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Supreme Court rules Ottawa’s carbon tax is constitutional

In a 6-3 decision, the Supreme Court of Canada has ruled the federal Liberal government’s carbon pricing regime is constitutional — a major decision that allows Ottawa to push ahead with its ambitious plan to ensure every province and territory has a price on carbon to curb greenhouse gas emissions.

Some provinces — notably Alberta, Ontario and Saskatchewan — have forcefully opposed the carbon tax, arguing natural resources are in the provinces’ jurisdiction under the Constitution.

Chief Justice Richard Wagner, writing for the majority, said the federal government is free to impose minimum pricing standards because the threat of climate change is so great that it demands a co-ordinated national approach.

He agreed with the federal government’s argument that climate change is a pressing matter of national concern and said it’s constitutionally permissible for Ottawa to take the lead on a threat that crosses provincial boundaries.

“Climate change is real. It is caused by greenhouse gas emissions resulting from human activities, and it poses a grave threat to humanity’s future,” Wagner wrote.

Wagner found that Ottawa can act under the Constitution’s “peace, order and good government” clause, better known as POGG — which gives the federal government authority to enact laws to deal with issues that concern the entire country.

The POGG clause

Ottawa has tried to justify constitutionally questionable laws in the past by citing the POGG clause. It has succeeded in few of those cases because the Supreme Court tends to defer to the division of powers set out in sections 91 and 92 of the Constitution Act, 1867.

In this case, Wagner said, invoking POGG is justified.

The POGG doctrine applies when there is a “provincial inability to deal with the matter” and where the “failure of one or more provinces to co-operate would prevent the other provinces from successfully addressing it.”

If Canada’s Parliament was blocked from addressing emissions in any way, Wagner said, “irreversible harm would be felt across the country,” especially in communities and regions most vulnerable to the effects of global warming.

Wagner said a patchwork approach — with some provinces refusing to impose a price on carbon — would hinder Canada’s collective fight against climate change. He said there is a “broad consensus among international bodies” that carbon pricing is a “critical measure for the reduction of GHG emissions.”

While Ottawa’s legislation does tread on provincial jurisdiction as set out by the Constitution Act, 1867, the threat of climate change “justifies the limited constitutional impact.”

“The evidence clearly shows that establishing minimum national standards of GHG price stringency to reduce GHG emissions is of concern for Canada as a whole. This matter is critical to our response to an existential threat to human life,” Wagner wrote.

“As a result, it readily passes the threshold test and warrants consideration as a possible matter of national concern.”

Emissions are ‘extraprovincial’: Wagner

Wagner said because emissions are “extraprovincial” by nature and “carbon leakage” across borders is inevitable, there’s a regulatory role for Ottawa to play in ensuring that each jurisdiction contributes to the national effort.

“A failure to include one province in the scheme would jeopardize its success in the rest of Canada,” Wagner wrote. “What is more, any province’s refusal to implement a sufficiently stringent GHG pricing mechanism could undermine GHG pricing everywhere in Canada.”

Wagner pointed out that the federal government’s Greenhouse Gas Pollution Pricing Act says only that the provinces and territories must put a price on carbon emissions — but it doesn’t explicitly dictate how they should do so.

To reduce emissions and help Canada meet its Paris climate accord commitments, the federal government passed legislation in 2018 that demands all provinces levy some sort of “price on pollution,” either through a carbon tax or a cap-and-trade regime.

As part of the legislation, Ottawa established national pricing standards designed to curb the use of fossil fuels. The tax, which is $40 a tonne this year, is set to rise dramatically in the decade to come as the federal government pursues an ambitious, green-friendly economic transition.

While encouraging provinces to craft their own plans, Ottawa said it would slap a carbon tax on fuels in provinces and territories that failed to establish adequate emissions pricing regimes.

The federal tax, the so-called “backstop,” only applies if a province refuses to act — so “the impact on provinces’ freedom to legislate is minimal,” Wagner said.

“Emitting provinces retain the ability to legislate, without any federal supervision, in relation to all methods of regulating GHG emissions that do not involve pricing,” Wagner said. “They are free to design any GHG pricing system they choose as long as they meet the federal government’s outcome-based targets.”

