Climate change and Canadian federalism: previewing the arguments to the Supreme Court of Canada regarding the constitutionality of Parliament’s Greenhouse Gas Pollution Pricing Act

Supreme Court to Hear GGPPA Case

Climate change is coming to the Supreme Court of Canada. As explored in a previous article, Parliament’s introduction of minimum national standards for greenhouse gas emissions under the Greenhouse Gas Pollution Pricing Act (the “GGPPA” or “Act”),¹  has sparked a constitutional debate about the balance of power between the federal and provincial legislatures regarding greenhouse gas emissions. 

On March 24 and 25, 2020,* the Supreme Court will hear arguments from Canada, Ontario, Saskatchewan, and various interveners, as Ontario and Saskatchewan challenge decisions of the Ontario Court of Appeal and Saskatchewan Court of Appeal upholding the constitutionality of the GGPPA.²  A majority of each Court of Appeal found the Act to be constitutional under the national concern branch of the Parliament’s “peace, order and good government” (“POGG”) power, a rarely-invoked federal, constitutional authority. (*Note: following this update’s publication, this hearing was rescheduled to September 22 and 23, 2020.)

In anticipation of the Supreme Court hearing, this Legal update summarizes some of the arguments made by the federal and provincial governments in their written submissions filed with the Court.³ Whereas the author’s previous article in this series looked at substantive issues regarding the GGPPA, this Legal update focuses more on advocacy, examining the strategic decisions of the attorneys general as they attempt to persuade the Supreme Court to accept their government’s position in this landmark case.

Why Does the GGPPA Case Matter?

The stakes are high for future climate policy in Canada. Because the POGG power confers permanent subject-matter jurisdiction on Parliament, this case is about more than just the GGPPA. The Supreme Court’s decision regarding the scope of Parliament’s authority to use the POGG power to legislate on greenhouse gas emissions will impact the direction of Canadian climate policy throughout the twenty-first century.

The stakes are also high from a constitutional perspective. Carbon pricing aside, the clash between the federal and provincial governments over the GGPPA has struck a nerve in Canadian federalism, raising difficult questions about the appropriate scope of Parliament’s power to impose national, minimum-standard legislation upon resistant provinces. This will be the Supreme Court’s first decision regarding the application of the national concern branch of the POGG power since 1988.⁴ Tellingly, both Canada and Ontario ask the Supreme Court to revise and clarify the legal test for the national concern doctrine. 

What is the GGPPA in a Nutshell?

On March 27, 2018, the federal government introduced the GGPPA in Parliament and on June 21, 2018, the Act became law.

Simply put, the GGPPA is federal legislation that prices carbon pollution to reduce greenhouse gas emissions and encourage innovation and clean technologies.⁵ It does so in two ways:

• First, it places a regulatory charge on carbon-based fuels. This charge is imposed on certain fuel producers, distributors and importers and will increase through to 2022.
  
  
• Second, it establishes a regulatory trading system for large industrial emitters known as an Output-Based Pricing System (the “OBPS”). The OBPS includes limits on emissions, a “credit” to those who operate within their limit, and a “charge” on those who exceed it. The OBPS is independent of the fuel charge. 

The GGPPA does not apply to all Canadian provinces. Instead, it serves as a “backstop” in provinces that have not adopted sufficiently stringent carbon pricing mechanisms. In other words, the Act permits provinces to enact laws to reduce greenhouse gas emissions through any legislative framework, provided the federal government decides that the provincial laws satisfy the GGPPA’s minimum national standards.⁶

What is the State of Play for the GGPPA?

Ontario and Saskatchewan challenged the constitutionality of the GGPPA in their respective Courts of Appeal. The resulting decisions are under appeal to the Supreme Court. 

Manitoba and Alberta have challenged the constitutionality of the GGPPA as well. Manitoba brought an application for judicial review in the Federal Court of Canada in April 2019. A hearing date has not been scheduled.⁷ Alberta brought a constitutional reference to the Alberta Court of Appeal in June 2019. The Alberta Court of Appeal released its decision on February 24, 2020.⁸ In contrast to the Saskatchewan and Ontario Courts of Appeal decisions, a majority of the Alberta Court of Appeal found that the GGPPA is not constitutional under the national concern branch of the POGG power. One judge of the Alberta Court of Appeal dissented, holding that the Act is constitutional.⁹

Other provinces have been involved as well, but have not brought separate proceedings. For example, British Columbia and New Brunswick both intervened in the Ontario and Saskatchewan proceedings. British Columbia aligned itself with Canada, arguing in support of the constitutionality of the GGPPA, while New Brunswick agreed with Ontario, arguing that it was unconstitutional.

