Against the stark backdrop of intensifying climate change, the Supreme Court will begin hearing arguments on Tuesday concerning the constitutionality of the Greenhouse Gas Pollution Pricing Act – what is known as the federal carbon-pricing backstop.
The hearing comes after a long saga of proceedings through provincial courts of appeal, and the decision will invariably be historic in how it shapes the way our country regulates carbon emissions in the decades to come. In Ontario and Saskatchewan, majority decisions upheld the backstop, finding that Ottawa had jurisdiction for the legislation under the “national concern” branch of the federal peace, order and good government power; in Alberta, the court found that it would unconstitutionally intrude on provincial powers.
But the questions of today are not only about today. The pivotal problem now faced by Canada’s highest court will be finding a durable and lasting fit for nationwide measures to reduce greenhouse gases (GHGs) that also work under our constitution.
The court’s solution should be to recognize exclusive federal jurisdiction for regulating greenhouse gases – but also deem the backstop unconstitutional. Such a “split the baby” result would establish clear authority over GHGs, but prevent Ottawa’s backdoor intrusion into provincial regulation of specific industries.
On the core issue, greenhouse gases are the quintessential national concern. They are inherently trans-boundary, accumulating in the atmosphere far beyond any earthbound jurisdictional borders. Although global climate change will inflict community-level consequences, GHGs lack direct local effects; any consequences come from cumulative atmospheric concentration.
Therefore, reducing GHGs represents a classic “collective action problem.” Any jurisdiction could free-ride on others' reductions, but failure by a single province to deal effectively with GHGs will have extraprovincial effects. This “provincial inability” to effectively regulate GHGs requires a uniform, national scheme.
Nonetheless, as I highlighted in my 2019 C.D. Howe paper Living Tree or Invasive Species, there are problems with the decisions by the Ontario and Saskatchewan majorities. Specifically, both defined the national concern in the makeshift terms of “minimum national standards,” with the apparent aim of avoiding displacement of the provincial legislation already on the books.
This is a dangerous road because it risks undermining exclusive federal jurisdiction for other national concerns. If this approach works for GHGs, for instance, why not similarly define federal jurisdiction for national concerns such as aeronautics, radio communications or nuclear power in terms of “minimum national standards”?
This approach is also inconsistent with previous Supreme Court case law that emphasized that a single and indivisible subject cannot be carved up to create shared federal and provincial jurisdiction. The Supreme Court has also previously rejected a “double aspect” that would allow concurrent provincial and federal jurisdiction in relation to other national concerns when it found, for example, municipal regulation of cell tower construction to be unconstitutional.
Moreover, if GHGs truly meet the “provincial inability” test, provincial regulation should be ineffective. It should therefore be irrelevant that exclusive federal jurisdiction displaces provincial jurisdiction for GHGs.
Provincial governments are right to be wary that a decision in favour of the federal backstop could be a Trojan horse, granting the federal government the licence to regulate any activity that emits GHGs and eviscerating provincial powers for industrial regulation.
Such an intrusion is exemplified by the federal output-based pricing system (OBPS) for large emitters under the backstop, which involves different “emission intensity” benchmarks for different products and, in the case of electricity, by fuel. The consequence is that different industries and facilities will pay a different cost per tonne of GHGs. (For example, at the 2020 carbon price of $30 a tonne, steel or cement production faces an average carbon cost of only $1.50 a tonne under the OBPS; refineries and petrochemical production face average carbon costs of $3.00 a tonne.)
Additionally, the OBPS favours coal-fired power generation by prescribing a higher benchmark for producing electricity with coal than natural gas. A higher benchmark means a lower cost per tonne. The Supreme Court should hold that such intentional distortion to the dispatch order for power plants contravenes the exclusive provincial jurisdiction for managing power generation under section 92A of the constitution.
Industry-level carbon pricing by Ottawa should be as offensive to the constitution as, say, inserting specific provisions for dentists or electricity trading in the federal Competition Act. The Supreme Court has stressed that the federal trade and commerce power must concern “trade as a whole rather than with a particular industry.” It would be inconsistent for federal jurisdiction over GHGs to provide a backdoor for activity-by-activity regulation.
Certain provinces straight out oppose federal carbon pricing, and Ottawa does not want to offend other provincial governments that support the backstop. But the politics of the moment should not define constitutional law for generations yet to come. The Supreme Court must look beyond the immediate legislation. As was written almost a century ago, our constitution is a “living tree,” adaptable to new contexts and challenges. In this century, confronting the challenge of climate change will define Canada. To face this challenge, our constitution must continue to bloom.
Grant Bishop is an associate director of research at the C.D. Howe Institute.