Constitutional Law – Jurisdiction to enact Environmental Legislation
In this decision, a majority of the Alberta Court of Appeal (the “Majority”) found that the federal government’s Greenhouse Gas Pollution Pricing Act (the “GGPPA”) was unconstitutional. One justice concurred in the result of the Majority, while another dissented.
Overview of the GGPPA
There are two main Parts to the GGPPA relating to greenhouse gas (“GHG”) pricing. Part 1 establishes a “fuel charge” on 22 GHG producing transport and heating fuels sold and consumed in listed provinces. This is characterized as a demand side charge because it is expected the fuel charges will be passed on to consumers.
Part 2 establishes an output-based pricing system (“OBPS”) for industrial GHG emitters. The federal Minister of Environment sets different output-based standards for different industries along with different stringency levels for different industries, all of which are subject to change at the Governor in Council’s discretion. Those whose GHG emissions are priced under Part 2 are exempt from paying the fuel charge under Part 1.
Each Part only applies to a “listed province”. The GGPPA allows the Governor in Council to “list” a province in respect of Part 1 or Part 2 or both. This feature of the GGPPA is sometimes referred to as the “backstop” because the federal standards are only imposed in a given province if the stringency of the province’s pricing mechanism for GHG emissions under either Part is not satisfactory to the federal government or if the province does not have a carbon pricing plan.
The Majority noted that since Alberta no longer has a carbon tax, it is subject to Part 1 of the GGPPA as of January 1, 2020. Alberta was not subject to Part 2 of the Act since the Governor in Council accepted Alberta’s OBPS — its Technology Innovation and Emissions Reduction (“TIER”) system — as being sufficiently stringent with regards to large emitters.
Relevant Provisions of the Constitution
The Majority set out the federal government’s Peace, Order and Good Government (“POGG”) power under section 91 of the Constitution Act, 1867, and then highlighted provincial powers under section 92, including “all matters of a merely local or private Nature in the Province.”
The Majority also highlighted a number of provisions from the Constitution Act, 1982, including section 92A, which gives provinces jurisdiction over the development, conservation, and management of non-renewable natural resources.
History of the Prairie Province’s and Ownership of Their Natural Resources
The Majority outlined the history of prairie provinces’ ownership over natural resources, from the time that Manitoba entered confederation in 1870, to the constitutional amendments that led to the repatriation of Canada’s Constitution in 1982.
The Majority took particular note of section 92A, which provided for exclusive provincial jurisdiction in three areas: (1) the development, conservation, and management of non-renewable natural resources; (2) the export of resources from the province; and (3) taxing powers over resources.
International, Interprovincial and Alberta Efforts to Address Climate Change
The Majority provided an overview of steps that had been taken by the federal government and provinces since 1992 to address GHG emissions. This included the United Nations Framework Convention on Climate Change, which was ratified in 1994; the Kyoto Protocol in 2002, the Copenhagen Accord in 2009 and the Paris Agreement in 2015. Recent federal and provincial efforts to address climate change in Canada were also examined. Finally, the Majority outlined in detail the steps that Alberta has taken since 2002 to address climate change.
References in other Appellate Courts
The Majority briefly summarized the constitutional reference cases from Saskatchewan and Ontario, where majorities had found the GGPPA constitutional.
In Saskatchewan, a majority found that the national concern doctrine of Parliament’s POGG power served as a valid constitutional basis for the GGPPA:
Parliament … [has] authority over a narrower POGG subject matter — the establishment of minimum national standards of price stringency for GHG emissions. This jurisdiction has the singleness, distinctiveness and indivisibility required by the law. It also has a limited impact on the balance of federalism and leaves provinces broad scope to legislate in the GHG area.
The Saskatchewan majority also considered whether the charges constituted a “tax” and concluded that both Part 1 (fuel charge) and Part 2 (OBPS) of the GGPPA impose a “regulatory charge” rather than a “tax” as that term is understood in law.
In a Saskatchewan Court of Appeal dissent, two justices concluded that both Part 1 and Part 2 of the GGPPA were invalid. Part 1 was invalid because the fuel levy constituted a “tax” that ran afoul of the requirement in section 53 of the Constitution that taxes be passed by Parliament rather than delegated to the Executive. And while the OBPS levy was not a “tax”, it was nevertheless not authorized under section 91, including the national concern branch of Parliament’s POGG power.