Who Are the Parties at the Supreme Court?

Canada, Ontario, and Saskatchewan are the main parties.¹⁰ The two appeals are being heard together. Ontario and Saskatchewan have each intervened in the others’ appeal.

Twenty-six other interveners, or coalitions of interveners, have filed written submissions. These interveners include the provinces of Quebec, New Brunswick, Manitoba, British Columbia, Alberta, and a number of non-profit and other advocacy groups.¹¹

What Are the Arguments at the Supreme Court?

The parties have filed factums outlining their arguments on appeal. The factums are more than mere previews; they are detailed briefs, carefully drafted to summarize the relevant law, shape the courtroom debate and persuade the Supreme Court in advance of oral submissions. 

This Legal update focuses on two issues that are expected to occupy a significant portion of the Supreme Court’s consideration of the constitutionality of the Act, namely: characterization of the GGPPA and classification of the GGPPA.

Issue 1 – Characterization of the GGPPA

With respect to characterization, the underlying theme is “change.” All three parties have revised their positions in response to the Court of Appeal decisions. While pivoting on appeal can undermine credibility in some cases, here, returning to the drawing board to distill the issues has served each party well. Generally speaking, their submissions are stronger, more focused and more effective on appeal. 

What is Ontario’s Argument on Characterization?

Ontario has refined its characterization of the GGPPA using Huscroft J.’s dissenting opinion from the Court of Appeal.¹²

Previously, Ontario characterized the pith and substance of the GGPPA as “a comprehensive regulatory scheme for the reduction of greenhouse gas emissions from all sources in Canada.”¹³

Ontario now argues that the GGPPA should be characterized as simply “the regulation of greenhouse gas emissions.”¹⁴  This was a prudent decision. Ontario’s previous characterization was cumbersome. The new characterization is clearer and simpler. It is also broader, which supports Ontario’s argument that the GGPPA impinges upon provincial jurisdiction. Ontario’s previous characterization was also criticized by the Ontario Court of Appeal.¹⁵  Adopting Huscroft J.’s analysis helps Ontario pivot from this criticism and buttress its argument to the extent that the Supreme Court shares Huscroft J.’s concerns about the Majorities’ narrower approach to the characterization of the GGPPA.¹⁶

What is Saskatchewan’s Argument on Characterization?

Saskatchewan has changed its tack on appeal as well.

Saskatchewan was the black sheep in the Courts of Appeal on this issue. The province argued that it was “…not necessary for the Court to engage in a traditional pith and substance analysis to determine this issue because the legislation is constitutionally illegitimate on a principled basis.”¹⁷

This decision to shun the traditional characterization analysis made more sense in light of Saskatchewan’s argument that the “principle of federalism,” independent of the POGG analysis, rendered the GGPPA unconstitutional.¹⁸  However, the principle of federalism argument failed to garner enough interest from either Court of Appeal. A re-evaluation was necessary. Judging from its factum in the Supreme Court, Saskatchewan has abandoned the principle of federalism as a standalone argument for constitutional invalidity.

In the alternative to its principle of federalism argument, Saskatchewan had proposed that the pith and substance of the fuel charges under Part I of the Act should be characterized as “taxes,”¹⁹ and that the pith and substance of the OBPS should be characterized as “the regulation of industries within the province.”²⁰  Although this piecemeal approach found favour with the dissenting judges in the Saskatchewan Court of Appeal,²¹  the balance of the Justices rejected this unconventional characterization. Again, a strategic re-evaluation was in order.

Saskatchewan now argues that the pith and substance of the GGPPA should be distilled to: “the regulation of provincial sources of GHG emissions through the imposition of a charge on fuels and setting industrial emission limits.”²²  Though self-serving (the characterization is clearly drafted to support Saskatchewan’s argument at the classification stage), this new characterization is an improvement. By dropping the principle of federalism argument and moving away from the unconventional piecemeal approach, Saskatchewan can now fully engage in the debate regarding the essential pith and substance of the GGPPA.

What is Canada’s Argument on Characterization?

Canada has also pivoted on the issue of characterization.

Previously, Canada argued that the pith and substance of the GGPPA was properly characterized as “the cumulative dimensions of greenhouse gas emissions.”²³ This characterization was criticized by the Courts of Appeal. The Chief Justice of Ontario, for example, held that “Canada’s definition is too vague and confusing, since GHGs are inherently cumulative and the “cumulative dimensions” are undefined.”²⁴  In fact, the inadequacy of Canada’s characterization was one of the few areas of agreement between the majority and dissenting opinions of the Ontario and Saskatchewan Courts of Appeal.

