SCC Confirms Constitutionality of Federal Carbon Pricing Regime – Key Takeaways for Businesses and Consumers

On March 25, 2021, the Supreme Court of Canada (“SCC”) delivered its much-anticipated judgment on the constitutional validity of the Greenhouse Gas Pollution Pricing Act (“GGPPA”), the statute which enacts the federal government’s carbon pricing standard.  In a 6-3 decision, the majority of the SCC held that the GGPPA is constitutional in full.

This post focuses on the key takeaways for businesses and consumers.  A detailed analysis of the decision will be posted in the coming days.

Provinces where the GGPPA currently applies must now decide whether to implement their own carbon pricing systems or accept the continued application of the federal backstop.  Saskatchewan has already indicated that it will implement its own system.  All provinces will also need to continually update their pricing systems as the standards under the GGPPA increase, or risk being supplemented or replaced by the federal scheme.

For businesses, this decision could lead to an increased burden of regulatory compliance as well as costs.  Businessowners may now need to understand and implement or consider new carbon pricing schemes in numerous provinces in which they operate.

For consumers in provinces where new carbon pricing systems are introduced, this will mean losing the annual rebate under the GGPPA (which is currently implemented under the income tax system).  Provinces may introduce their own rebate systems, but the federal rebates will be lost.

Finally, the SCC’s decision does not preclude future challenges to the federal carbon pricing system.  Decisions or rules which do not fit within the purpose of the GGPPA identified by the SCC could be subject to future challenge in the courts.  Part 2 of the GGPPA may be ripe for such challenges, as it provides for broad discretion in allowing the federal government to set emissions pricing standards for specific industries and/or specific emitting facilities.

Overall, this is a significant win for the federal government and its use of carbon levies and national emission standards in the fight against climate change.  The practical effects of the SCC’s decision, however, particularly in provinces where the GGPPA currently applies, remain to be seen.