Saskatchewan Appeals Carbon Tax Judgement to the Supreme Court of Canada

The Government of Saskatchewan has appealed to the Supreme Court of Canada the judgment of the Saskatchewan Court of Appeal, which found that the federal government has authority to establish a minimum national standard for pricing greenhouse gas (“GHG”) emissions.

In its judgment released on May 3, 2019, the Court of Appeal ruled, in a 3-2 split decision,  that the so-called federal carbon tax was constitutional. The decision came less than three months after the Court heard two days of oral arguments from the governments of Saskatchewan, Ontario, New Brunswick, British Columbia and Canada, as well as several intervenors. Jeff Grubb, Q.C., Khurrum Awan and Brady Knight of Miller Thomson’s Regina office represented the intervenor, the Agricultural Producer’s Association of Saskatchewan.

A Coordinated National Response to Climate Change

The majority opinion noted that climate change is a major threat to Canada and the world, and requires a coordinated national response. Against that backdrop, the Constitution had to be interpreted as a living tree, capable of growth and expansion within its natural limits.

The pith and substance of the Greenhouse Gas Pollution Pricing Act (the “Act”), according to majority, was “the establishment of minimum national standards of price stringency for GHG emissions.” On that basis, the majority found that the Act does not regulate GHG emissions from industrial and consumer activity more broadly and thus was not overly intrusive on areas of provincial jurisdiction. Further, the federal government’s authority to establish minimum national standards on carbon pricing included the authority to implement regulatory regimes necessary to put a minimum price-setting program into action.

Ultimately, the majority upheld the constitutional validity of the Act under the national concern branch of the federal power over the Peace, Order and Good Government of Canada. The majority’s key reasoning was as follows:

1. GHG emissions have the distinctiveness which separates minimum pricing standards from legislation intruding on matters of provincial concern. GHGs have a specific definition and are a very particular type of environment pollutant defined by specific scientific or chemical characteristics.
2. GHG emissions do not respect provincial boundaries. Therefore, failure of one province to take action will have impacts on other provinces, including climate change and businesses migrating to provinces with less stringent GHG pricing legislation.
3. Climate change is a global problem which requires a global response. Such a response can only be effectively developed internationally and by way of state-to-state negotiation. Canada cannot meet its national commitments unless all provincial jurisdictions are prepared to implement GHG emissions pricing schemes.
4. Establishing minimum GHG emissions pricing does not overreach into areas of provincial authority. The Act simply establishes minimum standards to which business and individual consumers can respond as they choose.

Many intervenors in the case sought to characterize the Act as valid under various heads of power, including the criminal law power, general trade and commerce power and the emergency power. The Court dismissed all of these arguments, noting that the Act either did not meet the relevant tests or that the evidentiary record was insufficient to permit the Court to uphold these arguments.

Finally, the majority found that the charges imposed by the Act are regulatory charges, and are not taxes as argued by Saskatchewan. Even if the charges are taxes, they were validly imposed since Parliament had expressly authorized the Governor in Council to decide where they will apply.

Disagreement over Intrusion on Provincial Jurisdiction

The minority’s opinion also recognized that climate change is a great concern that had to be addressed. However, in the minority’s view, the solution to climate change had to account for regional diversity. Therefore, the provinces had to be accorded significant latitude to tailor and implement their own plans to address GHG emissions based on the unique characteristics of each province.

The minority found that the Act was not a valid exercise of the federal power over Peace, Order and Good Government for the following reasons:

1. Pricing of GHG emissions does not have a distinctiveness that separates the Act from matters of provincial concern. Setting a minimum price impermissibly creates concurrent federal jurisdiction over GHG emissions arising from industrial and consumer activity within the provinces.
2. The provinces have the ability to individually set or collectively agree on a minimum pricing scheme for GHG emissions. Therefore, there was no provincial inability to act which required the federal government to implement a minimum national standard for pricing GHG emissions.
3. The Act’s impact on provincial jurisdiction was not reconcilable with the constitutional distribution of powers. Provincial autonomy was crucial to federalism given the geographic, climactic and economic diversity of Canada. However, the Act would impact an extremely broad range of industrial, commercial and private activity within provincial jurisdiction. The Act pervaded the life and economy of each province and unilaterally imposed federal policy in areas of exclusive provincial jurisdiction.

Finally, the minority held that the charges imposed by the Act are taxes, the setting of which has been impermissibly delegated to the Governor in Council.

Looking forward

A reference on the constitutional validity of the Act has also been heard by the Ontario Court of Appeal, and a decision is pending. However, given the appeal filed by the Saskatchewan government, the final word on the validity of the Act now rests with the Supreme Court of Canada.  That Court now has to grapple with the tension between the majority and minority reasons about the extent to which the Act intrudes on provincial jurisdiction and the options for dealing with climate change within the Canadian constitutional framework.