The Supreme Court of Canada released its decision1 on the constitutionality of the Greenhouse Gas Pollution Pricing Act2 (the "GGPPA" or the "Act") on March 25, 2021, marking an end to the multi-year and multi-province litigation.
The federal government enacted the GGPPA in 2018 and provincial governments quickly stepped forward to challenge its validity in the courts. The reference began in the Court of Appeal of Saskatchewan and was heard on February 13 and 14, 2019.3 Subsequent references were brought in two more provinces, Ontario4 and Alberta.5 The appeal of all three Court of Appeal decisions was heard by the Supreme Court on September 22 and 23, 2020.
The Supreme Court, with a divided 6-3 bench, found the Act constitutional. One justice dissented in part, finding that the federal government could legislate in the area but that the Act as currently formulated is too broad. The other two dissenters found, each on their own reasons, that the Act was unconstitutional as a whole.6
Below we provide a brief description of the Act, a summary of the majority decision, and some key highlights of the impacts of this decision moving forward.
In terms of basic structure, the GGPPA is made up of four parts and four schedules.7 These parts together form a minimum national standard for the pricing of greenhouse gas ("GHG") emissions. This standard applies as a "backstop", meaning that it will only impact provinces whose own carbon pricing strategy is found to be insufficiently stringent by the federal government.
Parts 1 and 2 set out the carbon pricing strategy and fuel charges for two distinct groups. Part 1 applies to "producers, distributors and importers of various types of carbon-based fuel". The Governor in Council, by regulation, will determine whether any particular fuel incurs a charge, the amount of the charge, and whether the Part as a whole applies to any particular province.8
Part 2 applies to large emissions-intensive industrial facilities (called "covered facilities in the Act") and establishes an output-based pricing system. This Part directly prices GHG emissions by these covered facilities but only to the extent, if any, that they exceed applicable efficiency standards.9
Part 3 authorizes the enactment of regulations "providing for the application of provincial law concerning GHG emissions to federal works and undertakings, federal land and Indigenous land located in that province, as well as to internal waters located in or contiguous with the province."10 Finally, Part 4 specifies that the federal Minister of the Environment must prepare an annual report and table it in Parliament every year.
The Reference addressed the constitutionality of the first two parts of the Act and the four schedules as well as the levies imposed by the Act.
The Majority Decision
In brief, the majority11 held that the federal government has jurisdiction to enact the GGPPA as a matter of national concern under the peace, order and good government ("POGG") power granted to it in section 91 of the Constitution Act, 1867.12 Therefore, the Supreme Court concluded that the GGPPA is constitutional and upheld the Act in its entirety.
The Court applied the "well-established two-stage analytical approach" whereby a court characterizes the subject matter or "pith and substance" of the legislation, then classifies this pith and substance with reference to the provincial and federal heads of power delineated in the Constitution.13 The Court also addressed in detail the national concern doctrine and its associated test.
The First Stage - Pith and Substance
A fair portion of the decision focused on the appropriate application of the "pith and substance" test, something that had been applied quite differently in the three provincial Courts of Appeal. The Supreme Court held that the impugned law should be defined as "precisely" as possible but not necessarily as "narrowly" as possible: "the pith and substance of a challenged statute or provision should capture the law's essential character in terms that are as precise as the law will allow".14
Further, the "means" used by the legislation, that is the particular way that it intends to achieve a result, may be justifiably included in the analysis where the means are a central feature of the statute.15 Finally, the pith and substance of the legislation should be determined without reference to the Constitutional heads of power; the two stages of the division of powers analysis must be kept distinct.16
The Court held that the true subject matter of the GGPPA is "establishing minimum national standards of GHG price stringency to reduce GHG emissions"17; not a broader mandate of mitigating climate change. The Court held that the wording of the Act, federal parliament commentary, and the legal effects of the Act confirm its focus on national GHG pricing and its minimum or backstop nature.
Importantly, the Court held that the Act does not bar certain business or individual activities or tell industry how to operate to reduce GHG emissions. Instead, the Act simply requires persons to pay a price if they engage in certain activities that result in GHG emissions.18
The Second Stage - National Concern Doctrine
In this portion of the analysis, the Court focused on the application of the "well-established but rarely applied"19 national concern doctrine under the federal POGG powers. The Supreme Court took this opportunity to clarify the application of the doctrine and the impact of finding a matter to be of national concern, before turning to the applicable test.
