References re Greenhouse Gas Pollution Pricing Act

SUMMARY

 

This is the Supreme Court of Canada deciding on the constitutionality of the Greenhouse Gas Pollution Pricing Act (GGPPA), which the federal government enacted in 2018. This legislation sets a minimum standard of carbon pricing in an effort to lower greenhouse gas emissions. Several provinces have challenged this legislation as not being within the federal government’s constitutional powers.

 

We recommend visiting our primer on constitutional law first: FAQ backgrounder.

Highlights

DECISION

This was appealed from the Ontario Court of Appeal’s (ONCA) decision (which found the GGPPA constitutional or “intra vires”), and the Alberta Court of Appeal’s (ABCA) decision (which found the GGPPA unconstitutional or “ultra vires”).

Appeal from ONCA dismissed, appeal from ABCA allowed. As such, the GGPPA is constitutional.

FACTS

  • Global climate change is real and human activities are the “primary cause”  (7)
  • Since the 1950s, concentrations of greenhouse gases (GHGs) have escalated and continue to escalate, leading to an increase of 1.0 C above pre-industrial levels, and will reach 1.5 by 2040 if this continues (8)
  • As a result, the world is experiencing extreme weather, rising sea levels, losses of coral reefs, ecosystem fragility, and negative effects on human health — Canada has experienced floods, forest fires, changes in precipitation, and spread of life-threatening vector-borne diseases like Lyme disease and West Nile Virus (9-10)
  • Climate has three particular characteristics of relevance:
    • It knows no boundaries
    • The effects of climate change do not necessarily have direct connection  to the place where those GHG emissions came from — in other words, places with low GHG emissions can still experience the effects of climate change that are grossly disproportionate to their individual contributions 
    • No one province, territory, or country can tackle the issues of climate change on their own–it requires “collective national and international action”
  • 1992: ratification of the United Nations Framework Convention on Climate Change (UNFCC); Canada failed to meets its commitments under multiple UNFCCC agreements, including the Kyoto Protocol and Copenhagen Accord
  • 2015-2016: Canada agreed to and ratified the Paris Agreement, agreeing to hold global average temperature to well below 2.0oC above pre-industrial levels (13)
  • 2016: Canada adopted the Vancouver Declaration on Clean Growth and Climate Change, committing to implementing GHG mitigation policies in support of meeting/exceeding Canada’s 2030 target of 30% reduction below 2005 levels; Canada released the Pan-Canadian Approach to Pricing Carbon Pollution, introducing a benchmark for carbon pricing in which Provinces/territories would have the flexibility to implement one of two carbon pricing systems by 2018. A backstop carbon pricing system would be implemented in those jurisdictions that requested it or failed to meet the benchmark (15-17)
    • 8 provinces, including Ontario and Alberta, and three territories adopted it; Manitoba followed in February 2018, but Saskatchewan never did; late 2018, Ontario, Alberta, and Manitoba withdrew their support
  • March 2018: the federal government introduced the GGPPA
  • BC, Alberta, Ontario, and QB were the only provinces with carbon pricing systems (23) 
  • Despite provincial action, Canada’s overall GHG emissions decreased by only 3.8% between 2005 and 2016 (24)
  • GHG emissions decreased in BC, Ontario, QB, NB, NS, and PEI, and Yukon, but increased in AB, SK, MB, NFL and Lab, NWT, and Nunavut
  • Essentially, between 2015 and 2016, decreases in GHG emissions in Ontario (Canada’s second largest GHG emitter), was offset by increases in emissions in ⅖ of Canada’s largest emitters, AB and SK (24)
  • Came into force on June 21, 2018
  • Basics: Comprises of four parts, the two main being:

1) Establishes a fuel charge that applies to producers, distributors, and importers of carbon-based fuel 