Canada now argues that the essential character of the GGPPA is “establishing minimum national standards integral to reducing nationwide GHG emissions.”²⁵ Effectively, Canada has adopted the Ontario Court of Appeal’s characterization (“establishing minimum national standards to reduce GHG emissions”) but with two qualifiers: “integral” and “nationwide”. Canada argues that these qualifiers make the characterization more amenable to the national concern doctrine by (a) limiting Parliament’s jurisdiction to establishing minimum national standards that Parliament has “a rational basis to believe will have a demonstrable impact on Canada’s nationwide GHG emissions”; and (b) ensuring that Parliament’s jurisdiction is limited to truly national mitigation measures.²⁶

Interestingly, Canada is the only party to expressly acknowledge its change of position on characterization, openly stating that “Canada’s characterization is informed by the characterizations of both courts below.”²⁷ This admission makes for effective advocacy, and adds a measure of credibility to Canada’s argument, highlighting the persuasive power of candour when addressing inconsistencies in written argument.

What is British Columbia’s Argument on Characterization?

A number of interveners have filed written submissions with the Court regarding the proper characterization of the GGPPA, further underscoring how important this question will be on appeal.²⁸

British Columbia, in particular, makes an important argument regarding characterization. Arguing in support of Parliament’s jurisdiction under the POGG power to enact the GGPPA, British Columbia submits that the Act should be characterized as “establishing minimum national pricing standards to allocate part of Canada’s overall targets for GHG reduction.”²⁹

British Columbia criticizes all three parties – Saskatchewan, in particular – for abandoning the well-established framework for assessing the pith and substance of the Act in order to determine its constitutional validity.³⁰

As discussed further below, British Columbia argues that while Saskatchewan starts with an unexceptional account of the general process of pith and substance analysis, Saskatchewan deviates from the established path when it introduces a new constitutional concept – the “Proposed POGG Power” – which Saskatchewan argues must be “broader than the pith and substance of the legislation before the Court.”³¹

According to British Columbia, this type of sui generis approach, which seems to introduce a second step to the characterization stage – namely, the identification of a broader “Proposed POGG Power” – is “…contrary to the text of the Constitution, the principles of federalism binding precedent and proper role of the judiciary.” ³² For British Columbia, this type of analysis “creates a completely unnecessary dilemma between robust limits to central power and effective national action where it would not otherwise exist. By detaching the matter from the objective analysis of the statute, it renders the debate on constitutionality a vicious circle. Saskatchewan’s chosen “Proposed POGG Power”, not surprisingly, fails its classification test, since Saskatchewan was the one that proposed it. The fight was fixed before the first bell sounded.”³³

British Columbia also argues that although Ontario and Canada do not explicitly take a sui generis approach to the national concern analysis, their characterizations, in practice, are flawed because they are less about the statute in question and more about a “new” constitutional power they either support (in the case of Canada) or oppose (in the case of Ontario).³⁴  Neither Ontario nor Canada expressly address British Columbia’s argument in their factums.

Notwithstanding Saskatchewan’s reply submissions, which criticize British Columbia for mischaracterizing its position,³⁵ there is much to commend about British Columbia’s argument on characterization. As an intervening province, British Columbia brings an important perspective to the debate. Of course, British Columbia is not a neutral party. It has skin in the game, and has made its reasons for intervening well-known, citing concerns about the environment and cross-border carbon leakage, among other things. As the only province actively supporting the federal government’s position at the Supreme Court, British Columbia brings a valuable third perspective on a difficult constitutional question.

Issue 2 – Classification of the GGPPA

With respect to classification, the underlying theme is “refine and revisit.” Both Canada and Ontario argue that the Supreme Court should “modernize” the legal test for classification under the national concern branch. And Saskatchewan, as British Columbia observes, proposes an entirely new approach to bridging the conceptual gap between characterization and classification in the context of the POGG power. 

What is Ontario’s Argument on Classification?

In support of its position that the GGPPA is unconstitutional, Ontario argues that the pith and substance of the Act cannot be classified as a federal power by way of the national concern doctrine.

