Greenhouse Gas Pollution Pricing Act

Court of Appeal for Saskatchewan

Docket: CACV3239

Citation: Reference re Greenhouse Gas

Pollution Pricing Act, 2019 SKCA 40

Date: 2019-05-03

IN THE MATTER OF THE GREENHOUSE GAS POLLUTION PRICING ACT,

BILL C-74, PART 5

AND IN THE MATTER OF A REFERENCE BY THE LIEUTENANT

GOVERNOR IN COUNCIL TO THE COURT OF APPEAL FOR SASKATCHEWAN

UNDER

THE CONSTITUTIONAL QUESTIONS ACT, 2012, SS 2012, c C-29.01

Before:

Richards C.J.S., Jackson, Ottenbreit, Caldwell and Schwann JJ.A.

Disposition:

The majority of the Court is of the opinion that the Greenhouse Gas

Pollution Pricing Act is not unconstitutional in whole or in part. The

minority of the Court is of the opinion that the Act is wholly

unconstitutional.

Majority reasons by:

In concurrence:

The Honourable Chief Justice Richards

The Honourable Madam Justice Jackson

The Honourable Madam Justice Schwann

Minority reasons by:

The Honourable Mr. Justice Ottenbreit and The Honourable

Mr. Justice Caldwell

Appeal Heard:

Counsel:

February 13–14, 2019

Mitch McAdam, Q.C., and Alan Jacobson for the Attorney General of

Saskatchewan

Sharlene Telles-Langdon, Brooke Sittler and Neil Goodridge for the

Attorney General of Canada

Joshua Hunter, Padraic Ryan and Thomas Lipton for the Attorney General

of Ontario

William Gould for the Attorney General of New Brunswick

Gareth Morley for the Attorney General of British Columbia

David Thera, Q.C., and Robert Affleck for Saskatchewan Power

Corporation and SaskEnergy Incorporated

Bruce Hallsor, Q.C., and Alexander Shalashniy for Canadian Taxpayers

Federation

Ryan Martin and Steven Dollansky for United Conservative Association

Jeffrey Grubb, Q.C., and Khurrum Awan for Agricultural Producers

Association of Saskatchewan Inc.

Lisa DeMarco and Jonathan McGillivray for International Emissions

Trading Association

Jennifer King and Michael Finley for Canadian Public Health Association

Amir Attaran and Matt Hulse for Athabasca Chipewyan First Nation

Jacqueline Wilson and Theresa McClenaghan for Canadian

Environmental Law Association and Environmental Defence Canada,

Inc.

Stuart Wuttke and Victor Carter for Assembly of First Nations

Joshua Ginsberg and Danielle Gallant for David Suzuki Foundation

Stewart Elgie and Nathalie Chalifour for Ecofiscal Commission of Canada

Nathan Hume for Intergenerational Climate Coalition

Larry Kowalchuk and Taylor-Anne Yee for Climate Justice Saskatoon;

National Farmers Union; Saskatchewan Coalition for Sustainable

Development; Saskatchewan Council for International Cooperation;

Saskatchewan Electric Vehicle Club; The Council of Canadians:

Prairie and Northwest Territories Region; The Council of Canadians:

Regina Chapter; The Council of Canadians: Saskatoon Chapter; The

New Brunswick Anti-Shale Gas Alliance; and Youth of the Earth

i

TABLE OF CONTENTS FOR THE MAJORITY REASONS

I. The question posed ................................................................................................................. 1

II. Overview................................................................................................................................. 1

III.

Background......................................................................................................................... 4

A. The greenhouse gas issue.................................................................................................... 4

B. International efforts to address climate change .................................................................. 6

C. Climate change initiatives in Canada.................................................................................. 8

D. The basic architecture of the Act....................................................................................... 10

E. The application of the Act................................................................................................. 12

IV.

Analysis............................................................................................................................. 13

A. Does the principle of federalism render the Act unconstitutional?................................... 15

B. Does the Act impose taxes in contravention of s. 53 of the Constitution Act, 1867? ....... 20

1. Basic principles............................................................................................................. 20

2. Does Part 1 impose a tax or a regulatory charge?......................................................... 22

3. Does Part 2 impose a tax or a regulatory charge?......................................................... 25

4. If Part 1 or 2 does impose a tax, is s. 53 of the Constitution Act, 1867 offended?....... 27

C. Is the Act sustainable under the national concern branch of POGG? ............................... 31

1. Basic principles............................................................................................................. 32

2. The pith and substance of the Act ................................................................................. 33

3. The POGG “matter” in issue......................................................................................... 35

4. Application of the Crown Zellerbach test..................................................................... 41

5. The validity of the Act................................................................................................... 46

D. Can the Act be upheld under heads of jurisdiction identified by the intervenors? ........... 47

1. The general trade and commerce power ....................................................................... 47

2. Treaty powers................................................................................................................ 50

3. Criminal law power....................................................................................................... 51

4. The emergency power................................................................................................... 57

5. Section 35 of the Constitution Act, 1982 ...................................................................... 57

E. A final issue ...................................................................................................................... 58

V. Conclusion ............................................................................................................................ 59

Appendix A................................................................................................................................. 149

ii

TABLE OF CONTENTS FOR THE MINORITY REASONS

I. Introduction........................................................................................................................... 60

II. The Constitution Act, 1867 ................................................................................................... 60

A. The division of powers...................................................................................................... 63

B. Sections 91 and 92 ............................................................................................................ 63

C. Pith and substance............................................................................................................. 69

1. Characterisation ............................................................................................................ 69

a. Background............................................................................................................... 69

b. Preamble to the Act ................................................................................................... 73

c. The two schemes of the Act ...................................................................................... 74

d. The two schemes and matter characterisation .......................................................... 76

2. Scheme of taxation or regulatory scheme? ................................................................... 77

a. The characteristics of a tax ....................................................................................... 79

b. Distinguishing a regulatory charge from a tax.......................................................... 79

3. Tax or regulatory charge? ............................................................................................. 80

a. Lawson tax analysis .................................................................................................. 81

b. Regulatory scheme analysis...................................................................................... 84

4. Classification of the Act.............................................................................................. 100

D. Constitutional limits on the power to tax........................................................................ 105

1. No clear and unambiguous delegation of the power to tax......................................... 110

2. Overbreadth in the delegation of law-making power ................................................. 112

3. The backstop aspect of the Act.................................................................................... 118

E. Peace, Order and good Government ............................................................................... 123

1. Federalism................................................................................................................... 123

2. The POGG power ....................................................................................................... 125

3. The two-step test in Crown Zellerbach....................................................................... 129

4. Analysis....................................................................................................................... 133

5. Conclusion under POGG ............................................................................................ 147

III.

IV.

Climate change and Confederation................................................................................. 147

Opinion ........................................................................................................................... 148

Appendix A................................................................................................................................. 149

Page 1

Richards C.J.S.

I.

THE QUESTION POSED

[1]

This is a reference pursuant to s. 2 of The Constitutional Questions Act, 2012, SS 2012,

c C-29.01. By way of Order in Council 194/2018, the Lieutenant Governor in Council has asked

the Court for an advisory opinion on the following question:

The Greenhouse Gas Pollution Pricing Act was introduced into Parliament on March 28,

2018 as Part 5 of Bill C-74. If enacted, will this Act be unconstitutional in whole or in

part?