    • this charge is not directly made against consumers but it is anticipated that it will be passed on to them; the fuel charge is not payable on qualifying fuel delivered to farmers and fishers (30)
    • The Ministry of National Revenue must distribute the amount collected from the fuel charge in any listed provinces with discretion to distribute the net amount back to the provinces, another prescribed person/class (ex. Schools or nonprofits), or a combination (currently, the feds intend to give 90% of the proceeds directly to the residents through the Climate Action Incentive payment, with the remaining 10% going back to the rest of the province) (31)
    • The Governor in Council has the discretion to make regulations to list/de-list provinces, but it must be for the purpose of ensuring that the pricing is applied broadly in Canada, taking into account the stringency of provincial pricing mechanisms (32)

2) Sets pan output-based pricing mechanism for large industrial GHG emitters

  • These emitters are exempt from the fuel charge, but must pay for any emissions that exceed its applicable limits delineated by the legislation (34)
  • These apply in backstop jurisdictions, although all provinces are held to this standard
  • The preamble is divided into 5 parts, which the court expresses as the following:
      1. GHG emissions contribute to global climate change, and that change is already affecting Canadians and poses a serious risk to the environment, to human health and safety and to economic prosperity both in Canada and internationally 
      2. Canada has committed internationally to reducing its GHG emissions by ratifying the UNFCCC and the Paris Agreement 
      3. it is recognized in the Pan-Canadian Framework that climate change requires immediate action by the federal, provincial and territorial governments, and GHG pricing is a core element of that framework  
      4. behavioural change that leads to increased energy efficiency is necessary to take effective action against climate change
      5. the purpose of the GGPPA  is to implement stringent pricing mechanisms designed to reduce GHG emissions by creating incentives for that behavioural change (paras. 12-16).
  • Majority at the SKCA found the GGPPA intra vires based on POGG, national concern
    • The pith & substance was “the establishment of minimum national standards of price stringency for GHG emissions” (39)
    • Dissent: GHG emissions are not a constitutionally distinct matter; this is a policy dispute, and the issue is not reconcilable with the balance of federalism (40)
  • Majority of ONCA found the GGPPA intra vires based on POGG, national concern
    • The Pith & substance was “establishing minimum national standards to reduce greenhouse gas emissions”
    • Dissent: the pith & substance was the regulation of GHG emissions
  • Majority of ABCA found the GGPPA unconstitutional: the national concern doctrine applies only to matters that would have originally fallen within provincial powers related to local/private nature (s. 92), but has no application otherwise
    • Dissent: GGPPA is constitutional based on national concern; this was a new matter that is single, distinctive, and indivisible and meets the provincial inability test

DISCUSSION

Requires the court to follow two steps: 

1. Determine the character or subject matter or “pith & substance” of the Act — what is its purpose and effects? — ie. What is the “power” we are trying to categorize?

    • The court must determine the Act’s main essence or characteristic (51)
    • Court can consider: intrinsic evidence (the Act’s preamble, purpose clauses) and extrinsic evidence (Hansard, Minutes from parliamentary committees); the legal effects (“direct effects” flowing from the provisions itself), and the practical effects (“side effects” that flow from the actual application of the Act) (51)
    • Other points:
      1. The P&S must be described as precisely as possible, but not necessarily NARROWLY (52)
      2. It is permissible in some circumstances for the court to include the legislative means in determining its purpose  (53)
      3. The Pith and Substance must be identified without regard to the division of powers (56)

2. Characterize the subject matter under the appropriate head of power

  • The objective is to “reconcile diversity with unity, promote democratic participation by giving meaningful powers to local levels, and foster cooperation between Parliament and provincial legislatures (48)
    • Captured in the Constitution by ss. 91 and 92, which distribute broad powers to the provinces while reserving powers to the federal government that would enable it to provide for Canada’s unity (49)
    • Federal government cannot act in a way that effectively eviscerates provincial powers (49)
    • The SCC’s role is to resolve jurisdictional disputes over the boundaries of federal and provincial powers (50)
    • Courts have gone from seeing the federal-provincial division of powers as “watertight compartments”, to having a more flexible view–regardless, federalism cannot override or modify the constitutional division of powers (50)

APPLYING THE CONSTITUTIONAL TEST

1) What is the Character of the Act?

