Appeal Watch: Fate of Federal Greenhouse Gas Legislation is Up in the Air
How urgent is the need for coordinated national action on climate change? According to the Court of Appeal for Ontario (“ONCA”), it is urgent indeed. On June 28 2019, the ONCA found, by a 4-1 majority, that the federal Greenhouse Gas Pollution Pricing Act (“GGPPA”or “the Act”) is a valid exercise of Parliament’s jurisdiction over matters of national concern under the POGG (peace, order, and good government) power (Reference re Greenhouse Gas Pollution Pricing Act, 2019 ONCA 544 [GGPPA Reference]). Seven weeks earlier, the Saskatchewan Court of Appeal (“SKCA”) reached the same conclusion in a 3-2 opinion in favour of constitutional validity (Reference re Greenhouse Gas Pollution Pricing Act, 2019 SKCA 40).
The GGPPA is ambitious and contentious climate change mitigation legislation, unprecedented in Canada for the way it makes industrial emitters pay to pollute. The Act represents Parliament’s first attempt to impose a national carbon pricing scheme in Canada, and dissenting provinces argue it is an unconstitutional intrusion into areas of exclusive provincial legislative jurisdiction. Since its passage on June 21, 2018, the Act has inspired both highly supportive commentary from environmental groups and fervently critical feedback, largely from Conservative provincial governments. The governments of Ontario, Saskatchewan, New Brunswick, Alberta, Quebec and Manitoba all publicly oppose the law, and many Premiers are meeting in Saskatchewan this week to discuss how to defeat it. Having failed to prove the GGPPA’s constitutional invalidity in their respective courts of appeal, the Attorneys-General of Ontario and Saskatchewan are exercising their appeals as of right on the matter to the Supreme Court of Canada (“SCC” or “the Court”).
In essence, the GGPPA references are about whether the climate change emergency has achieved such national dimensions that Parliament should be empowered to regulate GHG emissions across the economy as a whole – including in areas that currently fall within exclusive provincial jurisdiction. The references represent both a bitter political contest between the federal Liberal government and Conservative provincial governments over the regulation of climate change, and one of the most important federalism disputes to reach the top court in several generations.
This post provides a primer on the GGPPA, comments on the ONCA decision, and offers thoughts on the fate of the legislation as the references make their way to the SCC. It takes the position that despite two victories for the GGPPA in provincial appellate courts, the road to success for the federal government at the SCC is not yet free of roadblocks. The ONCA and SKCA rulings are notable in that they upheld the validity of the GGPPA under the national concern branch of POGG, a narrow and rarely invoked head of federal power. Whether the GGPPA survives constitutional scrutiny at the SCC will depend on whether the high court agrees that the Act is a valid exercise of this little-used head of federal authority. The appellate decisions may be read as expanding the existing parameters of the national concern branch power and representing a turning point in the jurisprudence (finally we have judicial recognition that there is an urgent need in Canada for coordinated national (and international) action on climate change). It is also possible that SCC will refuse to follow the appellate courts’ expansive approach and will render a decision that falls more in line with existing jurisprudence on the national concern branch. Unfortunately for the Attorney General of Canada, which will be defending the national concern branch argument, the GGPPA does not fit neatly within the four corners of existing national concern branch jurisprudence. If the SCC adheres more closely than the appellate courts did to the existing case law, the high court may well find the GGPPA to be invalid.
One core issue at the SCC is sure to be whether the GGPPA’s pith and substance is a subject matter capable of sufficiently narrow definition to be upheld under the national concern branch. In the jurisprudence, a sufficiently narrow subject matter is key to achieving judicial recognition of federal jurisdiction under national concern. Yet between the ONCA and SKCA decisions, the ten participating justices rendered no less than five interpretations of the Act’s pith and substance, none of which agreed with Ontario or Canada’s own submissions. Given how dramatically the justices split on this fundamental question, it is hard to predict which way the SCC will go on the question of narrowness, and consequently whether the Act will qualify as valid under national concern.
Regardless of outcome, the references invite the SCC to reconsider the shape of national concern branch jurisprudence, an opportunity the Court has not had since R v Crown Zellerbach ( 1 SCR 401 [Crown Zellerbach]) over three decades ago. The Court’s decision is sure to become a new leading case on both climate change policy and federalism in Canada. While we await the final verdict, here are some thoughts on the issues.