[2]

The Greenhouse Gas Pollution Pricing Act, SC 2018, c 12, s 186 [Act], came into force

on June 21, 2018. It varies in some small particulars from Part 5 of Bill C-74, as referred to in

Order in Council 194/2018. I understand the Lieutenant Governor in Council to be concerned

with the Act as it presently stands and will proceed on that basis. All of the participants in these

proceedings took the same approach.

[3]

As explained below, and in answer to the question posed by the Lieutenant Governor in

Council, the Act falls within the legislative authority of Parliament. It is not unconstitutional in

whole or in part.

II.

OVERVIEW

[4]

The factual record presented to the Court confirms that climate change caused by

anthropogenic greenhouse gas [GHG] emissions is one of the great existential issues of our time.

The pressing importance of limiting such emissions is accepted by all of the participants in these

proceedings.

[5]

The Act seeks to ensure there is a minimum national price on GHG emissions in order to

encourage their mitigation. Part 1 of the Act imposes a charge on GHG-producing fuels and

combustible waste. Part 2 puts in place an output-based performance system for large industrial

facilities. Such facilities are obliged to pay compensation if their GHG emissions exceed

applicable limits. Significantly, the Act operates as no more than a backstop. It applies only in

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those provinces or areas where the Governor in Council concludes GHG emissions are not priced

at an appropriate level.

[6]

The sole issue before the Court is whether Parliament has the constitutional authority to

enact the Act. The issue is not whether GHG pricing should or should not be adopted or whether

the Act is effective or fair. Those are questions to be answered by Parliament and by provincial

legislatures, not by courts.

[7]

The Constitution Act, 1867 distributes legislative authority between Parliament and the

provincial legislatures. Broadly speaking, a statute is valid if its essential character falls within a

subject matter allocated to the legislative body that put the statute in place. Neither level of

government has exclusive authority over the environment. As a result, Parliament can legislate in

relation to issues such as GHGs so long as it stays within the four corners of its prescribed

subject matters and the provinces can do the same so long as they stay within their prescribed

areas of authority.

[8]

The Attorney General of Saskatchewan [Saskatchewan] challenges the Act by submitting

it imposes taxes in the constitutional sense of the term. This would normally be legally

unobjectionable because Parliament enjoys a broad taxing authority. However, Saskatchewan

contends the Act is invalid because the Governor in Council determines the provinces where it

operates. This is said to offend the principle of federalism in that the application of the Act

depends on whether a province has exercised its own jurisdiction in relation to pricing GHG

emissions to a standard considered appropriate by the Governor in Council. Saskatchewan also

says the Act runs afoul of s. 53 of the Constitution Act, 1867. Section 53 requires, in effect, that

taxes be authorized by legislative bodies themselves, not by executive government or otherwise.

[9]

Saskatchewan’s arguments on this front cannot be accepted. The principle of federalism

is not a free-standing concept that can override an otherwise validly enacted law. Rather, it is a

value to be taken into account when interpreting the Constitution. The s. 53 argument cannot be

sustained either because, in constitutional terms, the levies imposed by the Act are regulatory

charges, not taxes. In any event, even if they were taxes, the Act does not offend s. 53.

Parliament has clearly and expressly authorized the Governor in Council to decide where the Act

will apply.

Page 3

[10] Saskatchewan submits, by way of an alternative line of argument, that the Act is

unconstitutional because it is concerned with property and civil rights and other matters of a

purely local nature falling within exclusive provincial legislative authority. The Attorney General

of Canada [Canada] responds by seeking to uphold the Act as a valid exercise of Parliament’s

jurisdiction under the national concern branch of its “Peace, Order, and good Government”

[POGG] power. The national concern branch of POGG applies to matters of national

consequence that have a singleness, distinctiveness and indivisibility clearly distinguishing them

from matters coming within provincial jurisdiction and, as well, a scale of impact on provincial

jurisdiction that is compatible with the basic division of powers between Parliament and the

legislatures under the Constitution. Canada contends it should be recognized, under the national

concern branch, as having jurisdiction over “the cumulative dimensions of GHG emissions”.

This approach must be rejected because it would allow Parliament to intrude so deeply into areas

of provincial authority that the balance of federalism would be upset. Further, it would hamper

and limit provincial efforts to deal with GHG emissions.

[11] However, Parliament does have authority over a narrower POGG subject matter – the

establishment of minimum national standards of price stringency for GHG emissions. This

jurisdiction has the singleness, distinctiveness and indivisibility required by the law. It also has a

limited impact on the balance of federalism and leaves provinces broad scope to legislate in the

GHG area. The Act is constitutionally valid because its essential character falls within the scope

of this POGG authority.

[12] Various intervenors suggest the Act, or aspects of it, can be sustained under such federal

heads of power as trade and commerce, the emergency doctrine, criminal law and treaty powers.

Canada has chosen not to make these submissions itself but says it does not object to the Act

being upheld on any of these grounds. At the end of the day, none of these arguments are viable

in light of how Parliament has chosen to frame the Act.

[13] As explained below, it follows from all of this that the Act is not unconstitutional either in

whole or in part.

Page 4

III. BACKGROUND

A. The greenhouse gas issue

[14] GHGs are gases that absorb and re-emit infrared radiation. Carbon dioxide is the most

recognizable GHG.

[15] The general character of the GHG phenomenon and the basic science of climate change

are not contested by any of the participants in this Reference. In simplest terms, planet Earth

absorbs energy from sunlight. When that energy is emitted, GHGs capture some of it. This slows

the escape of such energy into space and, over time, heats the atmosphere and the surface of the

earth. These higher temperatures disrupt global climate patterns.

[16] The broad contours of the impact of anthropogenic emissions of GHGs and of the nature

of the climate change issue are summarized in Climate Change 2014 Synthesis Report Summary

for Policymakers [Climate Change 2014]. It was prepared by the Intergovernmental Panel on

Climate Change [IPCC], which was established by the United Nations Environmental

Programme and the World Meteorological Organization. The IPCC, as described by John

Moffet, Assistant Deputy Minister with Environment and Climate Change Canada, in his

affidavit of October 25, 2018, is “the leading world body for assessing the most recent scientific,

technical, and socio-economic information produced worldwide relevant to understanding

climate change, its impacts and potential future risks, and possible response options”. Climate

Change 2014 concludes as follows:

(a)

“Human influence on the climate system is clear, and recent anthropogenic

emissions of greenhouse gases are the highest in history. Recent climate changes

have had widespread impacts on human and natural systems” (at 2).

(b)

“Warming of the climate system is unequivocal, and since the 1950s, many of the

observed changes are unprecedented over decades to millennia. The atmosphere

and ocean have warmed, the amounts of snow and ice have diminished, and sea

level has risen” (at 2).

Page 5

(c)

“Anthropogenic greenhouse gas emissions have increased since the pre-industrial

era, driven largely by economic and population growth, and are now higher than

ever. This has led to atmospheric concentrations of carbon dioxide, methane and

nitrous oxide that are unprecedented in at least the last 800,000 years. Their

effects, together with those of other anthropogenic drivers, have been detected

throughout the climate system and are extremely likely to have been the dominant

cause of the observed warming since the mid-20th century” (emphasis in original,

at 4).

