SCC Decision Ends Looming Uncertainty Over Canada's Jurisdiction to Enact Carbon Pricing Legislation

The Supreme Court of Canada (the Court) yesterday released its landmark 6-3 decision upholding the constitutionality of the Greenhouse Gas Pollution Pricing Act(GGPPA or the Act).


As promised, this bulletin provides the particulars for our upcoming webinar, co-hosted with the International Emissions Trading Association (IETA), and our detailed summary of the decision.


WEBINAR: The Supreme Court of Canada’s Decision on Carbon Pricing: Outcomes and Implications Date: Tuesday, March 30, 2021 Time: 3:00-4:00pm EDT Space is limited. Please click here to register.


DECISION SUMMARY:


Majority Reasons


The majority reasons were delivered by Chief Justice Wagner, who was joined by Justices Abella, Moldaver, Karakatsanis, Martin, and Kasirer. This may be one of the final and most impactful decisions of Justice Abella, who has announced her retirement effective July 1, 2021.


The Chief Justice confirmed and applied the well-established two-stage approach to the division of powers analysis under Canadian constitutional law to uphold the validity of the Act. In doing so he also elucidated where the majority of the Alberta Court of Appeal erred in its analysis.


A. Characterization of the GGPPA


First, the Court determined that the “pith and substance”, or true subject matter, of the GGPPA is “establishing minimum national standards of GHG price stringency to reduce GHG emissions” (para 80). The Court confirmed that each and all of the title, preamble, Hansard, purpose, effect, implications, and the integral means by which the purpose is implemented may all be relevant to the characterization of the matter. The Chief Justice also confirmed that the matter must be construed 'precisely', which is distinct from 'narrowly'.


B. Classification of the GGPPA


The Chief Justice then went on to classify the matter so construed as validly falling within a conservative construction of the federal Parliament's residual peace, order, and good government (POGG) power under the national concern doctrine. In doing so, he provided long-awaited Supreme Court clarifications on the national concern test, the “plenary” or exhaustive nature of the POGG power, and the application of the double aspect doctrine to a matter of national concern. The Court confirmed that the national concern test is a three-step process involving: (1) the threshold question, (2) the singleness, distinctiveness and indivisibility analysis, and (3) the scale of impact analysis (para 132).


1. Threshold Question


The threshold question is whether the matter is of sufficient concern to Canada as a whole to warrant consideration under the national concern doctrine. The Chief Justice clarified that the newness of a matter is not dispositive and that, contrary to the Alberta Court of Appeal’s finding, a matter that was once within a provincial power could evolve into a matter of national concern, with requisite protections against federal encroachment into provincial powers.


The Chief Justice found that the matter of minimum national standards of GHG price stringency to reduce GHG emissions met the threshold of being a matter of national concern. In doing so, he strongly endorsed carbon pricing as an essential legislative tool. Specifically, he found that “[t]here is broad consensus among expert international bodies […] that carbon pricing is a critical measure for the reduction of GHG emissions” (para 170) and that the matter of the GGPPA “is critical to our response to an existential threat to human life in Canada and around the world” (para 171). This is one of the strongest judicial pronouncements on climate change and is certain to be applied in other jurisdictions.


2. 'Singleness, Distinctiveness and Indivisibility'


The matter must have a 'singleness, distinctiveness and indivisibility' that clearly distinguishes it from matters of provincial concern in order for it to be classified as validly enacted under the national concern branch of the POGG power (para 145). Provincial inability is relevant to establishing the distinctiveness of the matter, and the Court relied heavily on trade and commerce jurisprudence to determine that both the impacts on national carbon pricing if one province does not participate and the negative carbon leakage impacts on participating provinces, supported provincial inability.


The Chief Justice concluded that the matter of the GGPPA is “specific, identifiable and qualitatively different from any provincial matters”, citing the harmful effects of GHGs and their predominantly extraprovincial and international character and implications, as well as the specific and limited nature of GHG pricing. The Chief Justice also concluded that “federal jurisdiction is necessitated by the provinces’ inability to address the matter as a whole through cooperation, which exposes each province to grave harm that it is unable to prevent” (para 192).


3. Scale of Impact


The matter must also have a scale of impact on provincial jurisdiction that is reconcilable with the fundamental distribution of legislative powers under the Constitution. The Chief Justice concluded that the GGPPA’s impact on the provinces’ freedom to legislate, and on areas of provincial life that fall under provincial heads of power will be limited and will ultimately be outweighed by the impact on interests that would be affected if Parliament were unable to constitutionally address this matter at a national level (para 196).


Clarifications


The Court clarified that POGG national concern powers, while plenary, are not exhaustive. Just like any other head of federal power, provinces may enact similar carbon pricing matters under provincial constitutional powers. In the event of a conflict, the federal scheme will prevail. This should provide some certainty to participants in the provincial trading schemes.


The Court clarified that the double aspect doctrine may also apply to a matter of national concern. The double aspect doctrine recognizes that the same fact situation can be regulated from different perspectives, one of which may relate to a provincial power and the other to a federal power. The Chief Justice stated that the double aspect doctrine is inevitably invoked where “Canada asserts jurisdiction over a matter that involves a minimum national standard imposed by legislation that operates as a backstop” (para 129). Canada and the provinces are consequently both free to legislate by imposing GHG pricing, but the federal law is paramount. It is therefore clear that the federal GHG pricing scheme and provincial GHG pricing schemes can operate simultaneously, acknowledging that, in the event of a conflict, the federal scheme will prevail as paramount.


Dissenting Reasons


The means used in the GGPPA to implement carbon pricing in Canada evoked three very strong dissents that would have struck down the GGPPA on the basis of the breadth of discretion afforded to the federal Cabinet, the supervisory jurisdiction afforded to the federal government, and the application of the POGG jurisdiction under the national concern test.


Dissenting in part, Justice Côté agreed with the majority's formulation of the national concern test but found that the breadth of the discretion conferred by the GGPPA, and certain of its 'Henry VIII clauses' that delegate legislative amendments to Cabinet, violate the principles of parliamentary sovereignty, the rule of law, and the separation of powers (para 294).


In his dissent, Justice Brown determined that the matter of the GGPPA is broadly defined as the reduction of GHGs and found that the GGPPA was unconstitutional in its entirety. He found that the reduction of GHGs falls squarely within provincial jurisdiction over property and civil rights and matters of a merely local nature and also failed to meet the requirements of a valid national concern under POGG (para 386). Justice Brown expressed deep concern with the supervisory jurisdiction that the majority's reasons may afford to the federal government in a manner inconsistent with federalism.


In his dissent, Justice Rowe characterized the approach of the Attorney General of Canada as “a troubling misinterpretation of and departure from Crown Zellerbach and the doctrine that preceded it” (para 616). Justice Rowe concluded that Canada lacks the authority to enact the GGPPA, and any corresponding regulations, under the POGG power, which he viewed as a “residual and circumscribed power of last resort” (para 477).


Conclusion


In summary, the decision ends the looming uncertainty over Canada’s jurisdiction to enact carbon pricing legislation. It provides Canadian business with the much-needed certainty to move forward with long-term planning and does so in a manner that is certain to be a precedent for other jurisdictions around the world.


This bulletin was authored by Lisa (Elisabeth) DeMarco (lisa@resilientllp.com), Jonathan McGillivray, and Daniel Vollmer.

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