How the GGPPA Works
The SCC has long recognized that all levels of government, including municipal and Indigenous governments, have jurisdiction over the environment and pollution control. Typically, each level of government is confined to regulating activities that fall within its own jurisdiction, and the Court has opined that no government has exclusive authority over these matters. The GGPPA is novel in that it is not confined to federally regulated activities. Rather, it imposes a levy on fossil fuel consumption, to be paid for by businesses, and sets mandatory minimum national standards for reducing Canada’s total greenhouse gas emissions nation-wide. The GGPPA is Parliament’s first attempt to impose a national carbon pricing scheme applicable to any carbon-emitting activity in Canada, including those that typically fall within exclusive provincial jurisdiction.
The main thrust of the GGPPA is that it compels all provincial legislatures to pass carbon emission reduction laws that conform to minimum national GHG reduction standards set out in the Act. Provincial legislatures are free to pass laws that exceed the minimum national standards, and to meet the benchmarks using whatever legislative framework they wish to use (i.e. by creating fuel charges, setting emissions limits, etc.). However the GGPPA demands that the provincial laws abide by the Act’s minimum standards for GHG reduction in the province per year. The GGPPA applies to any province that requests it, i.e. any province that does not wish to develop a compliant GHG reduction scheme of its own and prefers to rely on the federal framework. Controversially, the Act also applies to any province that, according to the federal government, has failed to implement its own provincial legislation that meets the minimum national standards for GHG reduction set by the GGPPA.
The GGPPA has two parts, each of which prices a different source of GHG emissions. The first part prices fossil fuel consumption and the second prices industrial emissions. Part I applies a monetary charge (the so-called “carbon tax”) to businesses that produce, distribute or import emissions-producing fuels in a province in which the Act applies. Parliament anticipates that businesses will pass this increased cost on to consumers. To mitigate the financial impact of the GGPPA on individuals, Parliament created a carbon tax benefit, whereby individual taxpayers can claim a “Climate Action Tax Credit” to recoup a share of the additional levies paid for carbon-emitting products at the point of sale (like at the pump). Part 2 of the Act targets industrial emitters as opposed to producers, distributors or importers. It creates an output-based pricing system (“OBPS”) that imposes a levy on emissions-intensive industries in applicable jurisdictions. The OBPS requires certain industrial facilities to pay for the portion of emissions they produce that go over a prescribed limit, with different limits applying to each regulated industrial sector.
The Legal Issues
Prior to the passage of the GGPPA, the landscape of GHG reduction in Canada was a patchwork of provincial and territorial policies. There was significant variation between provincial jurisdictions. Among other issues, the absence of a mandatory national framework for GHG reduction created problems with “carbon leakage,” whereby one province would pass stricter GHG reduction laws, another province would pass looser laws, and the more ambitious efforts of the first province would be cancelled out by the lackadaisical efforts of the second.
The purpose of the GGPPA is to harmonize GHG reduction efforts across Canada, eliminating the patchwork framework and requiring all provinces to abide by the same minimum national GHG emission reduction standards. Because GHGs are atmospheric pollutants that do not abide by territorial boundaries, the need for a national – and indeed an international – approach seems obvious. While the GGPPA represents Parliament’s first attempt to pass national GHG reduction legislation, legal scholars have long argued that Parliament can assert jurisdiction over GHG reduction under several heads of federal power, including the federal taxation power (s 91(3) of the Constitution Act, 1867), the criminal law power (s 91(27)), and/or the emergency and national concern branches of POGG. The provinces are also constitutionally competent to regulate GHG emissions under various powers, including the property and civil rights power (s 92(13)), the power over matters of a local or private nature (s 92(16)) and the power over non-renewable natural resources (s 92A).