In Ontario, the majority upheld the constitutionality of the GGPPA on the basis it was a valid exercise of Parliament’s power to legislate in the national concern. It found that while the environment was, broadly speaking, an area of shared constitutional responsibility, “minimum national standards to reduce GHG emissions”, the pith and substance of the GGPPA, were of national concern:
The application of the “provincial inability” test leaves no doubt that establishing minimum national standards to reduce GHG emissions is a single, distinct and indivisible matter. While a province can pass laws in relation to GHGs emitted within its boundaries, its laws cannot affect GHGs emitted by polluters in other provinces — emissions that cause climate change across all provinces and territories.
In dissent, an Ontario Court of Appeal justice rejected the theory that the national concern doctrine authorized federal law-making authority wherever there was an “intense, broadly based concern” across the country. He recognized the sweeping magnitude of the GGPPA’s impact on provincial heads of power, and that carbon pricing is not the only way to reduce GHG emissions. He found both Part 1 and Part 2 of the Act were invalid.
Section 92A and Provinces’ Proprietary Rights and the Other References
The Majority noted that neither appellate court generally considered the provinces’ powers to regulate their natural resources and, in particular, the: (1) provinces’ exclusive powers to make laws relating to the development and management of non-renewable natural resources under section 92A; and (2) the provinces’ proprietary rights as owners of their natural resources.
Foundational Constitutional Principles
The Majority noted that federalism is not merely an interpretive aid to a reading of our Constitution; it is a foundational feature of Canada’s constitutional architecture and defining characteristic of Canada as a nation. The courts must appreciate that an expansive interpretation of one level of government’s law-making authority will have an immediate and direct impact on the scope of the other level of government’s competing law-making authority. Courts need to maintain an appropriate balance between federal and provincial heads of power.
The Majority noted that the environment and federalism are not a comfortable fit. Nevertheless, understandable collective concerns about climate change do not justify overriding federalism.
The Majority highlighted the importance of subsidiarity in federalism, noting that subsidiarity can be described as the proposition that law-making and implementation are often best achieved at a level of government that is not only effective, but also closest to the citizens affected and thus most responsive to their needs, to local distinctiveness, and to population diversity.
The Majority further noted that the principle of subsidiarity also reflects the political realities of Canada’s geographically large country whose population is concentrated in certain provinces. Subsidiarity is a counterbalance to centralism and majoritarianism. The Majority quoted former Alberta Premier Peter Lougheed:
The only way that there can be a fair deal for the citizens of the outlying parts of Canada is for the elected provincial governments of these parts to be sufficiently strong to offset the political power in the House of Commons of the populated centres. That strength can only flow from the provinces’ jurisdiction over the management of their own economic destinies and the development of the natural resources owned by the provinces.
The Majority concluded that both federalism and subsidiarity must weigh heavily in its analysis of whether the GGPPA falls within the national concern doctrine. Where a doubt arises about the classification of a challenged law, the subsidiarity principle, which is an essential aspect of federalism, should weigh in favour of provincial jurisdiction.
Division of Powers Framework
The Majority wrote that there are two stages in any division of powers analysis: (1) characterization; and (2) classification.
The characterization stage requires that a court characterize the “matter” of the challenged law. The matter is the law’s “dominant or most important characteristic”, “main thrust” or “essential character”, or “pith and substance”. In searching for the “pith and substance” of a challenged law, a court will look at both its purpose and effects.
The classification stage requires the court to assign the “matter” to one of the heads of legislative powers, or more accurately, to determine “whether the subject matter of the challenged legislation falls within the head of power being relied on to support the legislation’s validity.”
The Majority noted the importance of keeping these two steps separate. That is, the “matter” should be determined without regard to the head(s) of legislative competence, which are to be looked at only once the ‘pith and substance’ of the impugned law is determined. Unless the two steps are kept distinct, there is a danger that the whole exercise will become blurred and overly oriented towards results.
The Majority wrote that when considering POGG, the classification step cannot simply consider the POGG head of power in the same manner as one would the enumerated classes of subjects under section 91. While peace, order and good government is the first head of power identified in section 91, it is a residuary power. Hence, Parliament’s POGG power only applies where the “matter” does not fall within one of the heads of powers assigned exclusively to the provinces.