Lengthy dissenting opinions

Justices Russell Brown and Malcolm Rowe both strongly disagreed with the majority’s decision, writing lengthy dissenting opinions in response to Wagner.

Brown said the law’s subject matter “falls squarely within provincial jurisdiction.”

“This is a model of federalism that rejects our Constitution and rewrites the rules of Confederation,” Brown wrote.

“Its implications go far beyond the [carbon tax] act, opening the door to federal intrusion — by way of the imposition of national standards — into all areas of provincial jurisdiction, including intra-provincial trade and commerce, health, and the management of natural resources. It is bound to lead to serious tensions in the federation.”

Rowe said that the POGG clause or national concern doctrine should be a “residual and circumscribed power of last resort.”

“Courts interpreting the division of powers must be careful not to dim or to whittle down the provisions of the Constitution, and its underlying values,” Rowe said. “The Canadian federation guarantees the autonomy of both orders of government within their spheres of jurisdiction.”

Speaking to reporters after the ruling, federal Environment Minister Jonathan Wilkinson said the debate over carbon pricing is now over and the top court has affirmed that “carbon pricing is integral” to any “credible plan” to reduce emissions.

“Canadians know we have to act, we have to be ambitious in fighting climate change,” he said, adding he’s ready to work with “recalcitrant jurisdictions” like Alberta, Ontario and Saskatchewan to implement provincial plans to curb emissions.

We want to do it in a way that fits into the context of the Canadian federation,” he said. “I look forward to having those conversations with all my counterparts.”

Delegates to the Conservative Party policy convention voted down a resolution to add “climate change is real” to the policy book last weekend. Wilkinson took a shot at the Conservatives today, saying they aren’t serious about the environment.

“They’ll need to do some reflecting,” he said. “Climate change shouldn’t be a partisan issue.”

In a statement, Conservative Leader Erin O’Toole said that, if elected, he’d scrap “the Liberal carbon tax,” which he said “threatens hundreds of thousands of jobs” and puts Canada at a competitive disadvantage in the world.

“Canada’s Conservatives will put forward a clear and comprehensive climate plan focused on reducing emissions, but we won’t do it on the backs of the poorest and working Canadians,” O’Toole said.

The federal government insists that most of the money collected through the backstop in Alberta, Ontario and Saskatchewan is returned to taxpayers at tax time through the “climate action incentive.”

Kenney says he’s ‘obviously disappointed’ with decision

Alberta Premier Jason Kenney, who won a commanding victory in the 2019 provincial election on a promise to scrap his predecessor’s carbon tax, said he was “obviously disappointed” with the decision.

Echoing the dissenting opinion, Kenney said he was “profoundly concerned” that the court’s expansive ruling would vest too much power in the hands of the federal government to fight climate change.

Asked if he’d restore a made-in-Alberta carbon tax regime to avoid the federal backstop, Kenney said those issues have not yet been resolved.

“We’re going to consult with Albertans and talk to our allied provinces to determine the best way forward to protect jobs and the economy and to minimize the cost of any future policies on this province,” he said.

Alberta is in no way a “bad actor” on climate as there are robust investments in renewable energy underway, Kenney said, adding the province’s restrictions on oilsands emissions have made a meaningful difference.

Despite the majority ruling, Saskatchewan Premier Scott Moe said today’s court decision “does not change our core conviction that the federal carbon tax is bad environmental policy” and “simply wrong.”

He also said the tax “kills jobs” and “threatens the competitiveness of our industries.” Moe and other leaders have said the carbon backstop places an unfair financial burden on farmers — especially those who use fossil fuels to dry grain and corn.

Moe said that, despite his misgivings, he would soon “outline measures that Saskatchewan will take in the months ahead to protect Saskatchewan people while addressing climate change.” He said Saskatchewan will “forge our own path.”

Jeff Yurek, Ontario’s environment minister, issued a more conciliatory statement. He said the Progressive Conservative government “will continue to do everything we can to make life more affordable for families and businesses,” but it will press ahead with a “tough but fair plan” to hold large industrial emitters accountable for their pollution.

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