Provincial legislatures and Parliament can assert jurisdiction over GHG reduction within their respective heads of constitutional jurisdiction with relatively little controversy. No constitutional issue arises, for example, if Parliament confines itself to federally regulated areas of the economy, such as aeronautics, shipping or interprovincial undertakings, and the provinces confine themselves to provincially regulated areas. The GGPPA represents a bolder approach by Parliament: It imposes levies on fuel transactions inside the province and on large industrial emitters, both matters that normally fall within exclusive provincial jurisdiction. This boundary-pushing strategy has produced a classic division of powers dispute. Parliament clearly has plenty of jurisdiction over pollution reduction, but that jurisdiction is limited by the bounds of specific heads of federal power in section 91 of the Constitution Act, 1867. Further, as the Attorney-General for Ontario noted in its factum to the ONCA, GHGs emit from many facets of human life, including transportation, industry, buildings, land use, forestry, electricity, waste and agriculture (para 12). The sheer breadth of carbon-emitting activities that are typically controlled by the provinces has inspired the dissenting provinces to argue that the GGPPA interferes dramatically in the provincial legislative sphere.
Whether the GGPPA survives constitutional scrutiny at the SCC will depend on whether it is a valid exercise of Parliament’s POGG national concern power. The federal government has not sought to uphold the GGPPA as a whole under any other head of federal power, and rightly so: The form of the legislation makes it very difficult to defend as a criminal law or a tax (other heads of federal power that may conceivably have been relied upon to support the GGPPA, had it been drafted differently). In this way, the GGPPA is reminiscent of the federal attempt to control inflation in the Reference re Anti-Inflation Act ( 2 SCR 373) [Anti-Inflation Reference], where the SCC upheld the Anti-Inflation Act as temporarily valid under the emergency branch of POGG, but where the majority found that inflation was an inappropriate subject matter to add permanently to exclusive federal jurisdiction pursuant to the national concern power. The GGPPA is not temporary and therefore cannot be upheld pursuant to the emergency branch of POGG. That leaves the national concern branch and the national concern branch alone. Relying on the national concern branch is a bold legal strategy, both high-risk and high-reward: It may result in an unprecedented expansion of federal legislative power, or it could be a risky gambit that dooms an important federal legislative initiative.
At the ONCA, Ontario argued that the GGPPA was invalid under the national concern branch because the legislative object was too broadly defined. As a result, recognizing that federal Parliament has jurisdiction over carbon emission reduction would disrupt the constitutional balance of powers. In an impressive victory for Canada, a 4-1 majority (Chief Justice Strathy writing, Justice Huscroft dissenting) disagreed and concluded that the GGPPA was valid under the national concern branch. The key legal issues at the ONCA were: 1) the pith and substance of the Act, or the characterization of its “dominant” or “essential” characteristic for the purpose of classifying it under the division of powers; and 2) whether the pith and substance of the Act falls within a subject matter that meets the criteria for recognition under Parliament’s POGG national concern power.
In federalism analyses, pith and substance determinations are paramount because constitutional validity depends on whether the essential feature of the law comes within the enacting legislature’s powers in the Constitution Act, 1867. If the pith and substance is found to be outside the enacting government’s constitutional jurisdiction, the law will be ultra vires and will be struck down. At the ONCA, the majority concluded the GGPPA’s dominant characteristic is “establishing minimum national standards to reduce greenhouse gas emissions” (GGPPA Reference, para 77). It rejected both the Attorney-General of Canada’s assessment of the GGPPA’s pith and substance (“the cumulative dimensions of GHG emissions”) as “too vague and confusing,” and the Attorney-General of Ontario’s assessment (“a comprehensive regulatory scheme for the reduction of greenhouse gas emissions from all sources in Canada”) as too broad (GGPPA Reference, para 74). Associate Chief Justice (“ACJ”) Hoy in concurrence diverged from the majority on this point, finding that the GGPPA’s pith and substance is “establishing minimum national greenhouse gas pricing standards to reduce greenhouse gas emissions” (GGPPA Reference, para 166). Importantly, the majority’s view of the GGPPA‘s pith and substance omitted the word “[carbon] pricing.”
Having determined that the Act’s pith and substance was “minimum national standards to reduce GHG emissions,” the majority (with ACJ Hoy concurring) found that the subject matter fits within the national concern branch. The controlling test for national concern, from Crown Zellerbach, requires that the legislative matter at issue be of genuinely national consequence, meaning that it lies beyond the capacity of the provinces to regulate effectively. Whether a matter is of national concern is determined by assessing whether the matter has a “singleness, distinctiveness and indivisibility” that separates it from matters of provincial concern. This involves considering the effect on extra-provincial interests of a provincial failure to effectively regulate the matter. The court will also ask and consider whether the legislative object impedes minimally upon provincial jurisdiction (Crown Zellerbach, pp 431-432).