Ontario’s argument has evolved in two notable ways. Previously, in R v Crown Zellerbach,³⁶  the Supreme Court summarized the two-part classification analysis of the national concern test as follows:

• singleness, distinctiveness and indivisibility: whether the matter has a singleness, distinctiveness and indivisibility that clearly distinguishes it from matters of provincial concern, including the effect on extra-provincial interests of a provincial failure to regulate the matter; and
  
  
• the scale of the federal legislation’s impact: whether the scale of the federal government’s impact is reconcilable with the constitutional distribution of legislative power.³⁷   

In its submissions, Ontario invites the Supreme Court to “modernize” the first part of the Crown Zellerbach test using caselaw on the general trade and commerce power under section 91(2).³⁸ Specifically, Ontario submits that (1) the “distinctiveness” criterion under the first arm of the analysis be understood as “qualitative distinctiveness” and (2) the provincial inability test be restricted to “jurisdictional inability.”³⁹

It remains to be seen if these nuanced refinements strengthen Ontario’s challenge to the GGPPA. On the one hand, drawing a distinction between qualitative and quantitative differences allows Ontario to argue that the evident quantitative change to the regulation of greenhouse gas emissions – i.e. its increase in scale and importance since 1867 – does not, on its own, satisfy the requirement that a matter of national concern be distinct from matters of provincial concern.

On the other hand, Canada agrees with Ontario that distinctiveness refers to qualitative difference,⁴⁰ and that incapable means constitutionally incapable.⁴¹ This takes some of the wind out of Ontario’s argument. Likewise, Canada endorses the use of the general trade and commerce power caselaw to guide the classification analysis. Canada simply argues that the subject matter of the GGPPA is qualitatively different from the provinces’ jurisdiction to address greenhouse gas emissions, including the provinces’ jurisdiction to implement carbon pricing policies.⁴² Likewise, Canada argues that the provinces are constitutionally incapable of legislating this matter, as it has been characterized in Canada’s submissions.⁴³  As a result, Ontario’s refinements serve primarily to reinforce the importance of the characterization analysis and bring the debate back to the central question: what is the GGPPA really about?

What is Saskatchewan’s Argument on Classification?

As noted above, Saskatchewan’s argument takes a turn into uncharted territory at the classification stage.

Saskatchewan begins its analysis by emphasizing the exclusive and plenary nature to legislate on matters falling under the national concern branch of the POGG power. According to Saskatchewan, the transfer of authority to Parliament under the national concern branch applies as if the authority were added to the list of exclusive enumerated federal powers under s. 91 of the Constitution.⁴⁴ In other words, this transfer is permanent and renders provincial legislation ultra vires to the extent that its pith and substance is in relation to that new federal head of power.⁴⁵ Saskatchewan’s framing device is effective. From an advocacy perspective, it underscores that the stakes are high, and further, that matters should not be classified under the national concern branch without careful and thoughtful analysis.

From there, as noted by British Columbia, Saskatchewan proposes a new step.⁴⁶ Saskatchewan argues that because subject matters of national concern are permanent heads of federal lawmaking authority, they must be broader than the pith and substance of the legislation under consideration. Further, according to Saskatchewan, it is the latter, broader head of power that should be submitted to the classification test under the national concern branch of the POGG power. In its view, the appropriate head of power in this case is “the regulation of GHGs in Canada by any and all means.”⁴⁷ Compared to Saskatchewan’s characterization of the pith and substance of the GGPPA, the proposed “head of power” is broader indeed. 

After this detour through its proposed head of power analysis, Saskatchewan returns to Crown Zellerbach.  Unlike Ontario and Canada, Saskatchewan does not propose to refine or modernize the classification analysis per se.⁴⁸ As such, Saskatchewan relies on many of the same arguments made in the Courts of Appeal below with respect to singleness, distinctness, indivisibility, provincial incapability, and the scale of the federal legislation’s impact on the constitutional distribution of power.

What is Canada’s Argument on Classification?

Canada argues that the subject matter of the GGPPA should be classified as a matter of national concern. Like Ontario, Canada invites the Supreme Court to modernize the Crown Zellerbach test for classification under the national concern doctrine.⁴⁹ 

Canada suggests a new, three-step formulation of the test for assessing whether a proposed matter should be classified as a matter of national concern.⁵⁰ Canada’s proposed classification test overlaps with the current Crown Zellerbach framework, but centres on the following questions:

• Is there a new matter or has there been a transformation of an existing matter? According to Canada, this step would capture the essence of the national concern doctrine by asking whether there is a new matter or a new factual matrix that supports Parliament’s assertion of a constitutionally significant transformation. To satisfy this step, Canada would have to present evidence that shows a matter is either new or has attained such dimensions that it affects the nation as a whole.
  
  
• Is the matter in question distinctly national? According to Canada, this step would incorporate the provincial inability test, as it is applied under the analogous general branch of the trade and commerce power. Like Ontario, Canada submits that the question is whether the proposed matter is qualitatively different from matters of provincial concern.
  
