Saskatchewan Court Upholds Federal Carbon Tax as Constitutional

Published by Tyler Berg & Rosemary Anderson

On May 3, 2019, the Saskatchewan Court of Appeal released its decision in the Saskatchewan government’s reference asking it if the federal “carbon tax” is unconstitutional.  The Court held that the federal legislation was validly enacted under the Constitution.  This article will give a brief summary of the Court’s decision and its potential impact on taxpayers going forward.

The Act

The federal government’s Greenhouse Gas Pollution Pricing Act (the “Act”) came into effect on June 21, 2018, and has since been the subject of much controversy and debate.  In general, the Act contains two regimes: a price on fossil fuel emissions (Part 1 of the Act) and a price on greenhouse gas emissions by industrial emitters (Part 2).

Part 1 of the Act currently applies in Ontario, New Brunswick, Manitoba, and Saskatchewan.  Part 2 currently applies in Ontario, New Brunswick, Manitoba, Prince Edward Island, Yukon, Nunavut, and partially in Saskatchewan.

Subsection 165(2) of the Act requires any money raised under the Act to be redistributed in the province it was collected in.  Further to this, section 122.8 of the federal Income Tax Act provides for a refundable tax credit for residents in provinces subject to Part 1 of the Act starting with the 2018 taxation year.

The Decision

Following the enactment of the Act, the Saskatchewan government brought a reference to its Court of Appeal asking it to determine if the Act was constitutional.  The Court heard arguments on February 13-14, 2019, and released its decision mere weeks later, signalling the significance of the decision and the Act as a whole.  The five-judge panel was split in its decision, with three judges holding that the Act is constitutional and two deciding it is not.

While the governments of Saskatchewan and Canada made the main submissions to the Court, the provinces of Ontario, New Brunswick, and British Columbia also made submissions, as did numerous private corporations, foundations, and First Nations.

Notably, each of the judges and parties to the appeal recognized the seriousness of human-caused climate change and the efficacy of carbon pricing regimes as a tool to combat this problem.  Significant quotes from the decision on this point include the following:

  • “…climate change caused by anthropogenic greenhouse gas [GHG] emissions is one of the great existential issues of our time.” (majority reasons, paragraph 4)
  • “…the factual record…indicates that GHG pricing is regarded as an essential aspect or element of the global effort to limit GHG emissions.” (majority reasons, paragraph 147)
  • “Because none of the Attorneys General dispute the causative effect anthropogenic GHGs have on climate change or the attendant and existential necessity of mitigating anthropogenic GHG emissions, the proof or truth of these facts is not at issue.  That is, they are proven and true.” (minority reasons, paragraph 236)

With this background in mind, both sets of reasons undertook an analysis of the constitutional validity of the Act.

The first issued analyzed by the Court is whether the Act imposes a “tax” in the constitutional sense of the word.  The majority of the Court held that the Act does not impose a tax, but rather a regulatory fee or levy, because the Act does not have a revenue-raising purpose.  The majority cited the fact that all revenues collected by the federal government under the Act are to be returned to the provinces they are collected from, either to the provincial government or directly to individual taxpayers.  Despite this, the Court held that the Act is within federal jurisdiction as falling under the “national concern” branch of the federal government’s “peace, order and good government” (“POGG”) power under the Constitution.  To reach this conclusion, the majority held that the “pith and substance”, or practical effect, of the Act was “the establishment of minimum national standards of price stringency for GHG emissions”.

The minority decision held that the fuel charge under Part 1 of the Act does in fact impose a tax (i.e. it is prima facie within the federal government’s jurisdiction), but that it is nevertheless unconstitutional as leaving too much power delegated to the executive branch.  The minority held that Part 2 of the Act does not impose a tax, and does not fall under the federal government’s POGG power.  The minority characterized the pith and substance of the Act more broadly than the majority, holding it to simply be “GHG emissions”.


The Saskatchewan Court of Appeal’s decision provides some guidance to taxpayers affected by the Act.  However, given the likelihood of this decision being appealed to the Supreme Court of Canada (“SCC”), the future of the carbon tax is by no means certain.

One of the main issues clouding the carbon tax moving forward is the fact that taxpayers in the affected provinces have already paid their taxes and potentially received rebates from the federal government.  This would become an issue if the Act is rendered unconstitutional on appeal to the SCC, or in one or more of the court challenges which have been hinted at in Ontario, New Brunswick, and Alberta.  In Kingstreet Investments Inc v New Brunswick, the SCC suggested that taxes collected under an unconstitutional tax should be returned to the taxpayers.  If the SCC follows the same reasoning in the event that it finds the Act to be unconstitutional, it is unclear how this would affect taxpayers who have directly or indirectly paid taxes under the Act (would these amounts be refunded, even though they likely passed these costs on to consumers?), taxpayers who received rebates (would they be forced to repay these amounts?), and provinces (would they similarly need to repay any amounts received from the federal government?).

Also muddying the waters is Alberta’s potential removal of its provincial pricing on emission levies on May 30, with this legislation currently making its way through the Alberta legislature.  If this comes to pass, it is unclear whether the federal government will amend the Act to have it apply immediately in Alberta, or if there will be a period where neither carbon pricing regime applies in this province.

These uncertainties impact taxpayers in all of the affected provinces, from trying to determine whether, when, or which tax will apply to them, to potentially having to repay rebates received under the Act if it is ultimately ruled unconstitutional.  However, often when the SCC holds that federal legislation is unconstitutional, it will give the government a period of time (usually one year) to replace the legislation while the original legislation remains in effect. Thus, in this case if the SCC rules that the Act is unconstitutional, taxpayers can take some solace in the fact that there could an extended period of certainty while the federal government and provinces work out a replacement to the Act (although this certainty could be in the form of some taxpayers being subject to an unconstitutional tax for up to a year).

Of course, all of these questions will be irrelevant if the SCC (and/or all of the remaining provinces launching their own court challenges) side with the majority of the Saskatchewan Court of Appeal in deciding that the Act was validly enacted under the Constitution.


Ultimately, three of the five judges of the Saskatchewan Court of Appeal concluded that national minimum pricing on carbon is properly within federal jurisdiction under the Constitution, a decision which is an important win for the federal government and the international fight against carbon emissions and climate change.  However, with the future of the federal carbon tax very much in questions, taxpayers would do well to keep abreast of future court cases regarding the Act.