In POGG jurisprudence, courts have taken a cautious approach to Parliament’s attempts to have new areas of federal jurisdiction recognized under the national concern branch. In part, this is because the potential scope of the POGG power is enormous. As Justice Huscroft at the ONCA noted in dissent, “any matter could be transformed into a matter of national concern simply by adding the word “national” to it” (GGPPA Reference, para 229). Moreover, acknowledging federal jurisdiction under the national concern branch has the legal effect of giving Parliament jurisdiction to regulate matters that would otherwise fall within exclusive provincial jurisdiction, such as local transactions and industrial activities. This situation threatens the erosion of provincial legislative autonomy. Concerns may be soothed to some extent by the double aspect doctrine, which allows provinces and the federal government to establish two layers of governance over the same legislative matter. However the federal paramountcy doctrine enables federal legislation to prevail over conflicting provincial legislation in areas of overlap. Considering all these facets together, if not treated with caution by the courts, the expansive national concern branch risks disrupting the constitutional balance of powers.
The courts, cognizant of these issues, have tended to interpret what counts as a matter of “national concern” under POGG quite strictly. Assertions by Parliament of federal jurisdiction under this head of power have also been rare. In cases in which the federal government has been successful in having federal jurisdiction recognized under national concern, the Supreme Court has exhibited sharp and passionate divisions. This is not least because recognizing jurisdiction under the national concern branch requires the Court to determine the characterization of a new subject matter that is not enumerated in section 91 of the Constitution Act, 1867, such as the reduction of GHG emissions. As Justice Huscroft noted in dissent, in contrast to the more routine federalism issues that require courts to determine whether a law fits under one of the existing federal powers, national concern branch issues raise “a more normative question of whether [the law] fits under a new federal subject matter that ought to be recognized for purposes of the POGG power” (GGPPA Reference, para 212).
At the ONCA, the majority made three key findings in deciding that the GGPPA is valid under the national concern branch. First, the court noted various contextual factors: the Act helps give effect to Canada’s international treaty obligations, it was the product of extensive consultation between the federal and provincial governments, and it only came into being after attempts to establish a national cooperative solution with the provinces failed (GGPPA Reference, paras 106-108). These background factors suggested to the court that the establishment of minimum national GHG reduction standards concerned the nation as a whole.
Second, the court seemed convinced by the fact that GHG pollution is extraprovincial in nature, or is “inherently indivisible” (i.e. incapable of being divided into national and provincial elements) (GGPPA Reference, para 123). The court drew a parallel to the facts in Crown Zellerbach, in which the Supreme Court found that marine pollution was a valid matter of national concern because the marine waters at issue could not be adequately demarcated from freshwaters under provincial control. This “difficulty in drawing the dividing line in practice” between marine and provincial freshwaters explained “the essential indivisibility” of marine pollution (Crown Zellerbach, 437). The ONCA majority found that the same logic applies to greenhouse gas emissions, which also resist abiding by territorial boundaries. However, the court went on to treat jurisdiction over greenhouse gas emissions as divisible, allocating the establishment of minimum national standards to Parliament and leaving most of the rest to the provinces. This is very different from the approach the Supreme Court took to marine pollution in Crown Zellerbach, which treated marine pollution as a wholly indivisible subject matter properly under federal jurisdiction.
Third, the ONCA found that GHG pollution had “sufficiently distinct and separate characteristics [from other types of pollution]” to make it subject to the national concern branch power (GGPPA Reference, para 116). This suggests that in the eyes of the ONCA, the GGPPA’s legislative object is sufficiently narrowly defined. The Act entitles Parliament to regulate only GHGs, which are a specific type of pollution, and does not amount to a sweeping authority by Parliament over the regulation of other forms of pollution within provincial boundaries.
Finally, the court rejected Ontario’s argument that recognizing federal jurisdiction over minimum national GHG reduction standards had an unacceptable scale of impact on provincial jurisdiction (i.e. would disrupt the balance of powers). The court pointed out that the GGPPA sets only minimum standards for GHG reduction, leaving provinces free to meet or exceed that minimum, and to choose whatever legislative framework they see fit in the pursuit of meeting the standards (create fuel charges, set emissions limits, create OBPSs, etc.) (GGPPA Reference, para 132). The court also pointed out that the GGPPA does not block the provinces’ ability to legislate over GHG reduction in addition to any regulations that Parliament may impose (a nod to the double aspect doctrine). To the contrary, “federal jurisdiction in this field is narrowly constrained to address the risk of provincial inaction regarding a problem that requires cooperative action” (GGPPA Reference, para 131). This was a direct reference to the carbon leakage problem noted above.
