Supreme Court of Canada Upholds Greenhouse Gas Pollution Pricing Act as Constitutional

We had previously written about the Saskatchewan Court of Appeal’s decision in which it ruled that the carbon tax imposed on the province by the federal government under the Greenhouse Gas Pollution Pricing Act (the “Act”) was constitutional and fell within the legislative authority of Parliament. We had also written about the Ontario Court of Appeal’s decision, in which the court also upheld the constitutionality of the Act, ruling that the carbon tax imposed on the province by the federal government was constitutional and fell within the legislative authority of Parliament. In 2020, the Alberta Court of Appeal also upheld the Act as constitutional.

The three provinces appealed to the Supreme Court of Canada. The court recently issued its decision, in which it held that the Act is constitutional.

It should also be noted that, as we had previously written about, the province of Alberta passed An Act to Repeal the Carbon Tax, in 2019, which effectively ended Alberta’s consumer carbon tax.

Background and Legislative Scheme

At issue before the courts was whether the Act was constitutional or not.

In 2018, Parliament enacted the Act, which is comprised of four parts and four schedules. Part 1 establishes a fuel charge that applies to producers, distributors and importers of various types of carbon-based fuel. Part 2 sets out a pricing mechanism for industrial greenhouse gas (“GHG”) emissions by large emissions-intensive industrial facilities. Part 3 authorizes the Governor in Council to make 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. Part 4 requires the Minister of the Environment to prepare an annual report on the administration of the Actand have it tabled in Parliament.

The provinces of Alberta, Saskatchewan and Ontario challenged the Act on constitutional grounds, essentially arguing that the federal government was intruding on provincial jurisdiction. The provinces challenged the constitutionality of the first two parts and the four schedules of the Act.

The Attorney General of Canada sought to uphold the Act as a valid exercise of Parliament’s jurisdiction under the national concern branch of its “Peace, Order, and good Government” (“POGG”) power.

Supreme Court of Canada Decision

The majority of the court found that the Act’s pith and substance was to establish “minimum national standards of GHG price stringency to reduce GHG emissions”. As such, the court held that the matter fell within the federal POGG’s national concern power, because GHG emissions are an identifiable pollutant and “not merely interprovincial, but global, in scope.” While the court acknowledged that the Act impacted the provinces’ rights, it held that the impact was limited and justified.

Ultimately, in a 6-3 decision, the majority of the court upheld the Act as constitutional, holding that the Act sets minimum national standards of GHG price stringency to reduce GHG emissions and, as such, the federal government had jurisdiction to enact the law as a matter of national concern under the POGG clause of s. 91 of the Constitution Act 1867.

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When disputes arise in the oil and gas industry they can be complex, involving international parties and various pieces of specialized legislation. If you are involved in such a dispute, it’s important for you to have a legal team in place who knows how these interests and laws work together and can help you navigate this intricate terrain.

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