Alberta Court of Appeal holds federal carbon price unconstitutional

The Alberta Court of Appeal (ABCA) held in a 4-1 decision that Parliament lacks the legislative authority to enact a minimum national price on greenhouse gas (GHG) emissions under the Greenhouse Gas Pollution Pricing Act (GGPPA), concluding that both the federal fuel charge and the output-based pricing system of the GGPPA are unconstitutional under the Constitution Act, 1867¹.

What you need to know

• The three-judge majority held that Parliament is infringing on provinces’ exclusive jurisdiction by regulating GHG emissions, and that the GGPPA is therefore unconstitutional. One judge concurred with the majority, but wrote his own reasons, and one judge dissented and would have held that the legislation was constitutionally valid.
• The breadth of the GGPPA was a key factor in the majority’s reasoning. The majority called the GGPPA a “constitutional Trojan horse” and likened it to “a wholesale takeover of a collection of clear provincial jurisdictions and rights”.
• The ABCA is the first court to find that the GGPPA is unconstitutional. Previously, the Court of Appeal for Saskatchewan and the Ontario Court of Appeal upheld the decision (three to two and four to one, respectively).
• The ABCA’s majority, and the concurring, reasons are perhaps the strongest statement we have seen to date regarding the constitutional concerns associated with this legislation.
  • The decision also represents one of the strongest statements from any appellate court about the scope and breadth of provincial powers, both in tone and substance.
• The Supreme Court of Canada is scheduled to hear the appeals from the Ontario and Saskatchewan decisions on March 24-25.

The Greenhouse Gas Pollution Pricing Act and the provincial references

The GGPPA was enacted with the statutory goal of reducing GHG emissions across Canada. Part one of the GGPPA imposes a charge (called the federal fuel charge) on the production, distribution and importation of a variety of GHG-producing fuels. Part two of the GGPPA establishes output-based performance standards for industrial emitters in covered sectors with emissions greater than 50 kt of carbon dioxide equivalent (CO2e)/year, and to facilities with emissions between 10 and 50 kt that voluntarily opt into the program. Both the federal fuel charge and the output-based pricing system (OBPS) apply only in designated provinces that have not adopted prices on GHG emissions that meet the national minimums under the GGPPA². In that way, the GGPPA serves as a national backstop carbon pricing scheme.

Although it imposes a carbon price in backstop jurisdictions, the GGPPA is not intended as a scheme to raise revenue. Rather, the proceeds of the federal fuel charge are generally required to be refunded either to the province in which the charge is collected, or to taxpayers in that province. Similarly, the federal government has proposed returning any proceeds from the OBPS to the jurisdiction of origin.

Four Canadian provinces have challenged the constitutionality of the GGPPA, arguing that the need to regulate greenhouse gasses is outside the power of the federal government. Alberta, Saskatchewan and Ontario have each brought their challenges through a constitutional reference to their respective Courts of Appeal. Manitoba has challenged the legislation through an application for judicial review. Last year, both the Saskatchewan and Ontario Courts of Appeal upheld the GGPPA. Saskatchewan and Ontario appealed these decisions to the Supreme Court of Canada, which will hear these appeals on March 24-25.

The constitutional issue

The Constitution Act, 1867 does not exclusively assign environmental regulation to either level of government. As a result, the environment is an area of shared constitutional responsibility. While the federal government has jurisdiction over “residual” or unassigned areas of responsibility, the provincial power to regulate “property and civil rights” and matters of a “local or private nature” has been broadly interpreted, leaving “residual” powers to a narrow category. As a result, when the federal government seeks to regulate environmental issues, it must either ground that regulation in a specific enumerated power (such as criminal law, which has been found to be the constitutional basis for federal environmental statutes) or the POGG clause, a catch-all that permits the federal government to regulate for the “Peace, Order and Good Government” of Canada.

“Peace, Order and Good Government”

The case law under POGG enables the federal government to regulate in three circumstances: national emergency, matters of national concern and when there is a genuine gap in the constitutional framework. The federal government relied on the national concern branch as the basis for its power to enact the GGPPA. However, the test for national concern is relatively strict. It requires that a matter be of concern to the entire country, and have a “singleness, distinctiveness and indivisibility that clearly distinguishes it from matters of provincial concern”³.