In his dissent, Justice Huscroft found that the GGPPA was invalid under the national concern branch. In Justice Huscroft’s view, the pith and substance of the Act is simply “the regulation of GHG emissions” (GGPPA Reference, para 213). Unsurprisingly, this definition of the Act’s pith and substance is too broad to fit beneath the national concern branch. Justice Huscroft found that the Act lacked the requisite singleness and indivisibility from matters of provincial concern, noting that while the provinces are unable to set minimum national standards for GHG reduction specifically, they are perfectly able to tackle GHG reduction in other ways, and those ways do not demand coordinated national action. Justice Huscroft also acknowledged the existence of the carbon leakage problem, but concluded that this was the result of “legitimate political disagreement on a matter of policy” (i.e. the suitability of carbon pricing in controlling GHG emissions), and that the issue was not indicative of provincial inability (GGPPA Reference, para 231). Finally, Justice Huscroft concluded that the majority’s determination of the Act’s pith and substance (“minimum national standards for GHG reduction,” omitting the word “pricing”) was incompatible with the constitutional division of powers, as “minimum national standards” was too vague to adequately contain the grant of power to Parliament over GHG pollution reduction.
The GGPPA Reference is notable for at least two reasons: (1) the Attorney General of Canada relied almost exclusively on an untested national concern argument, and (2) the majority of both the ONCA and the SKCA accepted it, a bold and novel assertion of federal jurisdiction.
The Attorney General of Canada, which developed its litigation strategy for the GGPPA Reference under former Attorney General Jody Wilson-Raybould, relied on a national concern branch submission at both the ONCA and the SKCA. This litigation strategy is a dramatic attempt to expand Parliament’s capacity to respond to the climate change emergency by expanding the existing parameters of the national concern branch power. The strategy is also fraught with risk, as the Crown Zellerbach test, as it is approached in existing case law, does not seem to favour the GGPPA. Depending on how the pith and substance of the Act is characterized, it may lack the requisite singleness and indivisibility from matters of provincial concern and/or may have an unacceptable scale of impact on provincial jurisdiction, as Justice Huscroft’s dissent pointed out. Given how wary the courts have been of relying on POGG to allocate new subject matters to exclusive federal jurisdiction, Canada’s decision to lean on POGG is a daring choice indeed. The litigation strategy seems to have been at least partially principled, as it dovetails well with Canada’s substantive arguments that climate change has reached a level of severity that demands coordinated national (and indeed international) action. The decision to rely on POGG rather than on s 91(3) (the federal taxation power) also seems to have been partially political – no government wants to be held responsible for introducing a new tax, particularly during an election year.
The second notable feature of the GGPPA Reference is the ONCA and SKCA’s willingness to uphold the Act under POGG despite the doctrinal difficulties. As it stands, national concern branch jurisprudence requires a subject matter to satisfy each element of the Crown Zellerbach test, not just one. This means that a subject matter may be of extreme national importance (read: climate emergency), and may be beyond the capacity of the provinces to regulate effectively, but it will not be allocated to POGG if doing so would have a significant impact on provincial jurisdiction. In other words, the Crown Zellerbach test tends to stress the “balance of powers” component over the “national concern” analysis, which is only step 1 of the equation. The jurisprudence seemed to suggest that the GGPPA was going to face an uphill battle in court: Climate change is clearly an issue of national importance, but whether the GGPPA has a tolerable scale of impact on the constitutional division of powers seemed debatable. Overall, the ONCA’s willingness to recognize the GGPPA’s validity may represent a turning point in national concern branch jurisprudence. The unprecedented and urgent nature of climate change may have led the majority to push the boundaries of the POGG power, considering the “national concern” aspect more heavily, in order to accommodate federal action addressing the climate crisis.
