A Detailed Analysis of the SCC Decision Confirming the Constitutionality of the Federal Carbon Pricing Regime

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 relation to greenhouse gas (“GHG”) emissions.  In a 6-3 decision, the majority of the SCC held that the GGPPA is constitutional in full.

This post provides a detailed analysis of the SCC’s reasoning.  We have previously provided comments on the impact of the decision on consumers and businesses.

Background

This case comprised appeals from the Courts of Appeal of Saskatchewan, Ontario, and Alberta.  The majorities of the Saskatchewan and Ontario Courts of Appeal held that the GGPPA is constitutional, while the majority of the Alberta Court of Appeal held that the statute is unconstitutional.  Our previous summaries of the Saskatchewan, Ontario, and Alberta decisions provide greater background on the operation and application of the GGPPA.

Majority Reasons

The reasons for the majority of the SCC were written by Chief Justice Wagner and make up the first third of a nearly 400-page decision.  Similar to the decisions of each of the lower courts, the majority framed the context of this appeal by stating, unequivocally, that “Climate change is real … and it poses a grave threat to humanity’s future” (para. 2).

The main issue before the SCC was whether the federal government has the constitutional authority to enact the GGPPA under its “peace, order and good government” (“POGG”) power in section 91 of the Constitution.  Specifically, the majority focused on whether the GGPPA fell within the “national concern” doctrine of the POGG power which has been developed in the jurisprudence.

The analysis of the constitutionality of a statute proceeds in two broad stages: first, the “pith and substance”, or true subject matter, of the statute is identified; second, the pith and substance of the statute is classified under the federal and provincial heads of power in sections 91 and 92 of the Constitution (para. 47).  If the statute is classified under a head of power belonging to the body that enacted it, the statute is constitutional.

The classification of the pith and substance of the GGPPA was a key consideration of each of the lower courts and the SCC.  The majority of the SCC determined that the true subject matter of the GGPPA is establishing minimum national standards of GHG price stringency to reduce GHG emissions (para. 57).  The majority reached this conclusion on numerous grounds:

• the title, preamble, and “mischief” addressed by the GGPPA indicate that its focus is not climate change or the regulation of GHG emissions generally, but rather the more precise goal of setting a national minimum price on GHG emissions in order to reduce those emissions across Canada (paras. 58-61);

• the context of the enactment of the GGPPA included the conclusions of numerous committees and working groups that carbon pricing is a key element in combatting climate change, and the legislative debates leading up to the GGPPA were focused on establishing a federal “backstop” carbon pricing system (paras. 62-69);

• the legal effects of the GGPPA are centrally aimed at pricing GHG emissions nationally, applying only in provinces which are determined to have insufficient carbon pricing systems, rather than addressing GHG emissions more broadly by, for example, regulating activities and industries that produce GHG emissions (paras. 70-76); and

• the practical effects of the GGPPA were too difficult to ascertain to be of much assistance, but the evidence of practical effects from the short time period in which the legislation has been in force is consistent with the principle of flexibility and support for provincially-designed GHG pricing schemes (paras. 77-79).

In reaching its conclusion on the pith and substance of the GGPPA, the majority addressed concerns raised in the dissenting reasons (discussed below) regarding the discretion afforded to the Governor in Council under the statute, including the ability to change the provinces in which the GGPPA applies.  The majority stated that this discretion is limited by the statutory purpose of the GGPPA and the guidelines under which this discretion must be exercised (e.g. that the stringency of provincial GHG pricing mechanisms must be taken into account), and that any overreach of discretion would be subject to judicial review in the Federal Court.  The majority was of the opinion that this discretion did not broaden the pith and substance of the GGPPA beyond that which it identified (paras. 73-76).

Having concluded that the pith and substance of the GGPPA is imposing a minimum national standard of GHG price stringency, the majority of the SCC went on to analyze whether that fell under the national concern doctrine of the federal government’s POGG power.  The majority’s analysis involved three tests, which were derived from the relevant case law: a threshold question; the “singleness, distinctiveness, and indivisibility” analysis; and the “scale of impact” analysis (para. 132).

The threshold question is whether the pith and substance of the impugned statute is of sufficient concern to Canada as a whole.  The majority concluded that the GGPPA easily met this standard, given the “undisputed existence of a threat to the future of humanity” and that carbon pricing is a critical part of addressing this threat (paras. 167-171).

The singleness, distinctiveness, and indivisibility test was met because the provinces individually are unable to implement a system of minimum national pricing standards for GHG emissions.  The failure of one province to implement minimum pricing standards would jeopardize the success of the plan in other provinces and have grave consequences for the residents of those other provinces (paras. 172-195).

Finally, the majority acknowledged that classifying the pith and substance of the GGPPA under the national concern doctrine would impact provincial legislative jurisdiction.  However, the majority held that the scale of this impact was acceptable, given that the intrusion on provincial jurisdiction is minimal and that there would be irreversible consequences if the federal government was unable to legislate in this area (paras. 196-206).

The majority therefore upheld the constitutionality of the GGPPA as a whole.  It also addressed concerns of the dissenting judges that this decision would “open the floodgates” and allow federal legislation to impose “minimum national standards” in all areas of provincial jurisdiction.  The majority stressed that the test for finding that a matter is of national concern is an “exacting one”.  To meet the test, it must be established that the matter of national concern is qualitatively different from matters of provincial concern and that federal jurisdiction is necessary due to provincial inability to deal with the matter.  In the majority’s view, the concern that their decision would open the floodgates to federal intrusion is “entirely misplaced” (paras. 207-211).

Dissenting Reasons

Justices Côté, Brown, and Rowe each wrote separate dissenting reasons.  Justice Côté would have struck down part of the GGPPA as unconstitutional, while Justices Brown and Rowe would have struck down the entire statute.

Justice Côté agreed with the majority that establishing minimum national standards of GHG price stringency to reduce GHG emissions is within federal jurisdiction under the national concern doctrine, but held that the GGPPA does not perform this function and instead invalidly delegates legislative authority to the executive branch by affording broad discretion to the Governor in Council.  She concluded that these discretion-granting provisions were unconstitutional (paras. 222-295).

Justice Brown delivered a dissent which was highly critical of the majority’s reasons.  He identified the pith and substance of Part 1 of the GGPPA as “the reduction of GHG emissions by raising the cost of fuel” and of Part 2 of the GGPPA as “the reduction of GHG emissions by pricing emissions in a manner that distinguishes among industries based on emissions intensity and trade exposure.”  Justice Brown stated that these matters both fall within provincial jurisdiction, and criticized the majority’s use of “minimal national standards” to justify their conclusion.  He stated that the federal government could have achieved its goals using other heads of power under the Constitution, such as its taxation power.  Justice Brown therefore concluded that the GGPPA is unconstitutional (paras. 296-456).

Justice Rowe generally adopted the reasons of Justice Brown as to why, in his opinion, the GGPPA is unconstitutional.  Justice Rowe also took issue with the three-part analysis undertaken by the majority to classify the pith and substance of the GGPPA.  He stated that the POGG power should be a doctrine of last resort, and that before it can be applied, it must first be determined that the relevant matter does not fall under any of the enumerated federal and provincial heads of power.  He also held that a provincial inability to legislate on a matter does not automatically mean that the matter is one of national concern.  Finally, Justice Rowe invited future challenges to the constitutionality of regulations made under GGPPA, notwithstanding the majority’s decision on the validity of the statute itself, setting out his view of the appropriate methodology for reviewing such regulations (paras. 457-616).