In particular, the Court held that a matter that falls under the POGG power cannot come within the classes of subjects set out in the heads of power under section 91 or section 92 of the Constitution.20 Importantly, the "effect of finding that a matter is one of national concern is permanent"21 and confers exclusive jurisdiction over that matter on the federal government.22 Therefore, the Supreme Court noted that such a finding must be approached with extreme caution.
The Court also held that the "double aspect doctrine", which allows both the provincial and federal governments to regulate certain factual circumstances where there are legitimate provincial and federal powers at play, can apply to situations where the federal government is legislating under the national concern doctrine.23 While not expressly described as such, this appears to be a shift from prior jurisprudence that applied the double aspect doctrine to legislation of the same "matter" to that of the same "factual circumstance".
The Court held that this is particularly the case with "backstop legislation", like the GGPPA, where the legislation operates as a minimum national standard and the provinces can elect to legislate more stringently. In that situation, the federal law is paramount, but both the provinces and the federal government can pass applicable legislation.24
The national concern doctrine focuses on whether the "matter" of the statute is of national concern. This matter need not be "historically new" (such as the advent of a new technology not contemplated in the Constitution), but could be "new" in the sense that our understanding of that subject matter has shifted to create a new inherently national character.
Ultimately, the Court turned to the three-part national concern doctrine test:
At the threshold step, Canada must adduce evidence to satisfy the court that the matter is of sufficient concern to Canada as a whole to warrant consideration in accordance with the national concern doctrine.25
[Second,] the matter "must have a singleness, distinctiveness and indivisibility that clearly distinguishes it from matters of provincial concern".26
At the final step of the national concern test, Canada must show that the proposed matter has "a scale of impact on provincial jurisdiction that is reconcilable with the fundamental distribution of legislative power under the Constitution".27
The Court held that all three part of the national concern doctrinal test were met in the case of the GGPPA.
First, for the threshold question of national importance, the held that "establishing minimum national standards of GHG price stringency to reduce GHG emissions is of concern to Canada as a whole [and is] is critical to our response to an existential threat to human life in Canada and around the world." The Court therefore concluded that the matter readily passed the threshold test.
The "singleness, distinctiveness and indivisibility" criterion, itself has multiple applicable principles:
- the "matter" must be qualitatively different from matters of provincial concern;
- the provinces jointly or severally must be constitutionally incapable of enacting the legislation and the failure to include one or more provinces or localities in a legislative scheme would jeopardize the successful operation of the scheme in other parts of the country; and
- a province's failure to deal with the matter must have grave extraprovincial consequences.28
The Court held that GHG emissions are "predominantly extraprovincial and international in their character and implications".29 It also found that the provinces are constitutionally incapable of establishing minimum national standards of GHG price stringency30; a failure to include one of the provinces would jeopardize the success of the scheme in other provinces31; and that a failure by one province to participate would have grave climate change impacts on extraprovincial interests.32
And third, while the Court recognized that classifying this subject matter as a matter of national concern would impact on provincial jurisdiction, it held that such impacts are qualified and limited33 because:
- the "subject matter" is limited to one narrow and specific regulatory mechanism, pricing of GHG emissions, and the GGPPA acts only as a backstop;34
- there is a limited impact on matters that would usually fall under provincial heads of power;35 and
- the irreversible consequences of climate change justify these intrusions.36
Thus, the majority held that the national concern test had been met and the GGPPA is a constitutionally valid exercise of the POGG power.
Constitutionality of the Regulatory Charges
Finally, the Court noted that the charges imposed by the GGPPA are constitutionally valid "regulatory charges", not taxes.
The Court held that a two-step approach to this issue should be applied. First, a court must identify the existence of a relevant regulatory scheme. Second, if such a scheme exists, there must be a relationship between the charge and the scheme itself.37
Importantly, the Court held that the charges could be set at a level designed to influence a behaviour and were not limited to the recovery of the costs of the regulatory scheme. Further, the revenues collected are not required to be used to further the purposes of the regulatory scheme.38
The practical and immediate consequence of the decision is that the GGPPA is constitutional in its entirety and is enforceable across the country.