While it is true that the ONCA eventually upheld the Act, it is crucial to note that no justice on the court sided with Canada’s pith and substance analysis. (To reiterate, Canada said that the GGPPA’s dominant characteristic was “the cumulative dimensions of GHG emissions.”) Indeed, between them, the justices of the ONCA and SKCA produced five judicial opinions on the pith and substance of the GGPPA, all of which differed from Ontario’s and Canada’s own submissions, for a total of seven possible interpretations. The extent of the division among the appellate bench indicates that the GGPPA’s true legislative objective remains wide open. The crux of the matter seems to be whether the Act is fundamentally about the reduction of GHG emissions in general or about carbon pricing in particular, carbon pricing being one means – but not the only means – of reducing GHG emissions. Canada attempted to claim federal jurisdiction over “the cumulative dimensions of GHG emissions reduction,” but the ONCA majority rejected this and found that the pith and substance was “minimum national standards for GHG reduction.” By contrast, ACJ Hoy in concurrence found that the GGPPA‘s main thrust was “minimum national pricing standards,” suggesting that carbon pricing specifically is integral to the GGPPA‘s overall constitutional validity. The ONCA majority did not explicitly say that the “minimum national standards” must include a carbon pricing component, which seems to indicate that the majority wishes Parliament to have leeway to adopt carbon emission reduction mechanisms other than carbon pricing under the GGPPA. Overall, the answer to this fundamental question about pith and substance remains unclear, and will surely be first on the docket at the SCC.
Another core aspect of the SCC decision will likely be how the Court chooses to approach the pith and substance analysis methodologically. At the ONCA, the court conducted an independent assessment of the Act’s pith and substance and rejected both Canada and Ontario’s submissions. It was this approach that subsequently allowed the justices to uphold the Act under the national concern branch. A similar situation took place at the SKCA, where Chief Justice Richards upheld the Act after defining the pith and substance as “minimum national standards of price stringency for GHG emissions” (2019 SKCA 40 at para 11). This fact did not escape the notice of Justice Huscroft at the ONCA, who opined in dissent that the SKCA had effectively “constitutionalize[d] the Act” (GGPPA Reference, para 224). How the SCC will approach its own pith and substance analysis remains to be determined. What we do know is that Canada’s success at the SCC will ride heavily on the answer to the pith and substance question.
Overall, as the ONCA and SKCA decisions make their way to the SCC, we should be watching closely to see whether the Court takes the opportunity to reconsider the strict limits placed on the national concern branch of POGG by the existing jurisprudence. The Court may seize on the chance to revise the Crown Zellerbach test, especially in the way it currently balances the protection of provincial autonomy with federal leadership over matters of urgent national concern. Whatever the high court decides, the outcome of the GGPPA Reference will represent both an important evolution in Canadian federalism jurisprudence and a complex judicial reckoning with the problem of climate change.
Author’s Note: The author wishes to thank Professor Bruce Ryder at Osgoode Hall Law School for providing research support on this post.
 The Saskatchewan appeal has been tentatively scheduled at the Supreme Court for December 2019 and the Ontario and Saskatchewan appeals will no doubt be heard together. In the meantime, the Alberta government has initiated an identical reference to its Court of Appeal. This is a legally moot exercise, as the SCC’s opinion in the Saskatchewan and Ontario appeals will prevail over the Alberta Court of Appeal’s decision.
 Saskatchewan declined to submit a pith and substance analysis, arguing that the GGPPA is invalid on the basis of unwritten constitutional principles.
 Examples of matters of genuinely national concern include aeronautics, nuclear power and marine pollution – another type of pollution that does not respect territorial boundaries.
 Courts have been especially reluctant to recognize federal jurisdiction where the legislative object at issue was not tightly defined (Oldman River) and where a considerable amount of discretion was left up to the federal political executive (Hydro-Quebec), i.e. in cases in which the scope of federal jurisdiction could not be clearly outlined and monitored. Since the power was resuscitated by the Privy Council in 1946 in Ontario AG v Canada Temperance Foundation ( AC 193), only a half-dozen subject matters have been allocated by the Supreme Court to the national concern branch of Parliament’s POGG power.
 At the SKCA, the majority found that the pith and substance was “minimum national standards of price stringency for GHG emissions.” Justices Ottenbreit and Caldwell in dissent found that the levy imposed under Part 1 of the Act was in pith and substance a section 91(3) tax, whereas the Part 2 OBPS levy was a regulatory charge (2019 SKCA 40, at para 265).