(d)

(e)

“Changes in many extreme weather and climate events have been observed since

about 1950. Some of these changes have been linked to human influences,

including a decrease in cold temperature extremes, an increase in warm

temperature extremes, an increase in extreme high sea levels and an increase in

the number of heavy precipitation events in a number of regions” (at 7).

“Continued emission of greenhouse gases will cause further warming and long-

lasting changes in all components of the climate system, increasing the likelihood

of severe, pervasive and irreversible impacts for people and ecosystems. Limiting

climate change would require substantial and sustained reductions in greenhouse

gas emissions which, together with adaptation, can limit climate change risks”

(at 8).

(f)

“Surface temperature is projected to rise over the 21st century under all assessed

emission scenarios. It is very likely that heat waves will occur more often and last

longer, and that extreme precipitation events will become more intense and

frequent in many regions. The ocean will continue to warm and acidify, and

global mean sea level to rise” (emphasis in original, at 10).

(g)

“Climate change will amplify existing risks and create new risks for natural and

human systems. Risks are unevenly distributed and are generally greater for

disadvantaged people and communities in countries at all levels of development”

(at 13).

Page 6

(h)

“Without additional mitigation efforts beyond those in place today, and even with

adaptation, warming by the end of the 21st century will lead to high to very high

risk of severe, widespread and irreversible impacts globally (high confidence). ...”

(emphasis in original, at 17).

None of these conclusions were challenged or put in issue by the participants in this Reference.

[17] Climate change impacts affecting Canada and Canadians include thawing permafrost,

increases in extreme weather and extreme weather events such as forest fires, degradation of soil

and water resources, increased frequency and severity of heat waves, and expansion of the ranges

of vector-borne diseases. Predictions show that Canada’s temperature, particularly in the Arctic,

will warm at a faster rate than that of the world as a whole. See: Affidavit of John Moffet at

paras 18–26.

B.

International efforts to address climate change

[18] The United Nations Framework Convention on Climate Change [Framework

Convention] was ratified by Canada in December of 1992 and came into force internationally in

March of 1994. The objective of the Framework Convention, as described in Article 2, is to

achieve the “stabilization of greenhouse gas concentrations in the atmosphere at a level that

would prevent dangerous anthropogenic interference with the climate system”.

[19] Canada’s commitments under the Framework Convention include a commitment to adopt

“national policies and take corresponding measures on the mitigation of climate change, by

limiting its anthropogenic emissions of greenhouse gases” (Article 4 at para 2(a)) with the aim of

“returning [GHG emissions] individually or jointly to their 1990 levels” (Article 4 at para 2(b)).

[20] The Framework Convention established a Conference of the Parties [COP], which is the

decision-making body of the Convention. All states that are parties are represented at the COP.

[21] The third session of the COP [COP 3] took place in Kyoto in 1997. The resulting Kyoto

Protocol observed that the GHG emission reduction targets established by the Framework

Convention were inadequate and established binding GHG reduction commitments for developed

country parties. Canada ratified the Kyoto Protocol in 2002 and committed to reduce its GHG

Page 7

emissions for 2008–2012 to an average of six percent below 1990 levels. Canada withdrew from

the Kyoto Protocol in 2012.

[22] COP 15 took place in Copenhagen in 2009. The Copenhagen Accord, agreed to by 114 of

the 194 parties to the Framework Convention, declared that “climate change is one of the

greatest challenges of our time” and recognized the scientific view that, to achieve the objective

of the Convention, the increase in global temperature should be below two degrees Celsius.

Canada joined the Copenhagen Accord and pledged to reduce its GHG emissions by 17 percent

from its 2005 levels by 2020.

[23] COP 21 was held in Paris in 2015. The resulting Paris Agreement was ratified by Canada

in October of 2016 and entered into force in November of 2016. Currently, the Paris Agreement

has been ratified by 179 states and the European Union.

[24] The preamble of the Paris Agreement reflects the COP’s assessment of the urgency of

addressing climate change. It includes the following terms:

Recognizing that climate change represents an urgent and potentially irreversible

threat to human societies and the planet and thus requires the widest possible cooperation

by all countries, and their participation in an effective and appropriate international

response, with a view to accelerating the reduction of global greenhouse gas emissions,

Also recognizing that deep reductions in global emissions will be required in order to

achieve the ultimate objective of the Convention and emphasizing the need for urgency in

addressing climate change,

…

Emphasizing with serious concern the urgent need to address a significant gap

between the aggregate effect of Parties’ mitigation pledges in terms of global annual

emissions of greenhouse gases by 2020 and aggregate emission pathways consistent with

holding the increase in the global average temperature to well below 2 °C above pre-

industrial levels and pursuing efforts to limit the temperature increase to 1.5 °C above

pre-industrial levels.

[25] To repeat, the aim of the Paris Agreement is to strengthen the global response to the

threat of climate change by “[h]olding the increase in the global average temperature to well

below 2 °C above pre-industrial levels and pursuing efforts to limit the temperature increase to

1.5 °C above pre-industrial levels” (Article 2 at para 1(a)). In order to achieve this goal, the

parties “aim to reach global peaking of greenhouse gas emissions as soon as possible,

recognizing that peaking will take longer for developing country Parties” (Article 4 at para 1).

Page 8

C.

Climate change initiatives in Canada

[26] Prior to Canada signing the Paris Agreement, the Prime Minister and all provincial and

territorial premiers [First Ministers] met in Vancouver to discuss climate change issues. The

result was the March 3, 2016, Vancouver Declaration on Clean Growth and Climate Change

[Vancouver Declaration]. First Ministers recognized the call in the Paris Agreement for

significant reductions in GHG emissions and committed to “implement GHG mitigation policies

in support of meeting or exceeding Canada’s 2030 target of a 30% reduction below 2005 levels

of emissions, including specific provincial and territorial targets and objectives” (at 1).

[27] The Vancouver Declaration spoke to increasing the level of ambition in relation to

limiting GHG emissions, promoting clean economic growth, and increasing action on adaptation

and resilience. In the section on GHG mitigation, the Declaration observed that carbon pricing

mechanisms were being used in Canada and elsewhere to “drive the transition to a low carbon

economy” (at 3). The Declaration also indicated that “the provinces and territories have the

flexibility to design their own policies to meet emission reductions targets, including their own

carbon pricing mechanisms” (at 3). The Declaration went on to provide for the establishment of

a Working Group on Carbon Pricing Mechanisms. The Working Group was to “provide a report

with options on the role of carbon pricing mechanisms in meeting Canada’s emissions reduction

targets, including different design options taking into consideration existing and planned

provincial and territorial systems” (at 7).

[28] The Working Group prepared a Final Report. It observed in the “Context” section that

many experts regard carbon pricing as “a necessary policy tool for efficiently reducing GHG

emissions” (at 5) and that there was a widespread international trend toward carbon pricing. The

Final Report went on to describe various carbon pricing mechanisms and to explore design

parameters for such mechanisms. It identified three options for carbon pricing: (a) a single

broad-based pricing mechanism for the entire country; (b) broad-based pricing mechanisms in all

jurisdictions but with flexibility of instrument choice; and (c) a range of broad-based pricing

mechanisms in some jurisdictions with the remaining jurisdictions instituting other mechanisms

or policies to meet specific GHG reduction targets within their jurisdictions (at 44).