There are, however, many more impacts of this decision on constitutional law and the division of powers in Canada.
One particular concern raised by some of the provinces and highlighted in Justice Brown's dissenting decision is the potential for an influx of federal backstop, or minimum standards, legislation in other areas of provincial jurisdiction.
The majority decision urges that this concern is "entirely misplaced" and that nothing about its ultimate conclusion flowed from that fact that the Act involves a minimum national standard.39 This statement feels less than convincing when the phrases "minimum national standard" and "backstop" were used almost 70 times in the majority decision alone.40 Clearly this was an extremely important feature of the Act in the division of powers analysis.
At the very least, the "backstop nature" of the legislation reduced the impact on provincial jurisdiction in the majority's eyes and also contributed to the "matter" of the legislation being qualitatively different than matters of provincial concern.
The clear statement that subject matter need not be "historically new" to fall under the national concern doctrine also opens up the possibilities for future matters falling into federal jurisdiction under the national concern doctrine. There are many areas of our lives (arguably most areas) that have become substantially more interprovincial and international in nature over the previous decades. To what extent subject matter needs to have been "transformed" to be of broader application will likely be a future area of dispute.
At a minimum, we can likely all agree that the impact of this decision, on Canada's climate policies and on our broader legal system, will be felt many years to come.
1 Reference re Greenhouse Gas Pollution Pricing Act, 2021 SCC 11 [SCC Decision].
2 SC 2018, c 12, s 186 [GGPPA].
3 Reference re Greenhouse Gas Pollution Pricing Act, 2019 SKCA 40. The Saskatchewan Court of Appeal found the Act constitutional.
4 Reference re Greenhouse Gas Pollution Pricing Act, 2019 ONCA 544. The Ontario Court of Appeal found the Act constitutional.
5 Reference re Greenhouse Gas Pollution Pricing Act, 2020 ABCA 74. The Alberta Court of Appeal found the Act unconstitutional.
6 Justice Brown held that the GGPPA's subject matter falls squarely within provincial jurisdiction. He held that the fact that the Act itself contemplates the provincial governments being able to enact the same scheme is fatal to the federal exercise of power under the residual authority of the POGG power.
Justice Rowe held that the national concern power is a residual power of last resort and can only apply to matters not coming with any enumerated head of power. Further, "the matter must be 'distinct' from provincial matters and must be incapable of division between both orders of government such that it must be entrusted solely to Parliament" (supra note 1 at para 539 (emphasis in original)). Justice Rowe held that the GGPPA does not meet this test and is therefore unconstitutional.
7 GGPPA, supra note 2.
8 Ibid, s 166.
9 SCC Decision, supra note 1 at para 38.
10 Ibid at para 26.
11 Per Chief Justice Wagner and justices Abella, Moldaver, Karakatsanis, Martin and Kasirer.
12 (UK), 30 & 31 Vict, c 3, s 91, reprinted in RSC 1985, Appendix II, No 5.
13 SCC Decision, supra note 1 at para 47.
14 Ibid at para 52.
15 Ibid at paras 53, 55.
16 Ibid at para 56.
17 Ibid at para 57.
18 Ibid at para 71.
19 Ibid at para 4.
20 Ibid at para 115.
21 Ibid at para 90.
22 Ibid at para 120.
23 Ibid at para 126.
24 Ibid at para 129.
25> Ibid at para 144.
26 Ibid at para 145, citing R v Crown Zellerbach Canada Ltd,  1 SCR 401 at 432.
27 SCC Decision, ibid at para 160.
28 Ibid at para 146-53.
29 Ibid at para 173.
30 Ibid at para 182.
31 Ibid at para 183.
32 Ibid at para 187.
33 Ibid at para 205.
34 Ibid at para 199.
35 Ibid at para 201.
36 Ibid at para 206.
37 Ibid at para 213.
38 Ibid at paras 212-19.
39 Ibid at para 208.
40 We counted 45 uses of the term "minimum national standards" and 23 uses of the term "backstop" (not counting those terms inclusion in titles of sources cited).
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.