  • The true subject matter of the GGPPA is “establishing minimum national standards of GHG prince stringency to reduce GHG emissions” (57) While true that generally, Parliament intended to reduce GHG emissions, but it must be recognized that their goal was to do so by establishing a minimum national standard — this is a more precise characterization  (69)
    • Intrinsic evidence: courts often use the statute’s title and preamble as a tool for characterization, although it is not determinative. Both the short and long title of the GGPPA, as well as the preamble, confirm the purpose of the GGPPA is more than just a regulation of GHG emissions, and that it specifically has to do with pricing GHGs (58-59)
      • Preamble: focuses on national GHG pricing; it begins with reviewing the contribution of GHG emissions to global climate change and its risk to Canadians and overview of pricing across Canada, and the need for a national GHG pricing scheme (60)
    • Extrinsic evidence: the court can consider the statute’s legislative history, the events leading up to it, debates, etc. Discussions surrounding the Paris Agreement and Vancouver Declaration all mention GHG pricing as a governmental response to climate change. It is clear that the reports arising out of these discussions was not for the federal government to take over GHG regulations or even GHG pricing, but to establish a minimum national standard without displacing provincial/territorial jurisdiction over their choice and design; legislative debates also reflect this (65)
    • Legal Effects: The legal effect of Parts 1 and 2 is to create one GHG pricing scheme that is consistent throughout the entire Canadian economy without telling those affected how to reduce their emissions; all it does is require a person to pay for engaging in activities that emit GHGs (71). The Governor in Council has discretion to make regulations, but within certain bounds: they cannot regulate GHG emissions in any way other than by implementing a GHG pricing scheme, and they are constrained by the Act’s own words and statutory purpose — any act outside of this would be open to judicial review (75)
    • Practical effects: evidence of this act’s practical effects is not that helpful, given its dearth (cannot predict the economic consequences of the GGPPA, nor is it the court’s job to assess how effective it is at reducing emissions) (78). However, the evidence given to date is consistent with the principle of flexibility and support for provincially-designed GHG pricing schemes. The only thing not permitted by the GGPPA is for a province/territory to not implement a GHG pricing mechanism or one that is not sufficiently stringent (79). It otherwise has no practical effect.
  • Conclusion: the subject matter is “establishing minimum national standards of GHG prince stringency to reduce GHG emissions” (80)
    • The broader characterization suggested by ONCA and ABCA cannot be accepted; GHG pricing is central to the GGPPA and operate as a backstop by setting the pricing floor; a national GHG pricing scheme is not merely the means of achieving a reduction in GHG emissions, it is the entire purpose of the GGPPA; it is the most precise characterization (80)
    • Rejects argument that the phrase “minimum national standards” adds nothing to the P&S — it “gives expression to the national backstop nature”, this is different than other failed attempts at federal legislation were not enacted to impose a unified system (see: 2011 Securities Reference, where regions could “opt in”, with the hopes of creating an effective unified national securities system) and it allows for provinces to implement their own mechanisms above the minimum “floor” being set (81)
    • Rejects argument that provisions give unconstitutional delegations of power to the GIC: parliamentary sovereignty and delegating powers is common (especially in complex environmental legislative schemes, such as the Environmental Protection Act, Environmental Protection and Enhancement Act, etc.) and constitutional; the sovereign legislature ultimately retains authority (84-6). This includes delegating the power to amend the statute — this is still subject to the general rules of administrative law, which is that any regulation that is made must be consistent with the provisions of the statute and its purpose (87)

2) How can we classify/categorize the GGPPA?

  • Grounded in s. 91 of the Constitution, — the federal government has jurisdiction over matters that are found to be of “inherent national concern” (89) – it is “residuary” — which means Parliament cannot legislate in relation to matters that already come within classes of subjects already assigned exclusively to the provinces under s. 92
  • Finding a matter to be of national concern is permanent (90) and “exclusive” (102); the courts therefore want to be cautious about eroding provincial autonomy (109)
  • Court reviews the origins of the National Concern doctrine (92-100)
  • Keep in mind:
    • Recognizing a matter of national concern must be based on evidence (133)
    • Jurisprudence have commented that the national concern doctrine only applies to “new matters” (135): A matter does not need to be historically new in order to qualify as national concern (134) — “new” can mean matters did not exist in 1867, and matters that have shifted in our understanding in whether they have a national character or not (136)
  • Some clarifications:
    • What is the “matter” to which the national concern test applies?
      • It is the “matter of the statute” as identified by the court at the characterization stage – the “pith and substance” (115)
    • What is the scope and nature of the federal power over matters of national concerns – does the double aspect doctrine apply?
      • The scope will be “case-specific” and depends on the nature of the national concern at issue (and not the concept of “national concern” itself) (123)
      • Does the double aspect doctrine apply? This recognizes those situations where both province and federal government can regulate (125) – this can include situations where the federal government has jurisdiction based on national concern (126)

