A Matter of National Concern: SCC Rules Parliament’s Greenhouse Gas Pollution Pricing Act is Constitutional

“Climate change is real. It is caused by greenhouse gas emissions resulting from human activities, and it poses a grave threat to humanity’s future” (Reference re Greenhouse Gas Pollution Pricing Act, 2021 SCC 11 [GGPPA Reference], para 2). In the strong opening lines of the Supreme Court of Canada’s (“SCC” or “the Court”) majority reasons in the GGPPA Reference, Chief Justice Wagner cuts straight to the urgency of the climate crisis and the need for swift and effective action. “The only way to address the threat of climate change,” the Chief Justice continued, “is to reduce greenhouse gases” (GGPPA Reference, para 2).

Concluding an almost three-year saga involving three separate provincial challenges to the federal government’s Greenhouse Gas Pollution Pricing Act, SC 2018, c 12, s 186 [GGPPA or the Act], the SCC found that the federal government has the jurisdiction to enact minimum standards to reduce greenhouse gas (“GHG”) emissions under the national concern doctrine of the Peace, Order and Good Government (“POGG”) clause in s. 91 of the Constitution Act, 1867. 5 justices concurred with Chief Justice Wagner, with Justices Rowe and Brown separately dissenting, and Justice Côté dissenting in part.

The decision has wide-ranging impacts not only on Canada’s response to climate change, but also on the development of federalism jurisprudence—particularly the national concern branch of the POGG power.

The GGPPA

The GGPPA requires that all provinces and territories have mechanisms in place to impose charges on the production, distribution, and importation of carbon-based fuel (under Part 1 of the GGPPA), and an output-based pricing system on industrial-level emissions of GHGs (under Part 2). If provinces’ or territories’ mechanisms are deemed “insufficiently stringent” by the Governor in Council, the GGPPA will operate as a legislative backstop to ensure that minimum standards are met (GGPPA Reference, para 27). The two parts, the majority emphasized, “together create a single GHG pricing scheme,” since Part 1 places a direct pricing system on all GHG emissions, while Part 2, which focuses on industrial-related emissions, creates “a more tailored pricing scheme that lowers the effective GHG price such facilities would otherwise have to pay under Part 1” (GGPPA Reference, para 38). While the actual pricing mechanisms set out by the Act may not apply uniformly across jurisdictions, the Court clarified that “the GGPPA itself always applies in the sense that provincial and territorial GHG pricing mechanisms are always subject to assessment to ensure they are sufficiently stringent” (GGPPA Reference, para 27).

POGG Power and the National Concern Branch

The POGG clause in s. 91 of the Constitution Act, 1867 is an exceptional power in which the federal government maintains exclusive jurisdiction over a matter that falls under one of three branches: the gap branch, the emergency branch, and the national concern branch. The national concern branch allows Parliament to have exclusive jurisdiction over matters that affect the nation as a whole. The SCC has only rarely found that a particular matter falls under the national concern branch of the POGG power. The most recent case was R v Crown Zellerbach, [1988] 1 SCR 401 [Crown Zellerbach], in which the Court held that federal regulation of marine pollution and dumping in provincial waters was an appropriate exercise of the national concern doctrine. In that case, the Court clarified the three-prong analysis for determining whether a particular matter fell within a matter of national concern:          

1. It must extend beyond provincial interests and be of concern to the country as a whole (i.e. the threshold stage);
2. It must “have a singleness, distinctiveness and indivisibility that clearly distinguishes it from matters of provincial concern” (Crown Zellerbach, 432); and
3. It must have “a scale of impact on provincial jurisdiction that is reconcilable with the fundamental distribution of legislative power” (Crown Zellerbach, 432).

Under the second prong of the analysis, a court must apply the “provincial inability” test, which asks whether a province’s failure to deal with the impugned matter would have extraprovincial consequences (Crown Zellerbach, 434).

Judicial History

Following the GGPPA coming into force in 2018, the Ontario, Saskatchewan, and Alberta provincial governments each challenged its constitutionality before their respective Courts of Appeal. Majorities of both the Ontario Court of Appeal (“ONCA”) and Saskatchewan Court of Appeal (“SKCA”) found that the GGPPA was intra vires the federal government under the national concern doctrine (see Reference re Greenhouse Gas Pollution Pricing Act, 2019 ONCA 544; Reference re Greenhouse Gas Pollution Pricing Act, 2019 SKCA 40). A more in-depth analysis of the courts’ rulings can be found in Natasha Novac’s comment. Both Saskatchewan and Ontario both appealed by right to the SCC.

In contrast, a majority of the Alberta Court of Appeal (“ABCA”) found the Act ultra vires the federal government and held that the national concern doctrine had no application to the matter (see Reference re Greenhouse Gas Pollution Pricing Act, 2020 ABCA 74). A closer look at the ABCA’s decision can be found in Corrine Tansowny’s comment. The Attorney General of British Columbia appealed the decision to the SCC.

