Provinces are now left with less room to oppose the federal government's carbon pricing measures after a recent challenge from Manitoba was rejected in a Federal Court ruling that held that the federal government's fuel charge backstop on the province was valid because Manitoba's own regime was not "stringent" enough.
Earlier this year, in response to other provincial governments' lawsuits in response to the federal Greenhouse Gas Pollution Pricing Act (GHPPA), the Supreme Court of Canada (SCC) ruled that the GHPPA was constitutional. While the government can backstop on regimes they deem not "stringent" enough under the GHPPA, the Financial Post and LegalWriter.net report that "the SCC allowed that federal decisions assessing stringency were open to judicial review to determine whether they were consistent with the purpose of the legislation."
"Because the act does not define 'stringency', it leaves open the question of whether an assessment of stringency requires consideration only of the unit price or of the overall impact of a provincial scheme in terms of reducing GHGs as well," said Dennis Mahony, head of Torys' Environmental, Health and Safety practice and co-chair of the firm's interdisciplinary Climate Change and Emissions Trading practice,.
In the end, the Federal Court's decision in the latest Manitoba case stated that the standard for evaluating Cabinet's decisions under the GHPPA was reasonable. Canada was able to prove that in this case "stringency" was intended to be interpreted as "carbon pricing that increases incrementally over time".
Environmental, Climate Change and ESG partner Tyson Dyck also commented on the Federal Court's ruling for the Financial Post.
"It's significant that the feds didn't take a cap-and-trade approach, which focuses on results, and instead used a pricing regime where what matters is the price signal," Tyson said.
"If provinces could justify their separate systems by an analysis of results, the price signal could easily get muddled."
When also asked about his thoughts on the case, international arbitration and litigation partner John Terry said that "[Justice Richard Mosley]'s ruling is consistent with courts' disinclination to get into complexities or become courts of science."
He added that "[t]he SCC's ruling upholding the constitutionality of the legislation and this decision means that the feds have a lot of wind in their sails as we move forward on these issues."
"Despite Mosley's deference to Cabinet decisions under the GHPPA, it's important to remember that the SCC justified the legislation's constitutionality under the peace, order and good government (POGG) rubric, which is a very wide power that the courts use rarely," John said.
"But having done so, the courts have historically demonstrated that they won't allow the feds to run amok through the constitutional balance by relying on POGG — especially where, as here, the legislation does impinge on traditional areas of provincial jurisdiction."
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