The Test:

1. Threshold question
  • this is a “common-sense inquiry into the national importance of the proposed matter” (142)
  • if applicant cannot discharge burden of proving that the matter is of sufficient national concern, analysis does not proceed (144); the matter must not just be “important”
2. Singleness, distinctiveness, and indivisibility
  • two guiding principles, more important than defining the terminology (164):

(1) must clearly and qualitatively distinguish matters of national concern from matters of provincial concern (prevents federal overreach), ie. Must be “specific” and “readily identifiable” – the “growth” or “extent” of a problem across Canada is insufficient (147)

    • is it “predominantly extra provincial and international”, considering its inherent nature and effects (148) – judges were unanimous in finding that federal jurisdiction over atomic energy due to its potential for “catastrophic inter-provincial and international harm”, whereas the court found that the substances being regulated in Hydro-Quebec were entirely intraprovincial and localized (148)
    • International agreements can indicate that a matter is qualitatively different from matters of prov concern but not determinative (149)
    • must not be duplicative of that of provinces; is not qualitatively distinct if it “overshoots” regulation of a national aspect of a matter and duplicates a regulation or regulates issues that are primarily of local concern (150)

(2) federal jurisdiction should only be found to exist where the evidence establishes provincial inability to deal with the matter (ie. The provinces cannot address the issue either jointly or severally, because the failure of 1+ provinces to cooperate would prevent them AND that this province’s failure within its own borders would have grave extraprovincial consequences) (146)

    • (1a) legislation should be of a nature that the provinces jointly or severally would be constitutionally incapable of enacting, and (2a) the failure to include 1+ provinces in a legislative  scheme would jeopardize the successful operation of the scheme in other parts of the country – these factors must be required for provincial inability to be established (152)
    • AND (for the national concern doctrine: (2b)): the province’s failure to deal with the matter must have “grave extra-provincial consequences” (153) — a “high bar” for finding provincial inability for the purposes of the national concern doctrine; can include serious harm to human life, health, or the environment; actual harm or risk of harm for the future – evidence is required (155)
      • It is a “necessary but not sufficient” requirement for national concern (156)
3. Scale of impact
  • scale of impact must be reconcilable with the fundamental distribution of legislative power under the Constitution (160)
  • purpose: prevent federal overreach and unjustifiable intrusions in provincial autonomy (161)
  • balance between intrusion and extent of the impact not legislating in that area would have on interests (161)

Determining the “matter” for the test to apply to:

  • What is the “Matter” here? “Establishing Minimum national standards of GHG price stringency to reduce GHG emissions” (119)
  • Does the double aspect doctrine apply: recognizing a matter involving a backstop will “inevitably result in a double aspect situation” — both province and federal government are free to legislate in relation to the same fact situation (by imposing GHG pricing) – but the federal law is paramount (129)
  • The court must still be satisfied at the “scale of impact step” that the consequences of finding a proposed matter is one of national concern is reconcilable within the division of powers (131)
  • The ABCA erred in adding (as a threshold), that the matters that have originally fell under provincial heads of power OTHER than s. 92(16) are incapable of acquiring national dimensions (137)
  • “marine pollution” is “predominantly extra-provincial and international in character” or the development of national capital is a concern to Canada as a whole – these matters were “specific and identifiable and had ascertainable and reasonable limits”; the requirements of provincial inability were met and compatible with the division of powers (140)