Canada argued that the purpose of the law (or “pith and substance”) was “the establishment of minimum national standards of stringency for GHG emissions pricing to reduce Canada’s nationwide GHG emissions”. The majority of the ABCA disagreed. It identified a broader purpose of the legislation, specifically, “at a minimum” the “regulation of GHG emissions”⁴, which it held fell “squarely” under core provincial powers. It focused most prominently on provincial jurisdiction and “proprietary powers” over the management and development on natural resources under sections 92A and 109 of the Constitution Act, 1867. The majority also referenced provincial jurisdiction over property and civil rights, local works and undertakings, and direct taxation.

In the majority’s view, the national concern doctrine could not be used to “assign a new head of power” to the federal government where the subject matter already falls within provinces’ exclusive jurisdiction. It held that the GGPPA was outside the federal government’s power. Historically, the fact that the matter was within provincial jurisdiction was not a bar to federal regulation, if the matter had evolved to the point that it rose to the level of being a national concern.

Although the majority held that the GGPPA was not capable of being the subject of a national concern, it continued its analysis to ask whether its requirements would have been met. It asked whether the regulation of GHG emissions possessed a “degree of unity” that makes it indivisible and distinct from provincial matters of concern. It concluded that the answer was no, finding that the regulation of GHG emissions is merely “an aggregate of powers – virtually all provincial”⁵. As a result, neither the fact that GHG emissions transcend provincial boundaries nor the imposition of minimum national standards were sufficient to meet the doctrine’s “singleness, distinctiveness and indivisibility” threshold. The majority was also unpersuaded that provinces were unable to address GHG emissions on their own. They concluded that, even if the national concern doctrine was available, the GGPPA did not satisfy its requirements.

Justice Wakeling wrote concurring reasons that went further than the majority. Justice Wakeling called the GPPAA “a massive and unprecedented peacetime-nonemergency invasion of Alberta’s and other provinces’ jurisdiction under the Constitution Act, 1867” and an “assault on provincial jurisdiction”⁶. His reasons are also notable for his suggestion that there “is not now and there has never been a pressing or any need for a national concern doctrine”⁷.

Justice Feehan dissented, agreeing instead with the reasons of the majority’s decision at the Saskatchewan Court of Appeal and Justice Hoy’s concurring reasons at the Ontario Court of Appeal. Justice Feehan also arrived at a more specific pith and substance conclusion regarding the legislation than the majority reasons: “to effect behavioral change throughout Canada leading to increased energy efficiencies by the use of minimum national standards necessary and integral to the stringent pricing of greenhouse gas emissions”⁸.

Based on this conclusion regarding the pith and substance of the legislation, Justice Feehan concluded that the GPPAA was constitutional and intra vires the Government of Canada under the national concern branch of POGG. Justice Feehan also observed section 92A—the resource power inserted into the constitution as part of patriation in 1982—was not meant to limit the powers of the federal Parliament.

Implications

With the decisions from the Saskatchewan and Ontario courts of appeal already scheduled to be heard by the Supreme Court of Canada in less than a month, none of these decisions will be the last word on the GGPPA. However, the ABCA’s majority, and the concurring, reasons are perhaps the strongest statement we have seen to date regarding the constitutional concerns associated with this legislation. The decision also represents one of the strongest statements from any appellate court about the scope and breadth of provincial powers, both in tone and substance. Assuming the Supreme Court does not delay its hearing to allow this appeal to “catch up” to Saskatchewan’s and Ontario’s, we will likely know the outcome of this long-standing saga some time before the end of 2020.

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¹ Reference re Greenhouse Gas Pollution Pricing Act, 2020 ABCA 74

² Currently, those provinces are Saskatchewan, Ontario, New Brunswick, Manitoba and Alberta.

³ Ibid. at para. 183

⁴ Ibid. at para. 256. This is also the pith and substance arrived at by Justice Huscroft in his dissenting reasons at the Ontario Court of Appeal: Reference re Greenhouse Gas Pollution Pricing Act, 2019 ONCA 544 at para. 213

⁵ Ibid. at para. 288

⁶ Ibid. at para. 348

⁷ Ibid. at para. 733

⁸ Ibid. at para. 943

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