Page 9

[29] The federal government released a document entitled Pan-Canadian Approach to Pricing

Carbon Pollution on October 3, 2016. The approach outlined in the document was grounded

both on the proposition that economy-wide carbon pricing was the most efficient way to reduce

GHG emissions and a recognition that several jurisdictions including British Columbia, Ontario

and Québec had already introduced carbon pricing regimes. The approach proposed by the

government involved a pan-Canadian “benchmark” for carbon pricing. The benchmark involved

a requirement that pricing regimes apply to essentially the same emission sources as British

Columbia’s carbon tax. The required stringency of the benchmark, for an explicit price-based

system, was that carbon pricing should start at a minimum of $10 per tonne in 2018 and rise by

$10 per year to $50 per tonne in 2022. The provinces with cap-and-trade systems would have to

ensure that emission reduction targets were in line with Canada’s overall reduction target. As

well, the federal government’s approach was stated to involve a “backstop”. This was the idea

that the federal government would introduce an explicit price-based carbon pricing system in

jurisdictions that did not meet the benchmark.

[30] First Ministers convened on December 9, 2016, to adopt the Pan-Canadian Framework

on Clean Growth and Climate Change [Pan-Canadian Framework]. It addressed carbon pricing

as well as matters concerning adaptation, clean technology and innovation issues. In relation to

carbon pricing, the Framework said the provinces and territories had the flexibility to design

their own policies to meet emission reductions targets and that the approach should be flexible

and recognize already implemented carbon pricing policies in some provincial jurisdictions. It

annexed the federal benchmark announced in October of 2016.

[31] It is also worth observing here that the Pan-Canadian Framework proceeded on the basis

that GHG pricing was a necessary, but not sufficient, response to the GHG problem. As a result,

the Pan-Canadian Framework also outlined extensive complementary actions in relation to

electricity generation, construction practices, transportation, industry, forestry, agriculture and

waste management. It also addressed financing for clean technology research and innovations.

[32] In May of 2017, the federal government released a document entitled Technical Paper on

the Federal Carbon Pricing Backstop [Technical Paper]. It outlined the components of the

proposed carbon pricing system and sought feedback from stakeholders. Further information was

Page 10

provided in Guidance on the Pan-Canadian Carbon Pollution Pricing Benchmark, a document

published by the federal government in August of 2017. Supplemental Benchmark Guidance

followed in December of 2017.

[33] The Government of Saskatchewan did not accept the federal government’s proposed

carbon pricing scheme and did not adopt the Pan-Canadian Framework. In December of 2017,

Saskatchewan released its own climate change strategy. Prairie Resilience: A Made-in-

Saskatchewan Climate Change Strategy outlined the steps the Province plans to take in order to

address climate change. This strategy does not include a broad-based carbon tax or levy. This

was explained as follows at page 1:

We wholeheartedly support efforts to reduce greenhouse gases. But those efforts must be

effective and they must not disadvantage one region of Canada more than another. A

federal carbon tax is ineffective and will impair Saskatchewan’s ability to respond to

climate change.

Our opposition to the federal government’s carbon tax should not be seen as reluctance to

act. Rather, it is a recognition that we must act, and act decisively, with all our economic

strength. For Saskatchewan, mitigation is not enough. Our agriculture and resource-rich

province must also focus on climate adaptation and resilience in order to be effective.

The Strategy includes a plan to impose sector-specific output-based performance standards on

facilities emitting more than 25,000 tonnes of CO₂equivalent per year and to obligate facilities

that emit more than the regulated standard to take compliance actions.

D.

The basic architecture of the Act

[34] The federal government proceeded with the legislative steps necessary to establish

minimum national standards of price stringency of GHG emissions. The Act was introduced in

the House of Commons in March of 2018 as Part 5 of the Budget Implementation Act, 2018,

No. 1, SC 2018, c 12 (Bill C-74).

[35] The Act came into force on June 21, 2018. It has four parts.

[36] Part 1 implements a fuel charge. It applies to 22 GHG-producing fuels listed in Schedule

2 of the Act. These include such things as gasoline, kerosene, fuel oil, propane, coke oven gas,

and methanol. The Governor in Council may add to, or delete from, this list (s 3, definition of

“fuel”; s 17(1)).

Page 11

[37] The charge under Part 1 applies to fuels that are produced, delivered or used in a listed

province (ss 17, 18, 21(1), 34 and 35), brought to a listed province from another place in Canada

(ss 19(1) and 20(2)) or imported into Canada at a place in a listed province (ss 19(2) and 20(3)).

Generally, a registered distributor will pay the fuel charge. The registered distributors will

typically be fuel producers or wholesale fuel distributors. Part 1 also imposes a charge on the

burning of combustible waste used to generate heat or energy (s 25).

[38] The amount of the charge for each fuel is set out in Schedule 2 of the Act. For 2019, the

specified rates represent $20 per tonne of CO₂equivalent emitted by each fuel. The rates rise to a

total of $50 per tonne of CO₂equivalent in 2022.

[39] The Part 1 charge is not payable on fuels delivered to specified persons. Such persons

include farmers and fishers in respect of qualifying fuels (s 17(2)). Further, the charge is not

payable on fuels delivered to industrial facilities subject to the output-based performance

standards under Part 2 of the Act. This is because GHG emissions for such facilities are priced

under Part 2.

[40] Part 1 also provides specific rules for determining the fuel charge applicable to certain

interjurisdictional air, marine, rail and road concerns (ss 28–35).

[41] The fuel charge is administered by the Minister of National Revenue acting through the

Canada Revenue Agency. Part 1 sets out a variety of administrative rules dealing with filing

obligations, filing periods and so forth. It also prescribes penalties and means of recovery.

[42] Part 2 of the Act establishes output-based performance standards for GHG emissions by

large industrial facilities. It applies to “covered facilities”. These are facilities either designated

by the Minister or meeting criteria specified in the regulations (s 169). Mr. Moffet indicates in

his affidavit that the initial intention is that the output-based performance standards will apply

primarily to facilities with annual CO₂equivalent emissions of 50 kt or more annually

(at para 111). See: Notice Establishing Criteria Respecting Facilities and Persons and

Publishing Measures, SOR/2018-213. As noted, covered facilities are exempt from the Part 1

fuel charge.

Page 12

[43] The annual GHG emissions limits for covered facilities will employ an emissions

intensity standard established by regulation. The output-based standard for an industry will be

prescribed as a percentage of the GHGs emitted on average by the facilities in the industrial

sector for a given unit of product.

[44] Part 2 requires a covered facility to provide compensation for the portion of its GHG

emissions that exceeds its annual limit (s 174). This can be done in one of three ways: (a) by

submitting surplus credits earned in the past or acquired from other facilities; (b) by paying an

excess emissions charge; or (c) a combination of both. If a facility emits less than its annual

limit, it will receive credits that it can bank and use for future compliance obligations or sell to

other regulated facilities (s 175).

[45] Part 2 also includes a variety of administrative enforcement provisions.

[46] Part 3 of the Act, which is not challenged in this proceeding, authorizes the Governor in

Council to make provincial laws applicable to federal works and undertakings, federal lands,

Indigenous lands, internal waters of Canada, the territorial sea, Canada’s exclusive economic

zone, and the continental shelf. It falls within the jurisdiction of Parliament.