APPLICATION TO THE GGPPA

(1) Threshold question

  • Canada provided evidence that establishing a minimum national standard is of sufficient concern to Canada as a whole that warrants consideration; this matter’s importance to Canada as a whole must be understood in light of the “seriousness of the underlying problem. All parties to this proceeding agree that climate change is an existential challenge. It is a threat of the highest order to the country, and indeed to the world… The undisputed existence of a threat to the future of humanity cannot be ignored.” (167)
    • The matter is NOT the regulation of GHG emissions generally—Canada is not trying to classify all potential forms of GHG regulations as a matter of national concern (168)
    • The history of efforts by Canada and provinces to address climate change shows the important role carbon pricing strategies have in reducing GHG emissions (169)
    • There is a “broad consensus among expert international bodies such as the World Bank, the Organization for Economic Cooperation and Development and the International Monetary Fund that carbon pricing is a critical measure for the reduction of GHG emissions” (170); based on the evidence, for both Canada and international efforts, “carbon pricing is integral to reducing GHG emissions” (170) “it is critical to our response to an existential threat to human life in Canada and around the world” (171) – it passes the threshold question

(2) Singleness, Distinctiveness, and Indivisibility

  • Court: (keeping in mind the principles outlined above)
    • Principle 1: GHGs are a “specific and precisely identifiable type of pollutant. The harmful effects… are known” (173)
      • GHG emissions are “predominantly extraprovincial and international in their character and implications… as a diffuse atmospheric pollutant and for their effect in causing global climate change… with serious deleterious extraprovincial effects” (173)
  • The international response to GHG emissions over the years confirms this—the 1993 preamble to the UNFCCC recognized climate change as a “common concern of humankind” with a “global nature” (174)
  • The Paris Agreement insists that we hold the global  average temperature to below 2.0oC above pre-industrial levels (174)
  • Further, the regulatory mechanism of GHG pricing is a “specific, and limited, one” — ie. Seeks to change behaviour by internalizing the cost of climate change impacts by incorporating them into the price of fuel (175); it does not regulate GHG emissions generally – this regulates GHG emissions on a “distinctly national basis, one that neither represents an aggregate of provincial matters nor duplicates provincial GHG pricing systems” (177)
  • The backstop only applies if the province’s pricing is insufficient, similar to the 2018 Securities Reference (178) – the prior existence of similar prov legislation does not constitutionally bar federal legislation that pursues qualitatively different national concerns (179)
  • Principle 2: provincial inability
    • (1) The provinces acting alone or together are constitutionally incapable of establishing minimum national standards of GHG price stringency to reduce GHG emissions (182)
    • (2) excluding one province in the scheme would jeopardize success in the rest of Canada; the scheme may continue to EXIST but the issue is whether it would be successful – questionable; emissions reductions by some provinces would be offset by increased emissions in other Canadian jurisdictions; any province’s failure to implement a sufficient GHG price could undermine the efficacy of GHG pricing because of carbon leakage (183)
      • The evidence here already shows that some provinces failed to achieve their goal because they were offset by others: between 2006 and 2016, Canada’s total emissions declined by 3.8%; emissions fell by 22% in Ontario, 11% in Quebec, and 5.1% in NBC (three of the highest levels of emitters in Canada), and 10% by NB, NS, PEI, and the Yukon – but this was all largely offset by increases of 14% in Alberta and 10.7% in Saskatchewan (the other two large emissions) – as a result, Canada failed to honour its commitments under the Kyoto Protocol before they withdrew and is not on track to meet Copenhagen Accord (184)
      • Carbon leakage is also a problem: it is when a business with high levels of carbon emissions relocates to another jurisdiction with less stringent carbon pricing policies (186)
        • the environmental consequences is real: the risk that any emission reductions achieved by pricing in one province will be offset by increases in another
      • (3) a province’s failure has implications on extraprovincial interests
        • Rejects the argument that because climate change is an “inherently global problem”, each province’s GHG emissions causes no “measurable harm” or do not have “tangible impacts on other provinces” — each province’s emissions are clearly measurable and contribute to climate change (188)
          • this argument has been rejected by courts around the world (see: Massacchusse: “a reduction in domestic emissions would slow the pace of global emissions increases, no matter what happens elsewhere”; State of Netherlands: “every emission… leads to an increase in the concentration of greenhouse gases in the atmosphere”) (189)
          • as a global problem, climate change can realistically only be addressed through international efforts—so any province’s failure to act threatens Canada’s ability to meet international obligations (190)
          • Without federal laws, there is nothing to protect provinces or the country as a whole from the consequences of one province’s decision to take insufficient action towards controlling GHGs (191)
          • dissent: it is possible to know the source and physical location of pollution, so indivisibility is not met
            • Court: no; a matter can be of inherent national concern even if it does not relate to something difficult to locate (193)
      • this is even stronger than Crown Zellerbach: (1) there is uncontested evidence of “grave extraprovincial harm as a result of one province’s failure to cooperate”, and (2) the matter here relates only to the risk of non-cooperation; this matter empowers the feds to do only what the provinces cannot do

