Climate Change And Canadian Federalism: Examining The Constitutional Dispute Sparked By Parliament's Greenhouse Gas Pollution Pricing Act

Introduction

Climate change is an increasingly central issue for governments, regulators and businesses around the world, and it is widely seen as significant risk to a sustainable future.1 Mitigating and adapting to its effects is causing far-reaching transitions in sectors such as energy, land and agriculture, banking and finance, infrastructure, transport and industry. As a result, we are witnessing significant and ongoing legal developments at the international, national and regional levels with respect to climate change and sustainability.2

This article looks at a recent legal development in Canada regarding climate change and examines how Parliament's introduction of minimum national standards for greenhouse gas emissions, pursuant to the Greenhouse Gas Pollution Pricing Act (the GGPPA or the Act),3 has sparked a constitutional dispute about the appropriate balance of power between the federal and provincial legislatures in regulating greenhouse gas emissions.

Specifically, this article looks at two recent appellate court decisions dealing with the constitutionality of the GGPPA: one from the Saskatchewan Court of Appeal and one from the Ontario Court of Appeal.4 In each case, a majority of the Court of Appeal upheld the constitutionality of the GGPPA in the face of a strong dissenting opinion. And in each case, the dissenting minority took the position that the majority had erred in its characterization and classification of the Act under the "national concern" branch of Parliament's "peace, order and good government" power (the POGG power), an important but rarely-invoked federal constitutional authority deriving from the preamble to section 91 of Canada's Constitution Act, 1867.5

The Supreme Court of Canada is expected to hear appeals from these two decisions in January 2020.6

Although both courts of appeal upheld the constitutionality of the GGPPA, the multiple dissenting opinions create uncertainty. By the time the Supreme Court considers the GGPPA, there will have been at least five judicial analyses of Act's constitutionality.7 The Supreme Court could endorse any one of them. Further, because the leading Supreme Court decision on the national concern branch of the POGG power, R v Crown Zellerbach,8 is over 30 years old, the Supreme Court could also take this opportunity to revisit the test for the national concern branch altogether.

This article suggests that one way to analyze the pending appeals, and understand the divergence between the judges who found the Act constitutional and those who found the Act unconstitutional, is to focus on the correlation that emerges between the opinions that relied on the notion of "national standards" to characterize the Act and the opinions that classified the Act as a matter of "national concern" falling within Parliament's legislative authority under the POGG power. Tracing this correlation does not resolve the issues surrounding the GGPPA, but it does provide a lens for thinking about some questions the Supreme Court might grapple with when it considers the constitutionality of the Act in the new year.

The GGPPA

On March 27, 2018, the federal government introduced the GGPPA in Parliament as part of the Budget Implementation Act, 2018, No. 1. On June 21, 2018, the Act received royal assent, becoming law.

The GGPPA places a price on carbon pollution in order to reduce greenhouse gas emissions and encourage innovation and the use of clean technologies.9 It does so in two ways:

First, it places a regulatory charge on carbon-based fuels. This charge is imposed on certain producers, distributors and importers, but is passed on to consumers both directly and indirectly. It is passed on indirectly through increases to the cost of doing business generally, and directly through the price consumers pay for carbon-based fuels. The charge will increase from 2019 through to 2022. Second, it establishes a regulatory trading system applicable to large industrial emitters. This system is known as an Output-Based Pricing System (the OBPS). The OBPS includes limits on emissions, a "credit" to those who operate within their limit, and a "charge" on those who exceed it. The OBPS is independent of the carbon-based fuel charge. The GGPPA does not apply to all Canadian provinces. Instead, the Act and its regulations serve as a "backstop" in provinces that have not adopted sufficiently stringent carbon pricing mechanisms. In other words, the Act permits provinces to enact laws to reduce greenhouse gas emissions through whatever legislative framework they prefer, provided that the provincial laws in question satisfy the GGPPA's minimum national standards.10

Provincial Challenges to the Constitutionality of the GGPPA

Four Canadian provinces have challenged the constitutionality of the GGPPA: Saskatchewan, Manitoba, Ontario and Alberta. The chart below outlines the pending challenges:

Constitutional Challenges to the GGPPA as of October 17, 2019 No. Province Procedure Court Decision Status 1 Alberta Constitutional Reference Alberta Court of Appeal NA Pending Reference 2 Ontario Constitutional Reference Ontario Court of Appeal Constitutional Decided. Pending Appeal to SCC 3 Manitoba Application for Judicial Review Federal Court of Canada NA Pending Application 4 Saskatchewan Constitutional Reference Saskatchewan Court of Appeal Constitutional Decided. Pending Appeal to SCC As noted above, both Ontario and Saskatchewan have appealed their respective reference decisions to the Supreme Court. They are tentatively scheduled for January 14 and 15, 2020.11

Manitoba commenced its application for judicial review in the Federal Court of Canada in April 2019. The application remains in progress and a hearing date has not been scheduled.

Alberta brought a constitutional reference to the Alberta Court of Appeal in June 2019. Alberta has applied to have the reference expedited, so that the Alberta Court of Appeal's decision will be available by the time the Supreme Court hears the Ontario and Saskatchewan appeals. However, Alberta's reference remains in progress. A hearing date has not been scheduled.

British Columbia and New Brunswick intervened in the Saskatchewan and Ontario proceedings, and have sought intervener status in the Alberta proceeding as well. In the Ontario and Saskatchewan proceedings, the Attorney General for British Columbia agreed with the Attorney General for Canada, arguing in support of the constitutionality of the GGPPA while the Attorney General for New Brunswick agreed with the Attorney General for Ontario, arguing that the GGPPA is unconstitutional in its entirety.

The constitutional question before the Supreme Court of Canada

The Ontario and Saskatchewan appeals to the Supreme Court will likely be heard before the Alberta and Manitoba proceedings are adjudicated at first instance. As a result, the Supreme Court's decision may render those challenges moot. Accordingly, this article focuses on the Ontario and Saskatchewan appeals.

The crux of the Ontario and Saskatchewan decisions was a constitutional question regarding the appropriate balance of power between Canada's federal and provincial governments in regulating greenhouse gas emissions.12 The decisions were not directly concerned with the efficacy of carbon pricing or the viability of the federal government's strategy for reducing greenhouse gas emissions. In fact, both Ontario and Saskatchewan acknowledged that climate change is real and requires proactive measures.13 Rather, the decisions concerned Ontario and Saskatchewan's disagreement with the federal government's approach to reducing greenhouse gas emissions through carbon pricing and denied that the federal government has the constitutional jurisdiction under the national concern branch to impose its chosen approach to greenhouse gas emissions on the provincial and territorial governments.

As a result, the Supreme Court's analysis of the GGPPA's constitutionality will likely focus on whether Parliament can use the national concern branch of the POGG power to impose minimum standards for carbon pricing on provinces that would prefer to pursue their own strategies for reducing carbon emissions. As detailed below, the applicable analysis has two main steps: (i) characterization of the subject matter of the Act; and (ii) classification of that subject matter under a federal head of power.

Analyzing the constitutionality of legislation in Canada

The Canadian Constitution consists of the Constitution Act, 1982 and the Constitution Act, 1867.14 In the latter, sections 91 and 92 delineate the heads of power, or jurisdictions, of Parliament and the provincial legislatures, respectively, to...