SCC Majority Reasons

Pith and Substance

Before determining whether the GGPPA is an appropriate exercise of Parliament’s POGG power under the national concern branch, the Court must first define the “pith and substance,” or dominant characteristic, of the Act in order to determine whether it falls within constitutionally defined limits of the federal government’s jurisdictional power. The majority rejected the “broad” characterizations adopted by the majorities in the ONCA’s and ABCA’s decisions, which suggested that the pith and substance of the Act is to establish minimum standards for reducing GHG emissions (Ontario), and that the pith and substance is to regulate GHG emissions (Alberta) (GGPPA Reference, para 57).

Instead, the majority agreed with the SKCA majority, the concurrence of Associate Chief Justice Hoy of the ONCA, and the dissent of Justice Feehan of the ABCA that “the true subject matter of the GGPPA is establishing minimum national standards of GHG price stringency to reduce GHG emissions” (GGPPA Reference, para 57). Chief Justice Wagner concluded that this was the “most precise characterization of the subject matter of the GGPPA, as it accurately reflects both what the statute does – imposing a minimum standard of GHG price stringency – and why the statute does what it does – reducing GHG emissions in order to mitigate climate change” (GGPPA Reference, para 80). The majority stressed the importance of the phrase “national minimum standards” to the overall pith and substance of the Act as integral to its backstop framework. More specifically, they found that the backstop approach contrasted from opt-in/opt-out frameworks, such as the one in the Reference re Securities Act, 2011 SCC 66, as the GGPPA provides a more flexible approach for provinces to set their own pricing mechanisms, rather than instating a “blunt unified national system” (GGPPA Reference, para 81).

National Concern Test

After determining the appropriate characterization of the GGPPA, the majority shifted to the national concern analysis. Chief Justice Wagner used this decision to clarify two components of the national concern test: first, that a finding that a matter falls within national concern must be grounded in evidence, and second, that it is unnecessary for a matter to be “historically new” in order to be one of national concern (GGPPA Reference, paras 133-34). Rather, the majority clarified, it is critical that the matter be “inherently national in character” and that it “transcend the provinces” (GGPPA Reference, paras 136, 141).

Moving through the three-prong Crown Zellerbach test, the majority decisively concluded that the establishment of minimum standards of GHG price stringency to reduce GHG emissions constituted a matter of national concern under the POGG power. Under the first prong, Chief Justice Wagner found that the evidence clearly demonstrated not only that climate change “is a threat of the highest order to the country, and indeed to the world,” but also that carbon pricing is an essential approach to reducing GHG emissions as reported by both domestic and international bodies and agencies (GGPPA Reference, paras 167, 169-70). Thus, the matter easily passed the initial stage of the test.

Under the second stage of the test, the majority clarified the two guiding principles to determine whether the matter is “clearly distinguished” from matters of provincial concern (GGPPA Reference, para 146). First, Chief Justice Wagner stated that the matter must be “qualitatively different from matters of provincial concern,” and second, that “federal jurisdiction should be found to exist only where the evidence establishes provincial inability to deal with the matter” (GGPPA Reference, para 146). Under the first principle, the majority notably drew on international responses of GHG emissions to show that pollution caused by GHG emissions is a global issue, and that state parties to international agreements such as the Paris Agreement and the United Nations Framework Convention on Climate Change must follow their determined contributions to reducing GHG emissions (GGPPA Reference, paras 173-74). Furthermore, the majority reasoned that the actual mechanism of the GGPPA to establish minimum standards plays a “distinctly federal [role]: evaluating provincial pricing mechanisms against an outcome-based legal standard in order to address national risks posed by insufficient carbon pricing stringency in any part of the country” (GGPPA Reference, para 179).

Under the second principle, Chief Justice Wagner held that the matter meets the provincial inability requirement. First, beyond the inability of provinces to create minimum national standards for price stringency to reduce GHG emissions, there would be a risk of a patchwork of varying carbon pricing schemes, with the possibility that some provinces may not even implement any sort of appropriate framework, which “would not assure a sustained approach to minimum national standards” (GGPPA Reference, para 182). Additionally, the majority noted that such inconsistencies “could undermine GHG pricing everywhere in Canada because of the risk of carbon leakage,” wherein companies who emit high levels of GHGs could jurisdiction-shop for provinces with the least onerous carbon pricing systems (GGPPA Reference, paras 185-86). Finally, the majority added a new sub-stage of the provincial inability test, which requires that “a province’s failure to act or refusal to cooperate would…have grave consequences for extraprovincial interests” (GGPPA Reference, para 187). The majority found that this sub-stage was easily met in the present case since “[a]ny province’s failure to act threatens Canada’s ability to meet its international obligations, which in turn hinders Canada’s ability to push for international action to reduce GHG emissions” (GGPPA Reference, para 190).

