The federal parliament passed the Greenhouse Gas Pollution Pricing Act (the “Act”) into law on June 21, 2018 with a view to curbing national greenhouse gas emissions. The Act implements the federal carbon pollution pricing system, which places regulatory charges on carbon-based fuel producers, distributors, and importers and also includes a mechanism whereby industrial carbon emitters can trade “credits” through an Output-Based Pricing System (the “OBPS”). The OBPS requires that certain carbon emitters are required to pay a carbon price if their emissions exceed a stipulated level, whereas carbon emitters whose emissions are less than the amount set by the federal government earn credits that can be sold to other carbon emitters.

Following the implementation of the Act, the House of Commons passed a motion to declare a climate emergency in Canada in June 2019 to signify Canada’s commitment to achieving its national emissions targets under the Paris Agreement; being a reduction of greenhouse gas emissions by 30% below 2005 levels by 2030.[1]

Several provinces challenged the authority of the Act almost immediately:

  • Manitoba brought an application for judicial review to the Federal Court of Canada.
  • Alberta sought a constitutional reference in the province’s court of appeal.
  • Ontario and Saskatchewan have challenged the constitutionality of the legislation in their respective courts of appeal as well.

Decisions rendered by the Ontario, Saskatchewan and Alberta courts are now under appeal to the Supreme Court of Canada (the “SCC”).

Provincial pushback to the Act centres on the federal government’s position that the Act deals with a matter of national concern, and therefore falls within the federal government’s jurisdiction pursuant to the Peace, Order and Good Government provisions as outlined in s.91 of the Constitution Act.[2]

Federal government powers to use national concern are delineated in R v. Crown Zellerbach Canada Ltd. (“Zellerbach”). In that case, the SCC found the following conclusions apply to the national concern doctrine:

  • the national concern doctrine is separate and distinct from the national emergency doctrine, which provides the constitutional basis for legislation of a temporary nature;
  • the national concern doctrine applies to an issue that, although originally a matter of a local or private nature, has since become a matter of national concern;
  • for the matter to qualify as a matter of national concern, it must have a singleness, distinctiveness, and indivisibility that clearly distinguishes it from matters of provincial concern and scale; and
  • it is relevant to consider the extra-provincial effects if the provinces failed to adequately deal with the control or regulation of that matter in determining the required degree of singleness, distinctiveness and indivisibility that clearly distinguishes it from matters of provincial concern; and
  • the matter must have a scale of impact on provincial jurisdiction that is reconcilable with the fundamental distribution of legislative power under the Constitution.[3]

In Zellerbach, the court found that marine pollution was a matter of national concern to Canada as a whole and required federal oversight. The finding in favour of the federal government in that case was predicated largely on the fact that the Ocean Dumping Control Act (the “Ocean Act”) limited the scope of the federal government’s oversight powers to marine pollution. Fresh-water sources (which were deemed to be within the jurisdictions of the provinces) were left outside the ambit of the Ocean Act.[4] Ultimately, the court in Zellerbach ruled that legislation must clearly carve-out the issue in question from issues within the jurisdiction of provincial legislatures to qualify as a matter of national concern.

The federal government has argued that the pith and substance of the Act is limited to addressing the cumulative dimensions of greenhouse gas emissions, which inherently affect Canada on a national level and consequently cannot be sufficiently addressed by the individual provinces. Accordingly, the Act satisfies the Zellerbach indicia of a national concern insofar as it is single, distinctive.

At their respective courts of appeal, Ontario[5] and Saskatchewan[6] argued that the schemes put forth by the Act are unconstitutional because it grants the federal government the power to infringe on provincial powers to regulate matters relating to property and civil rights by giving the federal government the power to regulate industrial operations and commercial transactions within provinces.[7]

Ontario further argued that provinces have the ability to limit greenhouse gas emissions without federal oversight, as evidenced by the province’s near 22% decline in emissions from 2005 levels, as of 2016.[8] According to Ontario the Act represents an unnecessary extension of federal jurisdiction. Alternatively, Saskatchewan argued that the charges imposed by the Act were unconstitutional as they amount to an invalid form of taxation.[9]

Both courts of appeal ultimately sided with the federal government, affirming that greenhouse gas emissions are a new and distinct matter and amount to a national concern requiring federal legislation.

In Ontario, the court reasoned that the environment is an area of shared constitutional responsibility that requires a balanced effort from all levels of government.[10] The court further reasoned that the carbon pricing scheme implemented by the Act provided sufficient room for the provinces to legislate concurrently. As written, the Act serves as a back-stop affording the provinces the opportunity to legislate above and beyond the minimum standards set by the federal government.[11]

The Saskatchewan the court of appeal found that the charges imposed by the Act were legal because they did not raise revenue for general purposes (as a tax would), and instead, sought to increase the price of emitting carbon to mitigate greenhouse gas emissions.[12]

Contrary to the decisions in Ontario and Saskatchewan, the Alberta Court of Appeal found the Act to be unconstitutional. That court reasoned that the Act would result in a shift in the constitutional balance of power that would result in the federal government having a direct impact on vital industries within the province such as natural resources and electricity generation.[13] The court warned that this expanded power could allow for unlimited reach by the federal government into other provincial jurisdictions moving forward.[14]

The SCC heard the appeals of the decisions from Ontario, Saskatchewan and Alberta on September 22 and 23, 2020. The provinces of British Columbia, Manitoba, New Brunswick, and Quebec joined the proceedings as interveners. The SCC reserved judgement after hearing the appeals and, to date, has not rendered a decision.

We will continue to monitor the development of this case and will return with a commentary on the judgment of the SCC when it is rendered in the near future.