[47] Part 4 of the Act requires the Minister of Environment to make reports to Parliament.

There is no suggestion that it is unconstitutional.

E.

The application of the Act

[48] Both Part 1 and Part 2 apply only in provinces or areas listed by the Governor in Council

in Schedule 1 of the Act. These listings are to be made for “the purpose of ensuring that the

pricing of greenhouse gas emissions is applied broadly in Canada at levels that the Governor in

Council considers appropriate” (ss 166(2) and 189(1)). In making an order listing a province or

area, the Act requires the Governor in Council to take into account, as the “primary factor”, the

stringency of provincial pricing mechanisms for GHG emissions (ss 166(3) and 189(2)).

[49] The Minister of National Revenue must distribute the revenues raised under Part 1 and

Part 2 in a listed province. That distribution may be made to the listed province itself, to

prescribed persons in that province, or to a combination of both (ss 165(2) and 188(1)).

Page 13

[50] The Governor in Council, for purposes of Part 1 of the Act, has listed Ontario, New

Brunswick, Manitoba and Saskatchewan. A modified fuel levy will also apply in Yukon and

Nunavut. See: SOR/2019-79. For purposes of Part 2 of the Act, the Governor in Council has

listed Ontario, New Brunswick, Manitoba, Prince Edward Island, Yukon and Nunavut.

See: SOR/2018-212. Part 2 applies only partially in Saskatchewan because the provincial

government has implemented its own output-based performance standards system for large

industrial facilities. See: SOR/2018-213.

IV. ANALYSIS

[51] Saskatchewan advances two main lines of argument in seeking to have the Act found

unconstitutional. The first is that the principle of federalism prevents Parliament from enacting a

statute applicable in only some provinces because of how those provinces have chosen to

exercise their legislative authority. Saskatchewan’s second argument is that the Act imposes a tax

and, because it allows the Governor in Council to decide where it applies, the Act offends the

requirement in s. 53 of the Constitution Act, 1867 that bills imposing taxes must originate in the

House of Commons. Saskatchewan goes on to deny that, as contended by Canada, the Act can be

sustained under Parliament’s authority under the national concern branch of POGG. It also

denies, as suggested by some intervenors, that the Act, or features of it, can be supported under

Parliament’s authority in relation to trade and commerce, emergencies, criminal law or treaties.

[52] In light of the arguments presented by Saskatchewan, Canada and the various intervenors,

it is appropriate to assess the constitutional validity of the Act by considering the following main

issues:

(a)

(b)

(c)

(d)

Does the principle of federalism render the Act unconstitutional?

Does the Act impose taxes in contravention of s. 53 of the Constitution Act, 1867?

Is the Act sustainable under the national concern branch of POGG?

Can the Act be upheld under heads of jurisdiction identified by the intervenors?

Page 14

[53] Each of these matters must be addressed in turn. However, before turning to them, it may

be useful to emphasize three basic points relevant to the required analysis.

[54] First, “the environment” is not a legislative subject matter that has been assigned to either

Parliament or the provincial legislatures under the Constitution Act, 1867. Rather, as the

Supreme Court put it in Friends of the Oldman River Society v Canada (Minister of Transport),

[1992] 1 SCR 3 at 64, the environment is “a constitutionally abstruse matter which does not

comfortably fit within the existing division of powers without considerable overlap and

uncertainty”. Justice La Forest explained this as follows in R v Hydro-Québec, [1997] 3 SCR 213

[Hydro-Québec]:

112

In considering how the question of the constitutional validity of a legislative

enactment relating to the environment should be approached, this Court in Oldman River,

supra, made it clear that the environment is not, as such, a subject matter of legislation

under the Constitution Act, 1867. As it was put there, “the Constitution Act, 1867 has not

assigned the matter of ‘environment’ sui generis to either the provinces or Parliament”

(p. 63). Rather, it is a diffuse subject that cuts across many different areas of

constitutional responsibility, some federal, some provincial (pp. 63-64). Thus Parliament

or a provincial legislature can, in advancing the scheme or purpose of a statute, enact

provisions minimizing or preventing the detrimental impact that statute may have on the

environment, prohibit pollution, and the like. In assessing the constitutional validity of a

provision relating to the environment, therefore, what must first be done is to look at the

catalogue of legislative powers listed in the Constitution Act, 1867 to see if the provision

falls within one or more of the powers assigned to the body (whether Parliament or a

provincial legislature) that enacted the legislation (ibid. at p. 65). If the provision in

essence, in pith and substance, falls within the parameters of any such power, then it is

constitutionally valid.

(Emphasis added)

[55] The second general point is that the standard methodology for deciding the constitutional

validity of a law applies, of course, to laws touching on or implicating the environment. This

methodology involves a two-stage process. To begin, it is necessary to determine the “pith and

substance” of the law in question. This involves identifying the essential character or dominant

characteristic of the law through an examination of both its purpose and its effect. Legislative

history, Parliamentary debates and other such extrinsic material may be considered in addressing

the question of purpose. The “mischief” that the legislation is aimed at curing may also be

considered. Assessing the effect of a law focuses on how the law will operate and how it will

affect Canadians. See, for example: Reference re Firearms Act, 2000 SCC 31 at paras 16–18,

[2000] 1 SCR 783.

Page 15

[56] In the next step of the analysis, the pith and substance of the legislation is slotted into the

roster of legislative powers found in ss. 91 and 92 of the Constitution Act, 1867. This is not a

precise science and may involve an interpretation of the scope of the power. As the Supreme

Court observed in Reference re Firearms Act at paragraph 26, “[l]aws mainly in relation to the

jurisdiction of one level of government may overflow into, or have ‘incidental effects’ upon, the

jurisdiction of the other level of government. It is a matter of balance and of federalism: no one

level of government is isolated from the other, nor can it usurp the functions of the other”. A law

is valid only if it falls within the jurisdiction of the enacting legislature.

[57] The third and final general point to note here is that the efficacy of a law in

accomplishing its goals does not bear on the division of powers analysis. The division of powers

issue is whether the law in question falls within the jurisdiction of Parliament or the provincial

legislatures. It is not whether the law is a sound policy initiative. Justice La Forest, dissenting but

not on this point, explained as follows in RJR-MacDonald Inc. v Canada (Attorney General),

[1995] 3 SCR 199 at para 44 [RJR-MacDonald]:

… the wisdom of Parliament’s choice of method cannot be determinative with respect to

Parliament’s power to legislate. The goal in a pith and substance analysis is to determine

Parliament’s underlying purpose in enacting a particular piece of legislation; it is not to

determine whether Parliament has chosen that purpose wisely or whether Parliament

would have achieved that purpose more effectively by legislating in other ways; see R. v.

Big M Drug Mart Ltd., [1985] 1 S.C.R. 295, at p. 358 (per Wilson J.) and Morgentaler,

supra, at p. 487:

Only when the effects of the legislation so directly impinge on some

other subject matter as to reflect some alternative or ulterior purpose do

the effects themselves take on analytic significance.

…

[58] With this background confirmed, I turn to the arguments that have been advanced about

the constitutional validity of the Act.

A.

Does the principle of federalism render the Act unconstitutional?

