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Ottawa’s carbon tax is constitutional ruled by Supreme Court.

Posted in Canada, Featured

Published on March 25, 2021 with No Comments

In 6-3 decision, top court finds federal government can impose nationwide pricing standards

In a 6-3 decision, the Supreme Court of Canada has ruled the federal Liberal government’s carbon pricing regime is constitutional — a major decision that allows Ottawa to push ahead with its ambitious plan to ensure every province and territory has a price on carbon to curb greenhouse gas emissions.

Some provinces, notably Alberta, Ontario and Saskatchewan, have forcefully opposed the carbon tax, arguing natural resources are exclusively provincial jurisdiction under the constitution.

However, Chief Justice Richard Wagner, writing for the majority, said the federal government is free to impose minimum pricing standards because the threat of climate change is so great that it demands a co-ordinated national approach.

He agreed with the federal government that climate change is a truly pressing matter of national concern and it’s constitutionally permissible for Ottawa to take the lead on an issue that crosses provincial boundaries.

“Climate change is real. It is caused by greenhouse gas emissions resulting from human activities, and it poses a grave threat to humanity’s future,” Wagner wrote.

Wagner found that Ottawa can act under the “peace, order and good government,” or POGG, clause of the constitution, which gives the federal government authority to enact laws to deal with issues that concern the entire country.

The POGG clause

Ottawa has tried to justify constitutionally questionable laws by citing the POGG clause in the past. It has succeeded in few of those cases because the Supreme Court is generally deferential to the division of powers set out in sections 91 and 92 of the Constitution Act, 1867. But in this case, Wagner said invoking POGG is justified.

The POGG doctrine applies when there is a “provincial inability to deal with the matter” and where the “failure of one or more provinces to co-operate would prevent the other provinces from successfully addressing it.”

Thus, Wagner said, if Canada’s Parliament was blocked from addressing emissions in any way, “irreversible harm would be felt across the country,” especially in communities and regions most vulnerable to the effects of global warming.

He said a patchwork approach where some provinces can avoid imposing a price on carbon would hinder Canada’s collective fight against climate change. While Ottawa’s legislation does tread on provincial jurisdiction as set out by the Constitution Act, 1867, the threat of climate change “justifies the limited constitutional impact.”

“The evidence clearly shows that establishing minimum national standards of GHG price stringency to reduce GHG emissions is of concern for Canada as a whole. This matter is critical to our response to an existential threat to human life,” Wagner wrote.

“As a result, it readily passes the threshold test and warrants consideration as a possible matter of national concern.”

Emissions are ‘extraprovincial:’ Wagner

He said, because emissions by their very nature are “extraprovincial” and diffusive, there’s a role for Ottawa in regulation to ensure each jurisdiction is contributing to the national effort.

“A failure to include one province in the scheme would jeopardize its success in the rest of Canada,” Wagner wrote. “What is more, any province’s refusal to implement a sufficiently stringent GHG pricing mechanism could undermine GHG pricing everywhere in Canada.” 

The federal government’s legislation, the Greenhouse Gas Pollution Pricing Act, doesn’t explicitly dictate how provinces should price carbon emissions, only that they must do something, Wagner said.

To reduce emissions and help Canada meet its Paris climate accord commitments, the federal government passed legislation in 2018 that demands all provinces levy some sort of “price on pollution.”

As part of the act, Ottawa established national pricing standards designed to curb the use of fossil fuels. The tax, which is $40 a tonne this year, is set to rise dramatically in the decade to come as the federal government pursues an ambitious, green-friendly economic transition.

While encouraging provinces to craft their own plans, Ottawa said it would slap a carbon tax on fuels in provinces and territories that failed to establish adequate emissions pricing regimes.

The federal tax, the so-called “backstop,” only applies if a province refuses to act. 

“Emitting provinces retain the ability to legislate, without any federal supervision, in relation to all methods of regulating GHG emissions that do not involve pricing,” Wagner said. “They are free to design any GHG pricing system they choose as long as they meet the federal government’s outcome-based targets.”

Lengthy dissenting opinions

Justices Russell Brown and Malcolm Rowe both strongly disagreed with the majority’s decision, writing lengthy dissenting opinions in response to Wagner.

Brown said the law’s subject matter “falls squarely within provincial jurisdiction.”

“This is a model of federalism that rejects our Constitution and rewrites the rules of Confederation,” Brown wrote.

“Its implications go far beyond the [carbon tax] act, opening the door to federal intrusion — by way of the imposition of national standards — into all areas of provincial jurisdiction, including intra-provincial trade and commerce, health, and the management of natural resources. It is bound to lead to serious tensions in the federation.”

Rowe said that the POGG or national concern doctrine should be a “residual and circumscribed power of last resort.”

 

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