining that a matter is one of national concern involves a three-step analysis, wrote Chief Justice Wagner.

“First, Canada must establish that the matter is of sufficient concern to the country as a whole to warrant consideration as a possible matter of national concern.” If this burden is discharged, the analysis proceeds.

“Second, the court must undertake the analysis explained in Crown Zellerbach through the language of ‘singleness, distinctiveness and indivisibility.’ … The first of these principles is that, to prevent federal overreach, jurisdiction based on the national concern doctrine should be found to exist only over a specific and identifiable matter that is qualitatively different from matters of provincial concern. The second principle to be considered at this stage of the inquiry is that federal jurisdiction should be found to exist only where the evidence establishes provincial inability to deal with the matter.”

If these two principles are satisfied, the court proceeds to the third step, to determine whether the scale of impact of the proposed matter of national concern is reconcilable with the division of powers between the federal and provincial governments.

“The onus is on Canada throughout this analysis, and evidence is required,” Chief Justice Wagner wrote. “Where a proposed federal matter satisfies the requirements of all three steps of the framework, there is a principled basis to conclude that the matter is one that, by its nature, transcends the provinces and should be recognized as a matter of national concern."

A matter of provincial jurisdiction

Justices Russell Brown and Malcolm Rowe each penned extensive, dissenting reasons, agreeing with each other. They disagreed across the board with the majority; they did not accept that Parliament had the authority to establish minimum standards for GHG pricing, or that this was a legitimate application of the national concern doctrine, agreeing with the provinces that GHG emissions were a matter of provincial jurisdiction.

At the first stage of inquiry, “a court must follow the accepted approach to the pith and substance analysis in order to characterize the matter of the statute,” wrote Justice Rowe. But, “the inclusion of ‘minimum national standards’ in the pith and substance of a federal statute effectively decides the jurisdictional dispute.”

Justice Rowe also characterized the national concern doctrine as being one of last resort.

The rule of law

Dissenting in part, Justice Suzanne Côté agreed with the majority that the subject matter of the GGPPA was of national concern; however, she took issue with the drafting of the legislation, in particular with the authority exercised by the Governor in Council, which she saw as unconstitutional.

“In my view, the GGPPA , as presently drafted, cannot be said to accord with the matter of national concern properly formulated by the Chief Justice because the breadth of the discretion conferred by the Act on the Governor in Council results in the absence of any meaningful limits on the power of the executive,” Justice Côté wrote.

“Additionally, the provisions in the GGPPA  that permit the Governor in Council to amend and override the GGPPA itself violate the Constitution Act, 1867, and the fundamental constitutional principles of parliamentary sovereignty, rule of law, and the separation of powers,” she said.

Jones finds Justice Côté’s dissent the most interesting. “What she's concerned about is that the minimum standards that the legislation talks about … are to be set by the executive branch of government. Her concern is more around the division between the executive branch and the parliamentary branch of government.”

Justice Côté appeared to take issue with “a structural feature of the legislation which had to do with amount of discretion invested in the Cabinet,” or Governor in Council, says Andrew Bernstein, a partner in Tory LLP’s litigation department.

Also of interest in Côté’s dissent is her discussion of the “Henry VIII” clause found in the bill, so named because it delegated to King Henry VIII the ability to make proclamations that had the same legal force as acts of Parliament,” says Bernstein. These clauses are incompatible with the conception of parliamentary sovereignty, Justice Côté found; “the breadth of the discretion conferred by the Act on the Governor in Council results in the absence of any meaningful limits on the power of the executive.”

Parliament is permitted to delegate those powers, but how broadly? asks Bernstein. “That’s the subject of Côté’s dissent. It has little to do with the heart of the federalism question, [but] it’s a feast for constitutional lawyers interested in the relationship between the executive and legislative branches of government.”

Implications of the decision

The decision “confirms what we already thought, which is that things that cross provincial borders are often going to be a matter of federal jurisdiction,” says Bernstein. “It affirms things like the environment: it’s certainly something the federal government will in many instances be able to weigh into. But when we’re talking about matters of systematic risk [such as the harm caused by climate change], that’s the kind of thing we can expect the federal government to be weighing into.”

Confirming that the federal government can take measures to address climate change will in the long run result in an expansion of its powers, he says. The Supreme Court of Canada calling climate change “real” also has rhetorical power, he adds.

“I think the political implications of this particular decision are helpful for the government that's in office right now,” he says. “Whether that reverberates through the provinces, whether it has an adverse effect on the provincial governments that were opposing this [legislation], I think that's a more interesting question, though it’s too soon to tell.”