[59] Saskatchewan submits the principle of federalism is an “overarching limit” on

Parliament’s powers. It then argues Parliament is not constitutionally entitled to exercise its

legislative authority in ways that offend the principle of federalism. While not going so far as to

contend all federal statutes must have uniform application across the country, Saskatchewan

Page 16

argues Parliament cannot condition the application of laws on how provinces have chosen to

exercise their own legislative jurisdiction. Thus, so the argument goes, the Act cannot stand

because it applies only in those provinces that have not adopted GHG pricing regimes considered

appropriate by the Governor in Council.

[60] It is useful to begin by underlining that, as Saskatchewan concedes, there is no

recognized constitutional requirement that laws enacted by Parliament must apply uniformly

from coast to coast to coast. To the contrary, a number of decisions have upheld federal laws

with uneven geographic application. For example, in Russell v The Queen (1882), 7 App Cas 829

[Russell], the Privy Council sustained an Act allowing the Governor in Council, after a petition

from the electors of a city or county, to apply alcohol prohibitions to that city or county. In

Lord’s Day Alliance of Canada v British Columbia (Attorney General), [1959] SCR 497, the

Supreme Court upheld a legislative scheme that allowed provincial laws to provide exceptions to

federal bans on certain activities. In R v Burnshine, [1975] 1 SCR 693, dealing with a challenge

under the Canadian Bill of Rights, the Supreme Court upheld a federal law that gave special

sentencing options to judges in British Columbia. Justice Martland, for the majority, said a

requirement that laws apply uniformly in all areas of Canada would represent a “substantial

impairment of the sovereignty of Parliament in the exercise of its legislative powers” (at 705).

Justice Laskin, as he then was, noted in dissent that “[a]s a matter of legislative power only, there

can be no doubt about Parliament’s right to give its criminal or other enactments special

applications, whether in terms of locality of operation or otherwise” (at 715). R v Furtney, [1991]

3 SCR 89, also warrants mention. It dealt with Criminal Code charges for counselling the

violation of bingo lotteries. Justice Stevenson observed, at pages 104–105, that Parliament may

“incorporate provincial legislation by reference and it may limit the reach of its legislation by a

condition, namely the existence of provincial legislation”. See also: R v S. (S.), [1990] 2 SCR

254 at 289–290; R v Turpin, [1989] 1 SCR 1296 at 1333–1335; Coughlin v Ontario (Highway

Transport Board), [1968] SCR 569 at 575; Hydro-Québec at para 153.

[61] I turn, then, to the notion of federalism. It is one of the fundamental organizing principles

of the Canadian Constitution. See: Reference re Secession of Quebec, [1998] 2 SCR 217 at

para 57. This is so because the Constitution Act, 1867 divides political power between the federal

and provincial orders of government by assigning jurisdiction with respect to some subject

Page 17

matters to Parliament and assigning jurisdiction with respect to other subject matters to the

provincial legislatures. See: Maritime Bank of Canada (Liquidators) v Receiver-General of New

Brunswick, [1892] AC 437 (PC) at 441–442. Provincial legislatures and Parliament are sovereign

within their own realms. Thus, the federalism principle recognizes the autonomy of provincial

legislatures to independently develop their own political and policy priorities. As indicated in

Re The Initiative and Referendum Act, [1919] AC 935 (PC) at 942, the aim of the Constitution

Act, 1867 was not “to weld the Provinces into one, nor to subordinate Provincial Governments to

a central authority”.

[62] However, all of this said, federalism is not a free-standing constitutional imperative that

somehow independently trumps the distribution of powers prescribed by the Constitution Act,

1867. Rather, it is a value that informs how the Constitution, and especially how the division of

powers prescribed by the Constitution Act, 1867, is to be understood and interpreted. Thus, by

way of illustration, the breadth of Parliament’s jurisdiction over trade and commerce under

s. 91(2) of the Constitution Act, 1867 has been heavily concerned with “the need to reconcile the

general trade and commerce power of the federal government with the provincial power over

property and civil rights” (General Motors of Canada Ltd. v City National Leasing, [1989]

1 SCR 641 at 659 [General Motors]). As explained in Reference re Pan-Canadian Securities

Regulation, 2018 SCC 48 at para 100, the concern in this regard has been that an aggressive

interpretation of the trade and commerce power could overwhelm provincial authority in respect

of matters of a local nature and property and civil rights.

[63] A recent illustration of the federalism principle in action can be found in R v Comeau,

2018 SCC 15, [2018] 1 SCR 342. There, the Supreme Court was required to consider the impact

of s. 121 of the Constitution Act, 1867 – which provides that all articles of manufacture from any

province shall be “admitted free” into each of the other provinces – on a New Brunswick

restriction on the possession of out-of-province liquor. After observing that foundational

principles underlying the Constitution may aid in its interpretation, the Court said this about the

federalism principle:

[78]

Federalism refers to how states come together to achieve shared outcomes, while

simultaneously pursuing their unique interests. The principle of federalism recognizes the

“autonomy of provincial governments to develop their societies within their respective

spheres of jurisdiction”: Reference re Secession of Quebec, at para. 58; see also Caron v.

Alberta, 2015 SCC 56, [2015] 3 S.C.R. 511, at para. 5. The tension between the centre

Page 18

and the regions is regulated by the concept of jurisdictional balance: Reference re

Secession of Quebec, at paras. 56-59. The federalism principle requires a court

interpreting constitutional texts to consider how different interpretations impact the

balance between federal and provincial interests. The same concern has led to, for

example, the development of doctrines like the necessarily incidental doctrine and the

ancillary powers doctrine.

(Emphasis added)

[64] Another recent case, Quebec (Attorney General) v Canada (Attorney General), 2015

SCC 14, [2015] 1 SCR 693, is also instructive here even though it deals with the concept of

cooperative federalism (coordinated action between or among governments) as opposed to the

principle of federalism per se. It arose out of the federal government’s decision to abolish the

long-gun registry. Québec announced its decision to create its own gun registry and asked the

federal authorities for their data connected to Québec. Canada refused this request and Québec

then sought a declaration that it had a right to obtain the data, relying on the unwritten

constitutional principle of cooperative federalism. The Supreme Court ruled against Québec,

finding that the principle of cooperative federalism could not prevail over otherwise valid federal

legislation. Justices Cromwell and Karakatsanis, writing for the majority, said this:

[20]

In our respectful view, the principle of cooperative federalism does not assist

Quebec in this case. Neither this Court’s jurisprudence nor the text of the Constitution

Act, 1867 supports using that principle to limit the scope of legislative authority or to

impose a positive obligation to facilitate cooperation where the constitutional division of

powers authorizes unilateral action. To hold otherwise would undermine parliamentary

sovereignty and create legal uncertainty whenever one order of government adopted

legislation having some impact on the policy objectives of another. Paradoxically, such

an approach could discourage the practice of cooperative federalism for fear that

cooperative measures could risk diminishing a government’s legislative authority to act

alone.

[21]

We conclude that the principle of cooperative federalism does not prevent

Parliament from exercising legislative authority that it otherwise possesses to dispose of

the data.

(Emphasis added)

See also: Reference re Firearms Act at para 48; Rogers Communications Inc. v Châteauguay

(City), 2016 SCC 23 at para 39, [2016] 1 SCR 467; Reference re Pan-Canadian Securities

Regulation at para 18.