  
• Is the matter in question reconcilable with the balance of federalism? This final step largely mirrors the existing second stage of the analysis under Crown Zellerbach. Specifically, Canada proposes that a court should ask whether the impact of recognizing the matter in question as falling within Parliament’s legislative jurisdiction is reconcilable with the fundamental distribution of legislative powers under Canada’s Constitution.

Canada’s proposed refinements to the classification test under Crown Zellerbach are practical. They draw, in part, on law regarding the general trade and commerce power⁵¹ and, if adopted, they would bring some clarity to what is, currently, a difficult, multi-stage analysis. However, the Supreme Court may not accept Canada’s suggested framework. And whether or not the Supreme Court agrees with Canada’s three-step analysis, Canada must still convince the Supreme Court that the subject matter of the GGPPA meets the requirements for classification under the national concern branch, based on the facts of this case.

What is British Columbia’s Argument on Classification?

British Columbia makes submissions on classification under the national concern branch.⁵²

British Columbia’s argument regarding the provincial inability component of the classification analysis is compelling. British Columbia attempts to bridge the gap between the classification submissions from Ontario, Saskatchewan and Canada, while also highlighting the shortcomings in each.

As it did when it intervened in the Courts of Appeal, British Columbia focuses its submissions on the issue of adverse extra-provincial effects, arguing that classification can be neither a tautological inquiry into whether a federal law applies nationally nor a theoretical question of whether a group of provinces could draft the same law.⁵³ Instead, what makes a matter a national concern, according to British Columbia, is the nature of the problem – and, in particular, whether the failure of one province to regulate an issue within its borders will cause harm to another province.⁵⁴ British Columbia highlights the importance of adverse extra-provincial effects by contrasting the regulation of greenhouse gas emissions with drug treatment:

“So drug treatment, although obviously of vital importance, is not a matter to which the national dimensions/concerns doctrine applies. The failure of one province to provide adequate addiction treatment would not demonstrably “endanger the interests of another province” and should be remedied by the voters of that province. By contrast, a failure to prevent drug trafficking does endanger the interests of others, and is therefore within the general power.”⁵⁵

British Columbia emphasizes that, as a province, it is constitutionally powerless to reduce or regulate greenhouse gas emitted in Saskatchewan or Ontario, even if those greenhouse gas emissions pose a risk of harm to Canadians living in British Columbia.⁵⁶

In anticipation of this argument, Ontario submits that the fact that the policy decisions of one province could negatively impact another province’s interests cannot be determinative of legislative jurisdiction.⁵⁷ Ontario gives the example of one province adopting a minimum wage standard that causes employers to relocate to its jurisdiction, away from other provinces. The potential negative impact does not make the regulation of minimum wage a national concern. In response, British Columbia argues that the minimum wage analogy falls short: the costs and benefits of a minimum wage are primarily felt within the province setting it. In the case of greenhouse gas emissions, however, not only are the costs imposed on the provinces with carbon pricing, carbon leakage (i.e. arbitrage from provinces having a carbon price to those without) deprives those provinces of a substantial portion of the environmental benefit for which they incurred that cost. A province can legislate to adjust its minimum wage in response to regulatory competition. But a province cannot prevent greenhouse gases emitted in other provinces from causing damage within its borders.⁵⁸

Ultimately, it remains to be seen how the Supreme Court will resolve these two, starkly different visions of provincial legislative rights within the context of Canadian federalism.

What are the Key Takeaways?

First, the Supreme Court is expected to hear oral arguments from parties and interveners regarding the constitutionality of the GGPPA on March 24 and 25, 2020. (Note: following this update’s publication, this hearing was rescheduled to September 22 and 23, 2020.)

Second, the constitutionality of the GGPPA under the national concern branch of Parliament’s POGG power features prominently in the parties’ written submissions. The Supreme Court is expected to focus on this issue, including the characterization and classification of the Act.

Third, regarding characterization, all three parties – Canada, Ontario and Saskatchewan – have changed their proposed characterizations of the GGPPA in response to the decisions of the Courts of Appeal.

Fourth, regarding classification under the national concern branch, Canada and Ontario ask the Supreme Court to modernize the applicable legal test. Saskatchewan proposes a new approach as well.

Fifth, the Alberta Court of Appeal’s February 24, 2020 decision complicates the debate regarding the national concern branch at the Supreme Court, but that decision will not be under review specifically.

The author wishes to thank articling student Saba Samanianpour for her help in preparing this legal update.