(3) Scale of impact

  • We must determine if the matter’s scale of impact on provincial jurisdiction is acceptable, considering the impact on interests to Parliament if unable to address this matter at a national level (196)
  • Finding the feds have jurisdiction over this matter has clear impacts on provincial autonomy, it will be limited and ultimately outweighs the impacts on the fed’s interests
  • Must recognize double aspect: provinces can regulate GHG pricing through s. 92(13) and (16), and 92A, operating concurrently by paramount federal law that establishes minimum standards of GHG price stringency (197)
    • Canada can regulate GHG emissions to address grave extraprovincial and interprovincial harm using a purely intraprovincial approach to GHG pricing– this would not be considered as legislating the “same aspect of the same matter”; rather, the feds are doing precisely what no province can do: protect themselves from the risk of grave harm if someone were to adopt insufficient GHG pricing standards (198)
  • the impact on province’s freedom to legislate is minimal; this is not  a case where feds are trying to regulate GHGs generally; is is a “narrow and specific regulatory mechanism” — any legislation relating to non-carbon pricing forms of GHG legislation, such as “roadways, building codes, public transit, etc.” would not fall under NC(199)
    • even with regard to carbon pricing, the interference is minimal: provinces can design and legislate any GHG pricing mechanism as long as it exceeds the minimum national standard (200)
  • second, the matter’s impact is limited: although the matter may apply to several types of fuel and industries, it is restricted to standards for GHG pricing stringency; it leaves out individual consumers and businesses (201)
    • Supervisory part does not either; the GIC doesn’t have unfettered discretion to apply the Act (202)
  •  The scale of impact is therefore reconcilable with the fundamental distribution of legislative powers (206) – although there are impacts, it is necessary to consider the interests that would be harmed if feds were unable to address this: “This irreversible harm would be felt across the country and would be borne disproportionately by vulnerable communities and regions, with profound effects on Indigenous peoples, on the Canadian Arctic and on Canada’s coastal regions… the impact on those interests justifies the limited constitutional impact on provincial jurisdiction” (206)

CONCLUSION:

  • It is intra vires Parliament; Canada has shown evidence that the proposed price stringency is clearly a concern to Canada as a whole and the two principles of the SDI inquiry are satisfied; considering the impacts of Canada not being able to address this, the scale of impact on prov juris is reconcilable (207)
  • this is NOT because the matter involves a minimum national standard
    • Brown J: giving the federal government this power would open up a floodgate of issues
    • Court: No; this is entirely misplaced; as can be seen from the above, the test for finding that a matter is of national concern is exacting; each of these requirements represents a meaningful barrier to accenting any matter of national concern (208)
      • this turns on the evidence provided: the critical value of GHG pricing as a tool to mitigate climate change; its nature as distinct and limited regulatory mechanism; how it operates across the country, and the risk of carbon leakage
    •  

OTHER INFO

JUDGES: 

Reasons for Judgment: (paras. 1 to 221)

Wagner C.J. (Abella, Moldaver, Karakatsanis, Martin and Kasirer JJ. concurring)

Reasons Dissenting in Part: (paras. 222 to 295)

Côté J.

Dissenting Reasons: (paras. 296 to 456)

Brown J.

Dissenting Reasons: (paras. 457 to 616)

Rowe J.