Greenhouse Gas Emissions – Peace Order and Good Government
In this decision, the SCC majority determined that the Greenhouse Gas Pollution Pricing Act (“GGPPA”), passed by Parliament in 2018, is constitutional.
Part 1 of the GGPPA establishes a fuel charge that applies to producers, distributors, and importers of various types of carbon-based fuel. Part 2 sets out a pricing mechanism for industrial greenhouse gas (“GHG”) emissions by large emissions-intensive industrial facilities.
Saskatchewan, Ontario, and Alberta challenged the constitutionality of the GGPPA on grounds related to federalism. Ontario further argued that the levies imposed by the GGPPA are unconstitutional. Unlike the courts of appeal for Saskatchewan and Ontario, the Court of Appeal of Alberta held that the GGPPA is unconstitutional. The Attorney General of British Columbia, who had intervened in the Court of Appeal of Alberta, the Attorney General of Saskatchewan, and the Attorney General of Ontario appealed as of right to the Court. The reference question before the SCC remained whether the GGPPA is, in whole or in part, unconstitutional.
Analysis – Classification of the GGPPA
In a 6-3 majority decision, the majority found the GGPPA to be constitutional. They noted that global warming causes harm beyond provincial boundaries and that it is a matter of national concern under the “peace, order and good government” clause of the Constitution and was therefore under federal jurisdiction.
National Concern Test
The Court noted that determining whether an issue is of national concern involves a three-step analysis. The matter must be sufficiently important to the country as a whole to deserve and require consideration as a possible matter of concern. Second, the matter must have a singleness, distinctiveness, and indivisibility. Third, it must be shown that the proposed matter has a scale of impact on provincial jurisdiction that is reconcilable with the division of powers.
With regard to the first step, the SCC noted that the issue was not the regulation of GHG emissions generally, but determining whether the establishment of minimum national standards of GHG price stringency to reduce GHG emissions is a matter of national concern.
All parties agreed that climate change is an existential challenge. They agreed that it poses a threat of the highest order to the country and to the world. The SCC majority found that this, as well as the history of efforts to address climate change in Canada and the fact that broad consensus exists among international expert bodies such as the World Bank and the Organization for Economic Cooperation and Development, that carbon pricing is a critical measure for the reduction of GHG emissions, shows that carbon pricing is integral to reducing GHG emissions and, more importantly, that establishing a minimum national standard of GHG price stringency to reduce GHG emissions is of concern to Canada as a whole.
With regard to the second part of the test, the SCC must also ensure that the principles of federalism are upheld. To prevent federal overreach, jurisdiction based on the national concern doctrine should be found to exist only over a specific and identifiable matter that is qualitatively different from matters of provincial concern. The second principle to be considered at this stage of the inquiry is that federal jurisdiction should be found to exist only where the evidence establishes the provincial inability to deal with the matter.
The SCC emphasized that these gases are a specific and precisely identifiable type of pollutant. It further found that GHG emissions are predominantly extra-provincial and international in their character and implications. It found that the type of pollutant covered by the matter at issue is identifiable and qualitatively different from matters of provincial concern and that the regulatory mechanism of GHG pricing is a specific and limited one. GHG pricing does not amount to the regulation of GHG emissions generally.
The SCC majority noted the inability of the provinces to establish a binding outcome-based minimum legal standard — a national GHG pricing floor — that applies in all provinces and territories at all times. While the provinces could cooperatively establish a uniform pricing scheme, any province could choose to withdraw at any time. While a cooperative scheme could continue to exist if one province was not included or withdrew, this would threaten the scheme’s success. The SCC emphasized that the issue was the success, not merely the existence of such a scheme.
The SCC noted that the principles underpinning the singleness, distinctiveness, and indivisibility inquiry clearly support a finding that the federal government has jurisdiction over the matter of establishing minimum national standards of GHG price stringency to reduce GHG emissions.
The third part of the test requires an analysis to determine whether the proposed matter of national concern is reconcilable with the division of powers. The SCC majority found that the impact of the GGPPA on the jurisdiction of the provinces was limited. While there is an impact on provinces’ freedom to legislate, this impact was determined to be narrow, specific, and limited to the pricing of GHG emissions. The federal government established a nationwide price on carbon pollution but left the provinces with the power and freedom to regulate GHG emissions. Canada would not interfere as long as the provinces meet the federal government’s outcome-based targets.
The SCC majority accordingly found that the federal government did not exceed its jurisdiction with the GGPPA. The GGPPA is not unconstitutional on the grounds of federalism.
Validity of the Levies as Regulatory Charges
Ontario argued that fuel and excess emission charges imposed by the GGPPA are not sufficiently tied to the regulatory scheme to be considered constitutionally valid regulatory charges. While the regulatory quality of the scheme created by the GGPPA was not an issue, Ontario was concerned with the connection between the levy and the regulatory scheme, as the GGPPA does not require that the revenues collected under Parts 1 and 2 are expended in a way connected to the regulatory purpose of the GGPPA.
The SCC majority found that regulatory charges need not reflect the cost of the scheme. The amount of a regulatory charge whose purpose is to alter behavior is set at a level designed to proscribe, prohibit, or lend preference to a behavior. It determined that the required connection with the scheme will exist where the charges themselves have a regulatory purpose. Where, as in the instant case, the charge itself is a regulatory mechanism that promotes compliance with the scheme or furthers its objective, the nexus between the scheme and the levy inheres in the charge itself.
The SCC majority found that the levies are constitutionally valid regulatory charges.