Page 19

[65] Notwithstanding these authorities, Saskatchewan suggests the strength of its federalism

argument is revealed by asking what would happen if a national government, spurned by the

electors in a particular province, implemented a tax aimed solely at that province in order to, in

effect, punish the electors in question. Saskatchewan submits that, in such a circumstance, the

principle of federalism would have to be invoked to invalidate the law. This line of argument is

not convincing. The easiest and most doctrinally regular answer to Saskatchewan’s hypothetical

problem lies in the doctrine of colourability, not in the principle of federalism. In other words,

the punitive law envisioned by Saskatchewan would be struck down not because it offended the

principle of federalism but because, in pith and substance, it was not a “tax” within the meaning

of s. 91(3) of the Constitution Act, 1867.

[66] There is little legal merit in Saskatchewan’s specific concern about Parliament

conditioning the application of a federal law on whether a province has chosen to exercise its

own jurisdiction. This is because of a very simple point. Parliament can only act within its own

sphere of legislative authority. Thus, if it can make a law applicable in a province in light of

provincial legislative inaction, that necessarily means it enjoyed the authority to make the law

applicable all along. Parliament cannot somehow acquire additional authority because of a

provincial decision not to act in relation to a particular matter. Parliament either has legislative

authority to act or it does not. There is no constitutional magic in the fact a province has failed to

move in a particular policy area.

[67] This fundamental reality is perhaps somewhat obscured in areas like the regulation of

GHG emissions where the constitutional boundaries between federal and provincial authority

might be somewhat unclear and where there is at least some room for both levels of government

to legislate. Nonetheless, the basic point remains the same. The scope of Parliament’s

constitutional authority is not dependent on how or whether a province has exercised its own

exclusive jurisdiction. Conversely, and putting the doctrine of paramountcy to the side, the scope

of a province’s constitutional authority is not dependent on how Parliament has or has not

exercised its jurisdiction.

Page 20

[68] Saskatchewan has referred to no judicial authority which in any way directly supports the

idea that the principle of federalism can or should independently render unconstitutional an

otherwise valid law. Its argument on this front cannot succeed.

B.

Does the Act impose taxes in contravention of s. 53 of the Constitution

Act, 1867?

[69] Subsection 91(3) of the Constitution Act, 1867 empowers Parliament to raise money “by

any Mode or System of Taxation”. In turn, s. 53 of the Constitution Act, 1867 requires that bills

imposing a tax must originate in the House of Commons. It reads as follows:

53. Bills for appropriating any Part of the Public Revenue, or for imposing any Tax or

Impost, shall originate in the House of Commons.

[70] Saskatchewan acknowledges Parliament’s broad authority to impose taxes. However, it

argued in its factum that Part 1 of the Act imposes an unconstitutional tax because of the

discretion enjoyed by the Governor in Council in deciding where Part 1 applies. It contended this

discretion offends not only the principle of federalism but s. 53 of the Constitution Act, 1867 as

well. In oral argument, Saskatchewan extended the reach of its submissions on this point and, for

the first time, took the position that Part 2 of the Act also imposes a tax and that it too is

unconstitutional by virtue of non-compliance with s. 53. Canada takes the position that the levies

imposed pursuant to the Act are regulatory charges, not taxes.

[71] In order to deal with these arguments, it is important to turn first to the controlling legal

principles. I will then consider whether either Part 1 or Part 2 impose levies that are “taxes” in

the constitutional sense of the term. Finally, it will be necessary to examine how s. 53 fits into

the analysis.

1.

Basic principles

[72] The broad characteristics of a tax were stated in Lawson v Interior Tree Fruit and

Vegetable Committee of Direction, [1931] SCR 357 to be: (a) a levy enforceable by law;

(b) imposed under the authority of the legislature; (c) levied by a public body; and (d) made for a

public purpose.

Page 21

[73] However, there is a difference between taxes on the one hand and regulatory charges,

including service charges, on the other. The leading case on this distinction is Westbank First

Nation v British Columbia Hydro and Power Authority, [1999] 3 SCR 134 [Westbank]. There,

the Supreme Court elaborated on the point previously made in Re Exported Natural Gas Tax,

[1982] 1 SCR 1004 at 1070, that a levy is a tax if its “primary purpose is the raising of revenue

for general [governmental] purposes” and that this stands in contrast to a “levy [imposed]

primarily for regulatory purposes, or as necessarily incidental to a broader regulatory scheme”.

[74] Justice Gonthier, writing for the Court in Westbank, explained that, in order for charges

to be imposed for regulatory purposes or to be otherwise incidental to a regulatory scheme, it is

first necessary to identify a regulatory scheme. He provided a non-exhaustive list of factors to

consider when determining if there is such a scheme in the required sense. Not all of these

factors need to be satisfied for such a scheme to exist.

[75] The first factor is whether there is a complete and detailed code of regulation. Such

schemes are usually characterized by complexity and detail. The second factor is a specific

regulatory purpose aimed at affecting behaviour. As Gonthier J. indicated, “a regulatory scheme

must ‘regulate’ in some specific way and for some specific purpose” (at para 26). The third

factor is actual or properly estimated costs of the regulation. Thus, for example, the levy found to

be a regulatory charge in Ontario Home Builders’ Association v York Region Board of

Education, [1996] 2 SCR 929, was said to have been “meticulously limited” to recoup only

actual costs. Significantly, although a regulatory charge may exist to offset the costs of the

regulatory scheme itself, “the regulatory charges themselves may be the means of advancing a

regulatory purpose” (at para 29). See also: Confédération des syndicats nationaux v Canada

(Attorney General), 2008 SCC 68 at para 72, [2008] 3 SCR 511 [Confédération]. The fourth and

final factor identified in Westbank as a consideration in determining whether a governmental

levy is a regulatory charge is the existence of a relationship between the regulation and the

person being regulated.

Page 22

[76] In broader and more essential terms, Westbank confirms that, in deciding whether a levy

is a tax or a regulatory charge, the fundamental point is as follows:

30

In all cases, a court should identify the primary aspect of the impugned levy. This

was the underlying current of the earlier cases on s. 125, which focussed on the “pith and

substance” of the charge: “Johnnie Walker” case [(1922), 64 SCR 377, aff’d [1924] AC

222]; Re Exported Natural Gas Tax [[1982] 1 SCR 1004]. Although in today’s regulatory

environment, many charges will have elements of taxation and elements of regulation, the

central task for the court is to determine whether the levy’s primary purpose is, in pith

and substance: (1) to tax, i.e., to raise revenue for general purposes; (2) to finance or

constitute a regulatory scheme, i.e., to be a regulatory charge or to be ancillary or

adhesive to a regulatory scheme; or (3) to charge for services directly rendered, i.e., to be

a user fee.

(Italics emphasis in original; underline emphasis added)

[77] With this background in place, it is now possible to turn to the particulars of the Act.

2.

Does Part 1 impose a tax or a regulatory charge?

[78] Saskatchewan argues, correctly, that the fact the levy imposed under Part 1 is referred to

in the Act as a “charge” does not answer the question of whether it is a tax. The characterization

of a levy for constitutional purposes involves an analysis of its substance. The label applied to a

levy is not determinative. The Supreme Court has, for example, found probate “fees” (Eurig

Estate (Re), [1998] 2 SCR 565 [Eurig Estate]) and employment insurance “premiums”

(Confédération) to be taxes.

