Canada: In Split Decision, Supreme Court Of Canada Upholds Federal Greenhouse Gas Pollution Pricing Act

In Reference re Greenhouse Gas Pollution Pricing Act (Decision), a majority of the Supreme Court of Canada (SCC) declared that the federal Greenhouse Gas Pollution Pricing Act (Act) is constitutional under the national concern branch of Parliament's power to legislate for the "Peace, Order and good Government of Canada" (POGG). Three Justices dissented, each authoring separate reasons.

The Decision resolved an issue that has sharply divided appellate courts nationwide. All four courts that have now ruled on the Act's constitutionality have issued split decisions. All told, 14 appellate judges have found the Act constitutional, while 10 appellate judges reached the opposite conclusion.

The Decision contains several significant clarifications and evolutions in constitutional law. This bulletin summarizes the multi-jurisdictional litigation that led to the Decision, the Decision itself and its potential implications for Canadian constitutional law. For a review of the environmental implications, please see our Blakes Bulletin: Now That the Greenhouse Gas Pollution Pricing Act Has Been Determined to be Constitutionally Valid - What Does it All Mean?

BACKGROUND

Parliament enacted the Act in 2018. Its purpose is to reduce greenhouse gas (GHG) emissions and cause behavioural change by introducing a GHG pricing system that sets minimum national standards. For a detailed discussion about the Act's mechanics and business impacts, see our December 2018 Blakes Bulletin: Federal Carbon Pricing System Coming Into Force January 2019: How Will it Impact Your Business?

The Attorneys General of Alberta, Ontario and Saskatchewan launched constitutional challenges to the Act. Majorities of the Courts of Appeal for Ontario and Saskatchewan concluded that the Act is constitutional. By contrast, a majority of the Court of Appeal of Alberta concluded that it is not.

SCC DECISION

Writing for the majority, Chief Justice Wagner found that Parliament has jurisdiction to enact the Act under the national concern branch of POGG. In the majority's view, to mitigate climate change, "federal action is indispensable."

For the majority, the Act's "pith and substance", or essence, "is establishing minimum national standards of GHG price stringency to reduce GHG emissions" - not regulating GHG emissions generally. This matter has the necessary "singleness, distinctiveness and indivisibility" to fall within the POGG "national concern" power, because GHG emissions are a "precisely identifiable" pollutant and "not merely interprovincial, but global, in scope." The provinces are constitutionally incapable of establishing minimum national GHG pricing standards because "a failure to include one province in the scheme would jeopardize its success in the rest of Canada." Although the Act has a clear impact on provincial autonomy, this impact is "qualified and limited", and justified by the Act's environmental benefits.

The majority emphasized that its conclusion largely turned on the evidence about the dangers posed by climate change and "the critical value of GHG pricing as a tool for the mitigation of climate change".

THE DISSENTS

Justice Brown concluded that the subject matter of the Act falls squarely within provincial jurisdiction. As a result, he would have found the Act to be wholly unconstitutional. Justice Rowe issued separate dissenting reasons. Both Justices Brown and Rowe expressed concern that the majority's recognition of a federal power to legislate "minimum national standards" in areas of national concern could encroach on other areas of provincial jurisdiction.

Justice Côté dissented in part. While she agreed with the majority that Parliament could legislate to set minimum national pricing standards to reduce GHG emissions, she found the breadth of regulation-making power that the Act confers on the federal Cabinet to be inconsistent with parliamentary sovereignty, the rule of law and the separation of powers between the legislative and executive branches of government and thus unconstitutional.

CONSTITUTIONAL LAW IMPLICATIONS

The Decision makes several important changes and clarifications to the constitutional law of Canada, particularly the legal test applicable to the national concern branch of Parliament's POGG power, including:

• Expansion of federal power. The Court extended Parliament's power to legislate on matters of "national concern." The Court had not recognized a new matter of national concern in 30 years. While the majority was careful to confine this extension, it acknowledged that the Decision "will have a clear impact on provincial autonomy".
• Means, not just ends. The first step in determining whether a law falls within federal or provincial legislative authority under the constitutional division of powers requires that the "pith and substance" or essence of the law be identified. The Decision clarifies that the legislature's choice of means may sometimes be so important that they should be included in identifying the law's pith and substance. The means chosen by Parliament to achieve the Act's purpose - minimum national pricing standards for GHG emissions - were so integral that they were incorporated into the Act's pith and substance.
• "Common sense" inquiry. The Decision establishes a new "threshold question" for the national concern analysis: is the matter of sufficient concern to Canada as a whole? According to the majority, this question "invites a common-sense inquiry into the national importance of the proposed matter."
• Proportionality test. The majority introduced a new proportionality test into the national concern analysis: "the intrusion upon provincial autonomy" that results from recognizing the proposed matter of national concern must be outweighed by the consequences "if Parliament were unable to address the matter at a national level."
• "Grave" consequences. To engage the national concern doctrine, the provinces must be constitutionally incapable of legislating in the area. The Decision establishes a new factor to consider when assessing provincial inability: does a province's failure to deal with the matter have "grave extraprovincial consequences"? In this case, the majority concluded that, since GHG emissions and the effects of climate change can transcend borders, "grave extraprovincial consequences" are present.
• Inherently national, not historically new. Prior cases had focused on the "newness" of a matter to justify the application of the national concern doctrine. The Decision clarifies that the "critical element of this analysis is the requirement that matters of national concern be inherently national in character, not that they be historically new."

Ultimately, the Decision's full impact on the division of powers remains to be seen. It will depend on whether the courts view the Decision as a product of its unique circumstances, or as a general relaxation on the limits that were previously imposed on Parliament's jurisdiction to legislate on the basis of the national concern doctrine rather than a specific "head of power" assigned to Parliament in the Constitution.

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