Ontario Court of Appeal Upholds Constitutionality of Federal Carbon Pricing Regime

Photo by Jonathan McGillivray

The Ontario Court of Appeal (the Court) has released its 93-page decision in Ontario’s constitutional reference regarding the federal Greenhouse Gas Pollution Pricing Act (the Act). At noon today (June 28, 2019), the Court released the groundbreaking decision upholding the constitutionality of the Act. This decision is in the second in four provincial cases challenging the constitutionality of the Act and the federal carbon pricing regime. The decision is significant both nationally and internationally as it sets out a strong factual record relating to the pressing nature of climate change, and the Canadian constitutional grounds for valid national legislative action in relation to it.

A 4-1 majority of the Court concluded that the federal Act is constitutional under Parliament’s power over matters of national concern to the peace, order, and good government (POGG) of Canada. Chief Justice Strathy (with whom Justice MacPherson and Justice Sharpe agreed) rejected both Canada’s and Ontario’s characterization of ‘the matter’ of the Act, and adopted the narrower view that the Act relates to “establishing minimum national standards to reduce greenhouse gas emissions.” In doing so, the Court allowed greater scope for both the provincial and federal governments to implement meaningful climate change legislation. The Court upheld both the large emitters output-based performance system (OBPS) (Part 2 of the Act), and the fuel levies (Part 1 of the Act), which it found to be a valid regulatory charge and not a tax.

This characterization of the matter is broader than that adopted by the Saskatchewan Court of Appeal (Saskatchewan Court). Associate Chief Justice Hoy — concurring on the outcome of the majority, but differing on the characterization — found that purpose and effect of the Act is closer to the Saskatchewan Court’s characterization. She characterized ‘the matter’ as “establishing minimum national GHG emissions pricing standards to reduce GHG emissions.” All four of the majority judges allowed for the Act, as narrowly characterized, to be upheld under the national concern branch of the POGG power.

Justice Huscroft — in dissent on both the outcome and reasoning — found that the Act is unconstitutional under the POGG power, but that the federal Parliament has other powers under which to enact valid GHG pricing legislation. He found that the Act should not be characterized on the basis of the means to implement the Act instead of its dominant purpose, which he views is “regulating GHG emissions”.

Both Associate Chief Justice Hoy and Justice Huscroft are aligned on the view that classifying a matter under the POGG national concern branch gives the federal Parliament “exclusive jurisdiction of a plenary nature to legislate in relation to that matter, including its intra-provincial aspects”. Narrow characterization is therefore necessary to ensure that a new and permanent federal jurisdiction does not impinge on the balance of federal and provincial powers set out in the Constitution.

Key elements of the decision include the Court’s findings that:

  • Climate change broadly is a matter of national and international concern.

  • The Act puts a price on carbon pollution in order to reduce GHG emissions and to encourage innovation and the use of clean technologies in two ways. First, it places a “regulatory charge on carbon-based fuels.” Second, it establishes a “regulatory trading system applicable to large industrial emitters of GHGs” or the OBPS. It includes limits on emissions, a “credit” to those who operate within their limit, and a “charge” on those who exceed it (para 34).

  • Neither Ontario’s nor Canada’s proposed characterization of the matter of the Act was persuasive. Ontario’s description was found to be too broad, and Canada’s characterization as “cumulative GHG emissions” was too vague (para 74).

  • The Act does not appear to be in conflict with any existing Ontario or other provincial legislation, or measures that provinces may take to reduce GHG emissions and mitigate climate change. The Act leaves generous room for provincial jurisdiction in relation to climate change and simply implements minimum national standards for greenhouse gas emissions, which the provinces are constitutionally unable to do (para 137).

Next Steps

The Attorney General of Saskatchewan has appealed the Saskatchewan Court’s May 3, 2019 decision, also upholding the constitutionality of the Act, to the Supreme Court of Canada. The Alberta, Ontario, British Columbia, and Quebec Attorneys General have also intervened in that Supreme Court challenge and all provinces are anticipated to participate. The Supreme Court is tentatively set to hear the matter on December 5, 2019. We anticipate that today’s Ontario Court of Appeal Decision will also be appealed to the Supreme Court and heard with the Saskatchewan appeal.

Alberta recently (June 20, 2019) launched its constitutional challenge of the Act in the Alberta Court of Appeal. It is unclear whether it will proceed with that process in light of the Saskatchewan and Ontario decisions and the impending Supreme Court appeal, which will be determinative on the issue. Manitoba has also challenged the constitutionality and the application of the Act, through an application for judicial review. The Federal Court of Canada is likely to hear the matter on the “applicability” of the Act, but it is unclear if and how the constitutionality of the Act will be considered in this proceeding in light of the pending Supreme Court hearing. Currently, the Manitoba judicial review is unlikely to proceed until January 2020 at the earliest.

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

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