The Supreme Court of Canada released its
decision[1] on the
constitutionality of the Greenhouse Gas Pollution Pricing Act[2] (the “GGPPA”
or the “Act”) on March 25, 2021, marking an end to the multi-year and
multi-province litigation.
The federal government enacted the GGPPA
in 2018 and provincial governments quickly stepped forward to challenge its
validity in the courts. The reference began in the Court of Appeal of Saskatchewan
and was heard on February 13 and 14, 2019.[3] Subsequent references were brought in two more provinces, Ontario[4] and Alberta.[5] The appeal of all three Court of Appeal decisions was heard by the
Supreme Court on September 22 and 23, 2020.
The Supreme Court, with a divided 6-3
bench, found the Act constitutional. One justice dissented in part, finding
that the federal government could legislate in the area but that the Act as
currently formulated is too broad. The other two dissenters found, each on
their own reasons, that the Act was unconstitutional as a whole.[6]
Below we provide a brief description of
the Act, a summary of the majority decision, and some key highlights of the
impacts of this decision moving forward.
The GGPPA
In terms of basic structure, the GGPPA
is made up of four parts and four schedules.[7] These parts together form a minimum national standard for the
pricing of greenhouse gas (“GHG”) emissions. This standard applies as a
“backstop”, meaning that it will only impact provinces whose own carbon pricing
strategy is found to be insufficiently stringent by the federal government.
Parts 1 and 2 set out the carbon pricing
strategy and fuel charges for two distinct groups. Part 1 applies to “producers,
distributors and importers of various types of carbon-based fuel”. The Governor
in Council, by regulation, will determine whether any particular fuel incurs a
charge, the amount of the charge, and whether the Part as a whole applies to
any particular province.[8]
Part 2 applies to large
emissions-intensive industrial facilities (called “covered facilities in the
Act”) and establishes an output-based pricing system. This Part directly prices
GHG emissions by these covered facilities but only to the extent, if any, that
they exceed applicable efficiency standards.[9]
Part 3 authorizes the enactment of
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.”[10] Finally, Part 4 specifies that the federal Minister of the
Environment must prepare an annual report and table it in Parliament every
year.
The Reference addressed the constitutionality
of the first two parts of the Act and the four schedules as well as the levies
imposed by the Act.
The Majority Decision
In brief, the majority[11] held that the federal government has jurisdiction to enact the GGPPA
as a matter of national concern under the peace, order and good government (“POGG”)
power granted to it in section 91 of the Constitution Act, 1867.[12] Therefore, the Supreme Court concluded that the GGPPA is
constitutional and upheld the Act in its entirety.
The Court applied the “well-established
two-stage analytical approach” whereby a court characterizes the subject matter
or “pith and substance” of the legislation, then classifies this pith and substance
with reference to the provincial and federal heads of power delineated in the
Constitution.[13] The Court also addressed in detail the national concern doctrine
and its associated test.
The First Stage – Pith and Substance
A fair portion of the decision focused on
the appropriate application of the “pith and substance” test, something that
had been applied quite differently in the three provincial Courts of Appeal.
The Supreme Court held that the impugned law should be defined as “precisely”
as possible but not necessarily as “narrowly” as possible: “the pith and
substance of a challenged statute or provision should capture the law’s
essential character in terms that are as precise as the law will allow”.[14]
Further, the “means” used by the legislation,
that is the particular way that it intends to achieve a result, may be
justifiably included in the analysis where the means are a central feature of
the statute.[15] Finally, the pith and substance of the legislation should be
determined without reference to the Constitutional heads of power; the two
stages of the division of powers analysis must be kept distinct.[16]
The Court held that the true subject
matter of the GGPPA is “establishing minimum national standards of GHG
price stringency to reduce GHG emissions”[17]; not a broader mandate of mitigating climate change. The Court held
that the wording of the Act, federal parliament commentary, and the legal
effects of the Act confirm its focus on national GHG pricing and its minimum or
backstop nature.
Importantly, the Court held that the Act
does not bar certain business or individual activities or tell industry how to
operate to reduce GHG emissions. Instead, the Act simply requires persons to
pay a price if they engage in certain activities that result in GHG emissions.[18]
The Second Stage – National Concern Doctrine
In this portion of the analysis, the
Court focused on the application of the “well-established but rarely applied”[19] national concern doctrine under the federal POGG powers. The
Supreme Court took this opportunity to clarify the application of the doctrine
and the impact of finding a matter to be of national concern, before turning to
the applicable test.