[79] Saskatchewan goes on to contend that the fuel charge under Part 1 bears the hallmarks of

a tax in that payments must be made to the state under the compulsion of the law. Further, says

Saskatchewan, Part 1 is administered by the Minister of National Revenue, the monies in

question are paid into the Consolidated Revenue Fund and disputes with respect to the payment

of the charge are adjudicated by the Tax Court of Canada. In this broad sense, the fuel charge

does have several features that tend to give it the appearance of a tax. However, getting to the

root of the constitutional status of the charge requires a deeper look and, as part of that look, the

application of the approach mandated by Westbank.

[80] As for the first Westbank factor, Part 1 is properly characterized as being a complete and

detailed code of regulation. This is because Part 1 (a) identifies the fuel subject to the charge,

(b) specifies the amount of the charge with a view to influencing decisions bearing on GHG

emissions, (c) sets out very specific rules about the application of the charge in various

Page 23

circumstances including, for example, when fuel is brought into a listed province, when fuel is in

transit through a listed province and when fuel is held in supply tanks, (d) lays down specific

rules with respect to certain inter-jurisdictional air, marine, rail and road carriers, (e) specifies

reports, returns and payments, and (f) goes on to provide, more generally, for the administration

and enforcement of the scheme. Further, and importantly, Part 1 dovetails into the regulatory

regime established in Part 2 in that the fuel charge is not applicable to covered facilities. Thus, in

combination, Parts 1 and 2 operate as an inter-locking regime.

[81] Turning to the second Westbank factor, it is readily apparent that Part 1 has a specific

regulatory purpose which seeks to affect the behaviour of individuals. As explained above, the

Act is the product of a long line of initiatives and agreements tracing back to the Framework

Convention in 1992. The Act treats GHG pricing as a core element of the initiative to mitigate

GHG emissions and its self-evident regulatory purpose is to attach a minimum national cost to

GHG emissions so as to incentivize behavioural changes that will reduce such emissions.

[82] The third Westbank factor – actual or properly estimated costs of the regulation – has no

application to Part 1. The levy that Part 1 imposes is not designed or intended to raise funds to

defray the costs of regulation. Rather, Part 1 is an example of a scheme where the charge itself is

the means of advancing a regulatory purpose.

[83] This brings the analysis to the fourth Westbank factor, the relationship between the

regulation and the person being regulated. This too is a somewhat uninstructive inquiry in

situations where, as here, the charge itself is the instrument by which the regulatory purpose is

realized. In such circumstances, the person being regulated will necessarily have a connection

with the regulation by virtue of paying the charge.

[84] In summary, therefore, the Westbank factors indicate that the charges imposed pursuant

to Part 1 are part and parcel of a regulatory regime.

[85] In addition to the specific matters identified in Westbank, there are two further, and

important, considerations that suggest the charges imposed under Part 1 are not taxes. The first is

that the Minister of National Revenue must distribute the amount raised by the charges to the

Page 24

province, or persons in the province, from which that amount was raised. Subsection 165(2) of

the Act says this:

(2) For each province or area that is or was a listed province, the Minister must distribute

the net amount for a period fixed by the Minister, if positive, in respect of the province or

area. The Minister may distribute that net amount

(a) to the province;

(b) to persons that are prescribed persons, persons of a prescribed class or

persons meeting prescribed conditions; or

(c) to a combination of the persons referred to in paragraphs (a) and (b).

“Net amount” in s. 165(2) means the charges levied in a province or area less any amounts

refunded, rebated or remitted in respect of those charges (s 165(1)). On the face of the Act,

therefore, it would appear that the whole of the funds collected by virtue of the fuel charge must

be distributed by the Minister.

[86] Saskatchewan suggests this feature of the Act is of little significance because, it submits,

tax revenues are also returned to the public. This happens through various payments and grants,

through the provision of programs and services, and through the construction of public works.

This, of course, is broadly true. Governments do not typically hoard their tax revenues. But, there

is a difference between regular tax revenues and monies raised pursuant to the Act. A dollar

taken in by way of taxes can be used by the Government of Canada for any purpose in any part

of the country or, indeed, the world. By contrast, monies raised under the Act must be returned to

the listed province, persons in that province, or a combination of both. Fuel charge and

combustible waste revenues raised in Saskatchewan could not be employed by the federal

government, and at the discretion of the Governor in Council, to build a bridge or to offset the

federal government’s cost of making old age security payments. Rather, they must be returned,

in the form of cash so to speak, to the province or prescribed persons in the province. This in

itself is perhaps not wholly determinative of the status of the charge imposed by the Act.

However, it certainly does serve to distinguish the charges from what would typically be seen as

a tax.

[87] The second broad consideration here is equally important. It is this. The Act could fully

accomplish its objectives, i.e., the establishment of minimum national standards of price

stringency for GHG emissions, without raising a cent. In other words, if every province put in

Page 25

place a level of GHG pricing acceptable to the Governor in Council, the Act would not be

brought into operation anywhere in the country and, as a result, it would generate no revenue.

This tells the tale. A taxing statute is one that, in pith and substance, is designed and intended to

raise revenue for general purposes. See: Re Exported Natural Gas Tax at 1070; Westbank at

para 30. It is difficult to see how the Act, which is ultimately wholly disinterested in generating

revenue, can nonetheless be seen as a law with a primary purpose of raising revenue for general

purposes.

[88] To repeat, the central task of a court attempting to identify the pith and substance of a

charge is to determine whether the primary purpose of that charge is “to tax, i.e., to raise revenue

for general purposes” or “to finance or constitute a regulatory scheme” or “to charge for services

directly rendered”. In the circumstances here, the primary purpose of the Part 1 fuel charge is not

to raise revenue for general purposes. Rather, the fuel charge is the centrepiece of a regulatory

plan to increase the cost of GHG emissions and thereby mitigate them.

[89] In the end, and considering all of the relevant aspects of this issue, it must be concluded

that Part 1 of the Act does not impose a tax in the constitutional sense of the term.

3.

Does Part 2 impose a tax or a regulatory charge?

[90] The charge payable under Part 2 is prescribed by s. 174 of the Act. A person responsible

for a covered facility that emits GHGs in a quantity exceeding the applicable emissions limit

must provide compensation to the Minister. As noted earlier, s. 174(2) stipulates this may be

done either by the remittance of compliance units earned from emitting fewer GHGs than the

prescribed limit in the past, by paying an excess emissions charge, or by a combination of both.

The amount of the charge is specified in column 2 of Schedule 4. It is set at the same level as the

fuel charge in Part 1 of the Act, i.e., $10 per tonne of CO₂equivalent in 2018, increasing by

$10 per year until it reaches $50 per tonne in 2022.

[91] With this brief background in place, it is appropriate to turn to the Westbank analysis. As

for the first Westbank factor, the excess emissions charge is obviously part and parcel of a

detailed code of regulation. Part 2 establishes the output-based performance standards for GHG

emissions by large industrial facilities. In this regard, it specifies such things as registration

requirements and GHG reporting obligations and goes on to require covered facilities to measure

Page 26

their emissions output against a GHG limit. The excess emissions charge fits closely into this

overall scheme given that it stands as one way in which a person may provide the required

compensation for exceeding an emissions limit.

[92] The second Westbank factor asks whether there is a specific regulatory purpose aimed at

affecting behaviour. