The recent decision of the Alberta Court of Appeal in Reference re Greenhouse Gas Pollution Pricing Act is the third chapter in the saga of provincial government challenges to what is commonly referred to as the federal government’s carbon pricing legislation. The legislation, and the provincial challenges by Saskatchewan, Ontario and Alberta, represent a modern-day depiction of the ever-present tension between provincial and federal government powers as enshrined in the Canadian Constitution. Unlike previous battles pitting provinces against the exercise of federal power in areas of perceived national concern, this particular clash is being played out against the backdrop of the global issue of climate change.
In a split opinion (4–1) heavily focused on Alberta’s oil and gas industry, and provincial control over natural resources, a majority of the Court of Appeal of Alberta (ABCA) found that the federal legislation establishing a backstop pricing regime for greenhouse gas (GHG) emissions is an unconstitutional “Trojan horse” into the jurisdiction of the provinces (opinion here). Released on February 24, 2020, this opinion breaks with the majority findings of the Courts of Appeal for Ontario and Saskatchewan on the constitutionality of the Greenhouse Gas Pollution Pricing Act (Act).
The narrow question the courts have been asked to address is whether the Act improperly infringes upon the jurisdiction of the provinces under the Constitution, referred to as a “division of powers” analysis. Under well established jurisprudence, the constitutional division of powers analysis begins with determining the “matter” or “pith and substance” of the legislation, followed by determining whether the matter falls under one or more of the powers granted to the provinces or the federal government.
Fifteen appellate judges have now opined on the constitutionality of the Act. Eight have found it constitutional, while seven have found it unconstitutional. Majorities and minorities of the three appellate courts have found five different characterizations of the “matter” of the Act. Much flows from these characterizations. The broader the characterization, the more likely the Act amounts to a federal overreach into provincial jurisdiction. The narrower the characterization, the more likely the Act can be seen to address a constitutionally necessary role for Canada to coordinate efforts to reduce GHG emissions in the goal of combatting climate change.
A particular feature of the Alberta reference, compared to those in Saskatchewan and Ontario, is the degree to which Alberta put evidence before the court relating to the extensive GHG emissions reductions steps that had been taken by the provinces. The impact of this evidence on the majority’s reasoning is palpable. Whether this will impact the pending Supreme Court of Canada (SCC) appeals, given the Alberta opinion (and record) is not strictly before the court, remains to be seen.
As the 2-1 (courts) or 8-7 (judges) record shows, differing legal conclusions, and different paths to those conclusions, are reasonably available on the constitutionality of the Act. The SCC will hear the appeals of Ontario and Saskatchewan from their appellate courts on March 25 and 26, 2020. The Alberta reference is not expected to be included as an appeal, though Alberta is an intervener in the Ontario and Saskatchewan appeals.
It is important to appreciate that the reference opinion by the ABCA that the Act is unconstitutional does not relieve Albertans and businesses in Alberta from paying levies charged under the Act. Reference cases such as this have no binding legal effect, as the court provides an opinion, not a decision, on constitutionality.
The sole federal power that Canada argued granted Parliament the necessary jurisdiction for the Act was the “national concern” power, thus the Justices of the ABCA focused their analyses on this power.
The majority opinion: Unconstitutional
The majority’s opinion is marked by a broad characterization of the Act, including the authority the Act grants the federal government, and the degree to which exercise of this authority could impact aspects of daily life that primarily fall under provincial jurisdiction – the “constitutional Trojan horse” in the words of the majority.
The “matter” of the Act is regulating GHG emissions
Agreeing with the dissenting justice of the Court of Appeal for Ontario, the majority adopted a very wide characterization of the Act, being to regulate GHG emissions, and found mitigating the effects of climate change to be the Act’s purpose. In the majority’s view, the Act grants the federal government excessive discretion to take whatever steps it considers desirable to mitigate climate change, including by putting a GHG emissions price on “anything”. Effectively, the majority found that the Act allows the federal government to impose its policy choices on the provinces, contrary to the federal structure of Canada’s Constitution, and the history of provincial ownership and control of natural resources.
While recognizing the Act requires all amounts levied in a province to be remitted back to that province, the majority took issue with the discretion the Act affords Canada to determine who within the province will receive the funds—the provincial government, individuals or organizations. Appearing to also draw support from the principle of the protection of minority rights, the majority identified the fact that the Act could be applied differently across provinces as creating a real “risk of majoritarian oppression of minority interests”.
Although the point was not argued by the federal government, the majority noted, without analysis, that it agreed with the Court of Appeal for Saskatchewan that the Act could not be justified under the federal criminal, trade and commerce, foreign treaty obligations or the “emergency” branch powers. As noted, Canada sought to rely upon only the national concern power as the justification for the exercise of federal legislative power.
Enumerated provincial powers are not subject to the national concern power
In a point likely to be subject of debate before the SCC, the majority held that the national concern power does not apply to any matter that falls under the areas specifically assigned to the provinces (enumerated powers)—it only applies to residual matters “of a local or private nature”, or matters that arose since Confederation. This finding fundamentally narrows the scope of the national concern power.
The majority opined that regulating GHG emissions falls within several areas of provincial jurisdiction, placing particular emphasis on the provinces’ proprietary and exploration, development, conservation and management rights over natural resources. These latter natural resource rights were added to the Constitution in 1982 in response to the western provinces’ objections to the National Energy Program, but the extent to which they may limit the exercise of federal legislative power has not been subject to any significant judicial interpretation, particularly by the SCC. The majority’s focus on these provincial powers was shared by the minority of the Court of Appeal for Saskatchewan, but received no reference in the opinions of the Court of Appeal for Ontario.
The majority treated GHG emissions as equivalent to general industrial pollution, leading to the conclusion that the matter of their regulation existed at the time of Confederation. Thus, on this first step of the national concern test, the majority found that the national concern power could not apply.
Regulating GHG emissions is diverse, indistinct and divisible
Additionally, to meet the national concern test, the “matter” addressed by the federal legislation must meet the test of “singleness, distinctiveness and indivisibility”. While a complex analysis, stated simply, this requires that the matter can be cleanly separated from provincial jurisdiction. The majority rejected Canada’s argument that regulating GHG emissions (or in Canada’s view of the “matter” of the Act, setting minimum standards of stringency for GHG emissions pricing) possessed the required singleness, distinctiveness and indivisibility. Instead, the majority found that regulating GHG emissions falls under an aggregate of provincial powers, and that the Act is irreconcilable with the constitutional division of powers because it extends deep into the provinces’ jurisdiction, potentially affecting the price of an “endless list of GHG producing items and things”, including beef, home sizes, second residences, vehicle ownership, travel, consumer goods and the consumption of electricity.
A second issue likely to feature before the SCC is the novel “backstop” nature of the Act. The Act only imposes the federal GHG pricing regime in a province if that province’s pricing mechanisms for GHG emissions do not meet federal standards or if the province does not have a carbon pricing plan. A contingent federal regulatory regime has not previously been considered in the context of the national concern power. While the majority found the backstop fundamentally inconsistent with the national concern power, the dissenting opinion of Justice Feehan found that it was a means to make the power more compatible with Canada’s federal structure by permitting provincial variation. Uncontroversially, the majority held that the federal government does not have a “minimum national standards” power allowing it to legislate in any provincial area it sees fit to impose national standards.
Provincial inability requires jeopardy to GHG emission schemes in other provinces
The final requirement to bring a matter within the national concern power is that it must have a national dimension that is beyond the power of the provinces to address. The majority adopted a narrow approach to the provincial inability test, finding that provincial non-cooperation does not engage the national concern, but is instead legitimate political disagreement. Agreeing with the minority opinion of the Court of Appeal for Ontario, the majority held that inaction by one province that would undermine the efforts of other provinces to reduce GHG emissions is not a matter of provincial inability. The majority explicitly rejected the position of Canada that Parliament can have a role to reduce the risk of harm to one province resulting from non-cooperation of another.
The majority also referred to the substantial body of evidence introduced by Alberta demonstrating actions the provinces have taken to reduce GHG emissions, as establishing that no federal role is necessary for the provinces to address climate change.
The concurring opinion: Unconstitutional
Justice Wakeling, writing for himself, concurred with the majority but applied a different constitutional analysis focused on whether the Act bears features that fall within established provincial and federal areas of jurisdiction. Finding that the Act has features that justify its classification under numerous provincial powers, and none that justify it under federal powers, Justice Wakeling determined that the Act is outside Canada’s jurisdiction. In his view, national standards to reduce GHG emissions do not fall within Canada’s national concern power.
The dissenting opinion: Constitutional
Justice Feehan took a fundamentally different view of the Act and the national concern power jurisprudence, largely agreeing with the majority of the Court of Appeal for Saskatchewan. However, a key difference from that majority opinion is Justice Feehan’s finding on the “matter” of the Act, preferring the narrowest characterization taken in this trilogy of cases: effecting behavioural change throughout Canada leading to increased energy efficiencies by the use of minimum standards necessary and integral to the stringent pricing of GHG emissions.
Justice Feehan considered this characterization of the Act, though an environmental matter, to be a matter that has arisen since Confederation and had become of national concern. He considered the Act to have a limited impact on provincial jurisdiction on the basis that it recognizes provincial jurisdiction over GHG emissions reductions policies, does not impose a “one-size fits all” formula, and accommodates various provincial systems; provided they meet specified minimum standards.
Differing further from the majority of the ABCA, Justice Feehan determined that provincial inability includes situations where non-cooperation by one or more provinces would render the other provinces unable to protect their interests. The potential for non-cooperation of some provinces to adequately address GHG emissions would result in a harm to the other provinces that they would not have the legislative authority to respond to—as one province cannot require another to take legislative action. On this basis, Justice Feehan found a role for the federal government, which the provinces cannot play, in ensuring a minimum equivalency in GHG emissions reduction efforts across Canada.
For more information, please contact Gord Tarnowsky, Q.C., David Konkin or another member of Dentons’ Litigation and Dispute Resolution group.
This post was originally published on dentons.com.