In particular, the Court held that a
matter that falls under the POGG power cannot come within the classes of
subjects set out in the heads of power under section 91 or section 92 of the
Constitution.[20] Importantly, the “effect of finding that a matter is one of
national concern is permanent”[21] and confers exclusive jurisdiction over that matter on the federal
government.[22] Therefore, the Supreme Court noted that such a finding must be
approached with extreme caution.
The Court also held that the “double
aspect doctrine”, which allows both the provincial and federal governments to
regulate certain factual circumstances where there are legitimate provincial
and federal powers at play, can apply to situations where the federal
government is legislating under the national concern doctrine.[23] While not expressly described as such, this appears to be a shift
from prior jurisprudence that applied the double aspect doctrine to legislation
of the same “matter” to that of the same “factual circumstance”.
The Court held that this is particularly
the case with “backstop legislation”, like the GGPPA, where the
legislation operates as a minimum national standard and the provinces can elect
to legislate more stringently. In that situation, the federal law is paramount,
but both the provinces and the federal government can pass applicable
legislation.[24]
The national concern doctrine focuses on whether
the “matter” of the statute is of national concern. This matter need not be
“historically new” (such as the advent of a new technology not contemplated in
the Constitution), but could be “new” in the sense that our understanding of
that subject matter has shifted to create a new inherently national character.
Ultimately, the Court turned to the
three-part national concern doctrine test:
At the threshold step, Canada must adduce
evidence to satisfy the court that the matter is of sufficient concern to
Canada as a whole to warrant consideration in accordance with the national
concern doctrine.[25]
[Second,] the matter “must have a singleness,
distinctiveness and indivisibility that clearly distinguishes it from matters
of provincial concern”.[26]
At the final step of the national concern
test, Canada must show that the proposed matter has “a scale of impact on
provincial jurisdiction that is reconcilable with the fundamental distribution
of legislative power under the Constitution”.[27]
The Court held that all three part of the
national concern doctrinal test were met in the case of the GGPPA.
First, for the threshold question of
national importance, the held that “establishing minimum national standards of
GHG price stringency to reduce GHG emissions is of concern to Canada as a whole
[and is] is critical to our response to an existential threat to human life in
Canada and around the world.” The Court therefore concluded that the matter
readily passed the threshold test.
The “singleness, distinctiveness and
indivisibility” criterion, itself has multiple applicable principles:
- the “matter” must be
qualitatively different from matters of provincial concern;
- the provinces jointly or
severally must be constitutionally incapable of enacting the legislation and the
failure to include one or more provinces or localities in a legislative scheme
would jeopardize the successful operation of the scheme in other parts of the
country; and
- a province’s failure to deal with the matter must have grave extraprovincial consequences.[28]
The Court held that GHG emissions are
“predominantly extraprovincial and international in their character and
implications”.[29] It also found that the provinces are constitutionally incapable of
establishing minimum national standards of GHG price stringency[30]; a failure to include one of the provinces would jeopardize the
success of the scheme in other provinces[31]; and that a failure by one province to participate would have grave
climate change impacts on extraprovincial interests.[32]
And third, while the Court recognized that classifying this subject matter as a matter of national concern would impact on provincial jurisdiction, it held that such impacts are qualified and limited[33] because:
- the “subject matter” is limited to one narrow and specific regulatory mechanism, pricing of GHG emissions, and the GGPPA acts only as a backstop;[34]
- there is a limited impact on matters that would usually fall under provincial heads of power;[35] and
- the irreversible consequences of climate change justify these intrusions.[36]
Thus, the majority held that the national
concern test had been met and the GGPPA is a constitutionally valid exercise
of the POGG power.
Constitutionality of the Regulatory Charges
Finally, the Court noted that the charges
imposed by the GGPPA are constitutionally valid “regulatory charges”,
not taxes.
The Court held that a two-step approach
to this issue should be applied. First, a court must identify the existence of
a relevant regulatory scheme. Second, if such a scheme exists, there must be a
relationship between the charge and the scheme itself.[37]
Importantly, the Court held that the
charges could be set at a level designed to influence a behaviour and were not
limited to the recovery of the costs of the regulatory scheme. Further, the
revenues collected are not required to be used to further the purposes of the
regulatory scheme.[38]
Conclusion
The practical and immediate
consequence of the decision is that the GGPPA
is constitutional in its entirety and is enforceable across the country.
