On Friday June 28, 2019, Ontario’s Court of Appeal released its decision upholding the federal government of Canada’s constitutional right to impose a nationwide price on carbon emissions. The Ontario provincial government, which brought the challenge, will seek leave to appeal  to the Supreme Court of Canada.

The Court’s decision follows a similar result for the Saskatchewan provincial government from the Saskatchewan Court of Appeal in May 2019. An appeal of that decision to the Supreme Court of Canada will be heard on December 5 this year. It seems likely that the two appeals with be heard together.

Ontario brought a reference to the Court of Appeal for Ontario asking the Court for its opinion on whether Canada’s Greenhouse Gas Pollution Pricing Act (the “Act”) is unconstitutional.

The Act was passed by Parliament in 2018. It puts a price on carbon pollution in order to reduce greenhouse gas (“GHG”) emissions and to encourage innovation and the use of clean technologies.

It places a fuel charge on certain producers, distributors, and importers who produce carbon-based fuels. It also establishes emissions limits for large industrial emitters of GHGs. Those that operate within their limit get a credit. Those that exceed it must pay a charge. The net revenues from these measures are returned to the province of origin or to certain other persons.

The Act serves as a backstop and applies to any province or territory that does not have a carbon pricing system that meets the federal benchmark. On October 19, 2018, Ontario was added to the list of non-compliant provinces to which the federal regime applies.

Canada’s constitution distributes legislative powers between Parliament and the provincial legislatures. To determine if legislation falls within federal or provincial authority, the first step is to examine the legislation’s purpose and effects to identify its main thrust. In the second step, the court determines whether that subject matter falls within the legislative authority of  Canada’s parliament or the provincial legislatures.

The majority of the Court (Chief Justice Strathy, Associate Chief Justice Hoy, Justice MacPherson, and Justice Sharpe) concluded that the Act is constitutional. They found that Act comes within Parliament’s power under s. 91 of the Constitution Act, 1867 to legislate on matters that are of national concern for the “Peace, Order, and good Government” of Canada. Justice Huscroft disagreed and concluded that the Act is unconstitutional.

Chief Justice Strathy (with whom Justice MacPherson and Justice Sharpe agreed) determined that the main thrust of the Act is to establish minimal national standards to reduce GHG emissions.

In his view, the Act falls within Parliament’s power to legislate on matters of national concern for the peace, order, and good government of Canada. GHGs are a distinct form of pollution that have no concern for provincial or national boundaries. Establishing minimum national standards to reduce GHG emissions has a singleness, distinctiveness, and indivisibility that distinguishes it from matters of provincial concern.

The Act leaves ample opportunity for provinces to pass legislation on other aspects of GHG regulation. The charges it imposes are not unconstitutional regulatory charges.

Associate Chief Justice Hoy wrote a separate opinion defining the main thrust of the legislation more narrowly as establishing minimum national GHG emissions pricing standards to reduce GHG emissions. Like Chief Justice Strathy, she concluded that the Act is constitutional under the national concern branch of the peace, order, and good government power.

Justice Huscroft also wrote a separate opinion. He concluded that the Act is concerned with regulating GHG emissions, and that recognition of a federal power to establish “minimum national standards” would impermissibly expand Parliament’s legislative authority.

To read the Court of Appeal’s decision, click here