Saskatchewan Court of Appeal Upholds Constitutionality of Federal Carbon Pricing Regime

May 3, 2019

 

The Court of Appeal for Saskatchewan (the Court) released its decision at 12:00PM Saskatchewan time today (May 3, 2019) in the first of at least three groundbreaking court cases in which provinces are challenging the constitutionality of the federal carbon pricing regime.

A 3-2 majority of the Court concluded that the federal Greenhouse Gas Pollution Pricing Act (the Act) is not unconstitutional either in whole or in part. However, the Court rejected aspects of each of the Attorney General of Saskatchewan's and the Attorney General of Canada's arguments to reach that decision.  

Specifically, Chief Justice Richards writing for the majority of the Court found that:

 

  • The subject "matter" of the Act is "the establishment of minimum national standards of price stringency for GHG emissions" (largely following submissions of the Attorney General of British Columbia, and consistent with the submissions of the International Emissions Trading Association) — and not "GHG emissions" or "cumulative GHG emissions".  

  • The "cumulative dimensions" approach "must be rejected because it would allow Parliament to intrude so deeply into areas of provincial authority that the balance of federalism would be upset." Further, the Court found, it would "hamper and limit provincial efforts to deal with GHG emissions." 

  • In contrast, the narrowly construed matter of "minimum national standards of price stringency for GHG emissions" was constitutionally valid under Parliament's Peace, Order and Good Government (POGG) power (national concern branch). 

  • Once found to be valid under the POGG power, the narrow matter of "minimum national standards of price stringency for GHG emissions" becomes one of exclusive federal jurisdiction.  

  • Part 1 of the Act (the backstop carbon price on fuels) was held to be a valid regulatory charge and not an invalid tax.

  • Part 2 of the Act (the OBPS) was also held to be a valid regulatory charge and not an invalid tax

  • The principle of "federalism" is an interpretive tool in the division of powers constitutional analysis  - and not a freestanding constitutional imperative that somehow independently trumps the federal/provincial division of powers.

  • There is a distinction between the applicability of the Act to provincial Crown corporations (SaskPower and SaskEnergy) and itsconstitutional validity, a point that is likely to be relevant in the forthcoming judicial review of the Act by Manitoba. 

 

The minority of the Court differed in reasoning and outcome. Justices Ottenbreit and Caldwell found that:

 

  • The characterization of the "matter", construed broadly, was "GHG emissions" and the narrower approach of the majority was simply a "clever and suspect" and "sanitized and unduly-narrow" attempt to regulate provincial GHGs.

  • The matter construed as such, is best characterized as a tax. 

  • Part 1 of the Act (the backstop carbon price on fuels) was a tax, and not a regulatory charge, and was not constitutionally valid given its broad application to matters of provincial jurisdiction.

  • Part 2 of the Act (the OBPS) was, in contrast, a valid regulatory charge.  

 

This first major decision is expected to soon be followed by a decision of the Court of Appeal for Ontario, which  has reserved judgment in Ontario's recently completed constitutional challenge of the Act.  Manitoba has also recently filed an application for judicial review on similar grounds in the Federal Court of Canada. The new Alberta government, sworn in on April 30, 2019, is anticipated to launch its own constitutional challenge.

All of these cases are widely anticipated to be appealed to the Supreme Court of Canada.

 

Please contact Lisa DeMarco at lisa@demarcoallan.com should you wish to discuss the contents of this bulletin.

 

 

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