National Concern Doctrine
History and Scope
The Majority outlined the judicial history of the national concern doctrine, highlighting Supreme Court findings that limited Parliament’s encroachment on provincial jurisdiction.
The central underlying premise of the national concern doctrine is that a “matter” originally of “local” concern within a province may be “transformed” into a national one where it has become “the concern of the Dominion as a whole”. In the Majority’s view, the disagreement about the scope of the doctrine has arisen because of a lack of clarity as to what matters may be “transformed” from a matter of local concern to a matter of concern to the Dominion as a whole.
Section 92(16) grants the provinces the power to make laws in relation to “Generally all Matters of a merely local or private Nature in the Province.” This residuary power is the corollary to Parliament’s residuary power under the introductory words of section 91.
The Majority concluded that only when the “matter” would originally have fallen within the provinces’ residuary power under section 92(16) does the national concern doctrine have any potential application. It rejected the proposition that the national concern doctrine opens the door to the federal government’s appropriating every other head of provincial power under section 92, section 92A or under provincial proprietary rights under section 109.
R v Crown-Zellerbach Canada Ltd,  1 SCR 401 (“Crown-Zellerbach”) and the Test
The Majority then summarized the four-part test set out by the Supreme Court in Crown-Zellerbach:
(a) the national concern doctrine is separate and distinct from the national emergency doctrine of the peace, order and good government power, which is necessarily legislation of a temporary nature;
(b) the national concern doctrine applies to both new matters which did not exist at Confederation and to matters which, although originally matters of a local or private nature in a province, have since, in the absence of a national emergency, become matters of national concern;
(c) for a matter to qualify as a matter of national concern in either sense it must have a singleness, distinctiveness and indivisibility that clearly distinguishes it from matters of provincial concern and a scale of impact on provincial jurisdiction that is reconcilable with the fundamental distribution of legislative power under the Constitution; and
(d) in determining whether a matter has attained the required degree of singleness, distinctiveness and indivisibility that clearly distinguishes it from matters of provincial concern, it is relevant to consider what would be the effect on extra-provincial interests of a provincial failure to deal effectively with the control or regulation of the intra-provincial aspects of the matter.
Characterization of the “Matter” Under the GGPPA
The Majority made note of Canada’s changing positions on defining the “matter” of national concern. It noted that all ten judges in the other References declined to extend the federal government’s powers under the national concern doctrine to GHG emissions generally. The majorities in the Saskatchewan Reference and the Ontario Reference attempted to limit the subject matter in an effort to confine the GGPPA to a realm of constitutional acceptability.
The Majority found that approach fundamentally flawed. Courts have no ability to confine or pre-limit the scope of the GGPPA by such pronouncements while at the same time clearing it constitutionally in its entirety. Validating the GGPPA means that each and every provision in the GGPPA is fully operational. In turn, all exercises of discretion and manners of administration of the GGPPA provided therein are thereby constitutional. Canada would be entitled to claim legitimacy by the Executive — and succeed — for any actions taken under the GGPPA, providing the language of the GGPPA so permits.
The Majority concluded that the “matter” of the GGPPA is regulation of GHG emissions, which was confirmed by examining its purpose, legal, and practical effects.
Classification of the Subject Matter of the GGPPA
The Majority held that the GGPPA did not fall within any of Parliament’s enumerated heads of power under s 91. The only basis on which Canada defended the validity of the GGPPA was under the national concern doctrine.
The Majority found that the regulation of GHG emissions falls squarely under provincial powers. This is shown by the fact the federal “backstop” only comes into effect if the provinces have not implemented carbon pricing or one to the federal government’s satisfaction.
Provincial governments can turn to several heads of power to impose on industries or end users of fuel products in their province a scheme to regulate GHG emissions, including carbon pricing. This includes the Resource Amendment, being section 92A of the Constitution. Under this section, provinces possess the exclusive power to develop and manage their natural resources. That power includes determining the terms and conditions under which industry will exploit those resources in the province.
The Majority wrote that in addition to section 92A, the provinces have proprietary rights under section 109 of the Constitution as owners of their natural resources. These rights extend to regulation of resources after recovery from the ground. Other heads of provincial power include provincial powers over property and civil rights (section 92(13)), local works and undertakings (section 92(10)), and direct taxation (section 92(2)). The GGPPA and its regulations interfere with classes of matters which have invariably been held to come within exclusive provincial jurisdiction.