There are, however, many more impacts of
this decision on constitutional law and the division of powers in Canada.
One particular concern raised by some of
the provinces and highlighted in Justice Brown’s dissenting decision is the
potential for an influx of federal backstop, or minimum standards, legislation
in other areas of provincial jurisdiction.
The majority decision urges that this
concern is “entirely misplaced” and that nothing about its ultimate conclusion
flowed from that fact that the Act involves a minimum national standard.[39] This statement feels less than convincing when the phrases “minimum
national standard” and “backstop” were used almost 70 times in the majority
decision alone.[40] Clearly this was an extremely important feature of the Act in the
division of powers analysis.
At the very least, the “backstop nature”
of the legislation reduced the impact on provincial jurisdiction in the
majority’s eyes and also contributed to the “matter” of the legislation being
qualitatively different than matters of provincial concern.
The clear statement that subject matter
need not be “historically new” to fall under the national concern doctrine also
opens up the possibilities for future matters falling into federal jurisdiction
under the national concern doctrine. There are many areas of our lives
(arguably most areas) that have become substantially more interprovincial and
international in nature over the previous decades. To what extent subject
matter needs to have been “transformed” to be of broader application will
likely be a future area of dispute.
[1] Reference re Greenhouse Gas Pollution Pricing Act, 2021 SCC
11 [SCC Decision].
[2] SC 2018, c 12, s 186 [GGPPA].
[3] Reference re Greenhouse Gas Pollution Pricing Act, 2019 SKCA
40. The Saskatchewan Court of Appeal found the Act constitutional.
[4] Reference re Greenhouse Gas Pollution Pricing Act, 2019 ONCA
544. The Ontario Court of Appeal found the Act constitutional.
[5] Reference re Greenhouse Gas Pollution Pricing Act, 2020 ABCA
74. The Alberta Court of Appeal found the Act unconstitutional.
[6] Justice Brown held that the GGPPA’s subject matter falls
squarely within provincial jurisdiction. He held that the fact that the Act
itself contemplates the provincial governments being able to enact the same
scheme is fatal to the federal exercise of power under the residual authority
of the POGG power.
Justice Rowe held that the national
concern power is a residual power of last resort and can only apply to matters
not coming with any enumerated head of power. Further, “the matter must be ‘distinct’
from provincial matters and must be incapable of division between both
orders of government such that it must be entrusted solely to Parliament” (supra
note 1 at
para 539 (emphasis in original)). Justice Rowe held that the GGPPA does
not meet this test and is therefore unconstitutional.
[7] GGPPA, supra note 2.
[8] Ibid, s 166.
[9] SCC Decision, supra note 1 at
para 38.
[10] Ibid at para 26.
[11] Per Chief Justice Wagner and justices Abella, Moldaver,
Karakatsanis, Martin and Kasirer.
[12] (UK), 30 & 31 Vict, c 3, s 91, reprinted in RSC 1985, Appendix
II, No 5.
[13] SCC Decision, supra note 1 at
para 47.
[14] Ibid at para 52.
[15] Ibid at paras 53, 55.
[16] Ibid at para 56.
[17] Ibid at para 57.
[18] Ibid at para 71.
[19] Ibid at para 4.
[20] Ibid at para 115.
[21] Ibid at para 90.
[22] Ibid at para 120.
[23] Ibid at para 126.
[24] Ibid at para 129.
[25] Ibid at para 144.
[26] Ibid at para 145, citing R v Crown Zellerbach Canada Ltd,
[1988] 1 SCR 401 at 432.
[27] SCC Decision, ibid at para 160.
[28] Ibid at para 146-53.
[29] Ibid at para 173.
[30] Ibid at para 182.
[31] Ibid at para 183.
[32] Ibid at para 187.
[33] Ibid at para 205.
[34] Ibid at para 199.
[35] Ibid at para 201.
[36] Ibid at para 206.
[37] Ibid at para 213.
[38] Ibid at paras 212-19.
[39] Ibid at para 208.
[40] We counted 45 uses of the term “minimum national standards” and 23
uses of the term “backstop” (not counting those terms inclusion in titles of
sources cited).
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