Finally, under the scale of impact stage, the majority held that although a finding of federal jurisdiction would have a “clear impact on provincial autonomy,” any impact would be limited and outweighed by the interests of those most affected by failures to appropriately respond to the climate crisis (GGPPA Reference, para 196). Chief Justice Wagner reiterated that provinces are free to legislate their own carbon pricing schemes so long as they meet the minimum national standards, and noted that the failure to appropriately address climate change would disproportionately affect Indigenous peoples, the Arctic, and coastal regions (GGPPA Reference, paras 200, 206).

Ultimately, the majority concluded that the GGPPA falls within Parliament’s jurisdiction under the national concern doctrine.

SCC Dissenting Reasons

The three dissenting or partially dissenting judgments each take issue with the constitutionality of the GGPPA. Further, while Justice Côté agreed with the majority’s formulation of the national concern analysis, Justices Brown and Rowe both disagreed with the majority’s use of the national concern doctrine to uphold the legislation.

On the issue of the GGPPA’s constitutionality, Justice Côté reasoned that the Governor in Council’s power to determine whether a province’s carbon pricing mechanisms are sufficiently stringent “vests inordinate discretion in the executive with no meaningful checks on fundamental alterations of the current pricing schemes” (GGPPA Reference, para 223). She held that because of this unfettered discretion, the GGPPA “cannot be said to establish national standards of price stringency because there is no meaningful limit to the power of the executive” (GGPPA Reference, para 236). This critique was echoed in the reasons of Justices Brown and Rowe, who cite potential for abuse and untrammeled discretion within these informally known “Henry VIII” clauses (see GGPPA Reference, paras 414 and 611).

Additionally, Justice Brown, with Justice Rowe in agreement, found that the GGPPA’s subject matter falls within the province’s jurisdiction under s. 92 of the Constitution Act, 1867. In particular, he noted that because the GGPPA’s “entire scheme is premised on the provinces having jurisdiction to do precisely what Parliament has presumed to do in the Act,” this alone should be enough to demonstrate that the Act is ultra vires Parliament (GGPPA Reference, para 342). More specifically, he reasoned that the GGPPA is better characterized as falling under the property and civil rights power, which is vested in the provinces under s. 92(13) (GGPPA Reference, para 343). Furthermore, Justice Brown argued that allowing a matter of legislating “minimum national standards” to be deemed a national concern opens the floodgates to “more easily invade provincial jurisdiction, and has the potential to upset the fundamental distribution of legislative power under the Constitution” (GGPPA Reference, para 425).

Finally, Justice Rowe, with Justice Brown agreeing, criticized the majority’s reliance on the national concern doctrine to find the GGPPA constitutionally valid. Justice Rowe contended that the POGG power is a power of last resort and should only be used “where the matter does not fall under any enumerated heads and cannot be distributing among the existing heads of powers” (GGPPA Reference, para 477). He argued that the national concern doctrine must similarly be limited to such instances where matters cannot be appropriately characterized under any enumerated head of power, which thus makes it a matter of genuine national concern (GGPPA Reference, para 534).

Analysis

As a matter of policy, the majority reasons beginning with a forceful treatise on the effects of climate change in Canada demonstrates a clear acknowledgement by Canada’s highest court that the climate emergency is, in fact, an emergency that requires serious consideration and swift responses. Chief Justice Wagner stressed the “severe and devastating” impacts of climate change across the country, including rising temperatures, increased floods and forest fires, rising sea levels, ice reductions, and the effects of the crisis on Indigenous peoples’ livelihoods (GGPPA Reference, paras 10-11). This decision is monumental in its recognition of the urgency and importance of implementing mechanisms like carbon pricing mechanisms to address the growing climate crisis.

Additionally, the distinctly global nature of climate change, and GHG pollution specifically, appears to have informed the majority’s development of the national concern test. In particular, the majority endorsed the use of international law to assist with determining whether a matter is of national character. It further specified that, as part of the provincial inability test, a matter must lead to grave consequences on extraprovincial interests if a province failed to appropriately deal with it. Both of these factors are critical to considering the global implications of the matter and can be instrumental to finding that the matter ought to be deemed one of national concern. In this case, the national concern test warranted further consideration of global implications to ensure that Canada could put forward a nationally coordinated and effective response that would mitigate any negative extraprovincial or global impacts in the fight against climate change.

Overall, the Court’s decision marks a notable step forward for Canada’s climate change response, and for the Court’s federalism jurisprudence. The socio-political issues Canada faces today are increasingly complex and have global implications; the courts must consequently consider how they can appropriately develop and strengthen the country’s constitutional framework in order to respond to and address current and future crises.