Take carbon taxes to court
Now that Premier Rachel Notley has broken with Ottawa over carbon pricing after the suspension of the Trans Mountain pipeline expansion, Alberta joins Ontario and Saskatchewan in a growing resistance to the federal climate change plan. Last week, Ontario Premier Doug Ford’s government outlined its constitutional arguments against Ottawa’s carbon-pricing “backstop” plan. Today, everyone is wondering about Ottawa’s next move.
The Trudeau government has legislated the “backstop” to impose a federal levy on greenhouse gases in any province that doesn’t meet the federal standard by January 2019. The federal government seeks uniformity in the pan-Canadian pricing of greenhouse gases. However, the “backstop” is arguably the most significant assertion of federal authority in a generation, and there are major open questions about whether the backstop is actually within the federal jurisdiction under Canada’s Constitution. With the clock ticking, the federal government must ensure the constitutionality of its carbon-pricing backstop by referring the questions to the Supreme Court of Canada.
Both Ontario and Saskatchewan governments are challenging the federal government’s legislation in their respective courts of appeal. While some downplay the legal merit of the challenges, a federal carbon price represents new and far-reaching constitutional territory: no court has yet affirmed a general federal jurisdiction to regulate GHG emissions. Without word from the Supreme Court, definitive resolution will wait until the challenges are heard and decided by the provinces’ appellate courts, with a likelihood of follow-on appeal to the Supreme Court in any event. An adverse ruling would force the federal government to unwind or rush to amend its legislation.
Earlier federal governments sought direct answers from Supreme Court on legislation that raised significant constitutional questions — particularly laws that stake out federal jurisdiction on novel issues. For example, in 1976, the government of Pierre Elliot Trudeau asked the Supreme Court to rule on the constitutionality of its wage and price controls as emergency measures for countering inflation. In 2010, the Harper government sought an answer on the federal jurisdiction to create a national securities regulator. Notably, many constitutional experts also believed that federal jurisdiction for a national securities regulator was a slam dunk — until the Supreme Court decided otherwise. The federal government similarly faces a risk that the rug gets pulled out from under its carbon-pricing backstop.
As recent court decisions have exhibited, constitutional law remains in flux. Indeed, commentators disagree about the specific head of power that would undergird federal jurisdiction for carbon pricing. Some point to the federal taxation power. However, this power requires that a tax be for the “raising of monies” rather than a charge that is primarily for regulating particular activities. Since it is applied only in select provinces and its express purpose is to encourage GHG reductions, the backstop carbon price is not intended to raise federal revenues. Moreover, if the backstop is a “tax,” it could be offside because our constitution requires a high degree of parliamentary control over taxes, and the backstop legislation gives discretion for the minister to decide which provinces face a federal carbon price.
Others believe a constitutional basis for the backstop could be the federal criminal law power, which has supported previous federal environmental legislation — for example, limits on contaminants and renewable content in diesel fuels. However, this power requires a prohibition backed by a penalty. In contrast, carbon pricing is not truly a prohibition since it expressly allows emissions for a price. Affirming the federal backstop as “criminal” legislation would dramatically increase the scope of the federal criminal law power.
For the backstop to be constitutional, the federal government would likely need to establish the regulation of GHGs as a “national concern” under the peace, order and good government power. The Supreme Court’s previous holding that marine pollution was such a national concern may provide precedent for regulating GHGs: somewhat analogously, the impact of GHGs on climate change occur beyond any one province.
However, such a “national concern” must also be reconciled with the powers assigned to provinces in Canada’s constitution. GHGs result from a nearly all-encompassing range of human activities from home heating to highway driving, from oil extraction to cow flatulence. Without clear boundaries, a general jurisdiction to regulate greenhouse gases could effectively eviscerate the provincial jurisdiction for industrial regulation and natural resources.
Indeed, the Supreme Court has guarded against “overflow” of federal legislation and has cut down particular sections of otherwise constitutional legislation that intruded on provincial jurisdiction. Even if the federal government has jurisdiction to regulate greenhouse gases, it cannot use this as a foothold to regulate particular industries or natural resources. For example, it is questionable whether the industry-specific emissions credits in the federal backstop are integral to the regulatory scheme or, in substance, industrial regulation.
Carbon pricing is the economically efficient way to reduce Canada’s GHGs. But it is critical that pan-Canadian framework for carbon pricing respect the federal-provincial division of powers. The Trudeau government has so far failed to ensure that all of its legal bases are covered. It owes Canadians in all provinces a speedy confirmation that its backstop legislation is firmly within its jurisdiction. It can do this by referring the question to the Supreme Court.
THE TRUDEAU GOVERNMENT HAS SO FAR FAILED TO ENSURE THAT ALL OF ITS LEGAL BASES ARE COVERED.