The Majority found that the provinces’ jurisdiction over the regulation of GHG emissions does not rest on section 92(16), and the national concern doctrine, therefore, could not apply.
Why the National Concern Doctrine Does Not Apply to the GGPPA
The Majority found that even if it was incorrect in its view that the national concern doctrine cannot intrude on provincial jurisdiction under enumerated heads of power outside of s 92(16), it nevertheless concluded that the GGPPA could not be saved under the national concern doctrine.
The “Matter” Fails the Singleness, Distinctiveness and Indivisibility Criteria
The Majority found that the “matter” of this GGPPA is an aggregate of powers — virtually all provincial. The regulation of GHG emissions within a province falls within provincial powers under section 92A, section 109 and a number of heads of power under section 92.
Further, simply because GHG emissions transcend provincial boundaries does not make their regulation an “indivisible” subject matter. In Crown-Zellerbach, the Supreme Court made it clear that the mere fact a polluting substance crossed a provincial border would not be sufficient to invoke the national concern doctrine. The problem in Crown-Zellerbach that justified adding “marine pollution” as a federal head of power was the inability to detect the source of the pollution. No such problem exists with respect to GHG emissions within a province.
The subject matter of the GGPPA, the regulation of GHG emissions, and all variations on this theme do not meet the requirements of the national concern doctrine for singleness, distinctiveness and indivisibility.
The Majority noted that analysis of “provincial inability” involved two key questions:
(a) “Is the scheme of such a nature that the provinces, acting alone or in concert, would be constitutionally incapable of enacting it?” and
(b) “Would a failure to include one or more of the provinces or localities in the scheme jeopardize the successful operation in other parts of the country?”
The first question goes to “jurisdictional” inability, not risk of inaction. Regarding the second question, inaction alone (a province’s choice not to be included in the scheme), would not suffice. The question is whether that inaction (not participating in the scheme) goes so far as to “jeopardize” the successful operation of the scheme in other provinces. The test cannot be met by an affirmative answer to the simplistic question: “Is there a risk a province might fail to participate in a national scheme?”
The Majority also held that there was no evidence on the record that anything any one province does or does not do regarding the regulation of GHG emissions will cause any measurable harm to any other province now or in the foreseeable future. The atmosphere is affected largely by what is being done or not being done in other countries. Four large countries or groups of countries, the United States, China, India and the European Union, generate, cumulatively, 55.5 percent of the world’s GHG emissions. Canada generates 1.8 percent.
Why the Proposed New Head of Power Is Not Reconcilable with the Division of Powers
The Majority noted that for a “matter” to qualify as a matter of national concern, it must have a scale of impact on provincial jurisdiction that is reconcilable with the fundamental distribution of legislative power under the Constitution. If not, the national concern doctrine cannot be successfully invoked.
The Majority held that the scale of impact was not reconcilable. It interferes with the provinces’ exclusive jurisdiction over the development and management of their natural resources, including the oil and gas sector under sections 92A and 109 of the Constitution. This intrusion effectively deprives the provinces of their right to balance environmental concerns with economic sustainability.
Second, the regulation of GHG emissions intrudes deep into the provinces’ exclusive jurisdiction over property and civil rights. There would be almost no aspect of the daily lives of the citizens of a province that would not be affected and areas into which the federal government could not intrude.
Third, the GGPPA purports to be neutral but has a disproportionate negative impact on certain provinces and their citizens.
Fourth, if minimum national standards for pricing of GHG emissions or any variation on this were permitted, then, on this theory, the federal government could impose minimum national standards on innumerable areas under provincial jurisdiction: roadways, building codes, public transit, home heating and cooling.
Fifth, granting the federal government the new head of power over GHG emissions and any variations on this theme would negatively impact federalism.
Sixth, the final decision of the courts that a newly claimed power of the federal government falls within the national concern doctrine binds everyone in accordance with the Rule of Law. Thus, courts should be slow to judicially expand federal heads of power under the national concern doctrine since this effectively bypasses provinces’ rights and protections under section 38(3) of the Constitution (the right to dissent from a constitutional amendment that derogates from the province’s legislative powers or proprietary rights).
The Majority found Part 1 and 2 of the GGPPA unconstitutional in their entirety.