Court of Appeal of Alberta Declares Federal Greenhouse Gas Pollution Pricing Act Unconstitutional

In Reference re Greenhouse Gas Pollution Pricing Act, a 4-1 majority of the Court of Appeal of Alberta (ABCA) held that Parts 1 and 2 of the federal Greenhouse Gas Pollution Pricing Act (Act) are unconstitutional in their entirety (Decision). Justice Kevin Feehan dissented.

The ABCA's Decision is the first time that a court has found the Act to be unconstitutional. In split decisions released last year, both the Court of Appeal for Ontario (ONCA) and the Court of Appeal for Saskatchewan (SKCA) concluded that the Act is constitutional. All told, eight appellate judges have now found the Act to be constitutional, while seven appellate judges have found the Act to be unconstitutional. The issue is clearly a difficult one and courts are sharply divided.

The Supreme Court of Canada (SCC) is set to finally determine the matter following the hearing of the Saskatchewan and Ontario appeals in Ottawa on March 24, 2020, and March 25, 2020, respectively. The key question for the SCC is whether the federal government has the constitutional authority to enact the Act, or whether the Act unduly interferes with provincial jurisdiction.

BACKGROUND

The Act came into force on June 21, 2018, with certain provisions coming into force in January 2019. The purpose of the Act is to cause behavioural change by introducing a national greenhouse gas (GHG) pricing system. The Act seeks to accomplish this goal by empowering the federal government to administer and enforce a two-pronged carbon pricing system depending on whether a province or territory meets the federal benchmarks specified in the Act. Part 1 of the Act establishes a fuel "charge." Part 2 contains an output-based pricing system for large industrial emitters. For a detailed discussion about the mechanics of the Act, see our December 2018 Blakes Bulletin: Federal Carbon Pricing System Coming Into Force January 2019: How Will it Impact Your Business?

The Attorneys General in Saskatchewan, Ontario and Alberta each launched constitutional challenges to the Act. A majority of the SKCA concluded that the Act is constitutional pursuant to the national concern branch of Parliament's power over peace, order and good government (POGG). A majority of the ONCA agreed.

The Attorney General of Canada (Canada) sought to defend the constitutionality of the Act before the ABCA with sole reference to the national concern branch of POGG. In doing so, Canada abandoned previous efforts to defend the Act based on other enumerated federal powers, including powers over trade and commerce, criminal law and national emergencies.

ABCA DECISION

The majority observed that the "pith and substance" of the Act is, at a minimum, the "regulation of GHG emissions." By regulating such a broad area, the majority concluded that the Act "is a constitutional Trojan horse" that has a "scale of impact on provincial jurisdiction [that] is irreconcilable with the fundamental distribution of legislative powers under the Constitution." As a result, the majority declared the Act unconstitutional.  

The majority reached this conclusion on two separate bases:

• First, the majority of the ABCA observed that, by regulating GHG emissions, the Act engages core provincial jurisdiction over natural resources, property and civil rights, local works and undertakings, and direct taxation. In the majority's view, there is no scope for the national concern branch of POGG to apply. In making this determination, the ABCA observed that neither the SKCA nor ONCA had considered generally the provinces' powers to regulate their natural resources. The majority held that provincial jurisdiction over natural resources was integral to the analysis; and

• Second, even if there were room for the national concern doctrine to apply, the Act fails to qualify for that doctrine. The matters addressed by the Act are not sufficiently "distinct" or "indivisible" from matters of provincial concern. Moreover, the Act's scale of impact on provincial jurisdiction is not reconcilable with the fundamental distribution of legislative power under the Constitution. The Act opens the door to federal regulation of virtually every segment of the provincial economy and society.

In dissent, Justice Feehan would have upheld the Act. In his view, the Act falls within the jurisdiction of the federal government pursuant to the national concern branch of POGG because of the growing need to address climate change and the difficulty of obtaining cooperation from all provinces and territories.

CONCLUSION

In March 2020, the SCC is set to hear arguments about the constitutionality of the Act. The stakes are indisputably high. As the ABCA wrote, this case cuts to the heart of "how to resolve social, economic and environmental issues in this country in a way that maintains public trust and confidence in our democratic federal state and the Rule of Law."

For further information, please contact:

Dalton W. McGrath, Q.C.                    403-260-9654
Dufferin Harper                                   403-260-9710
Michael O'Brien                                   403-260-9753
Brendan MacArthur-Stevens             403-260-9603
 
or any other member of our Litigation & Dispute Resolution or Environmental groups.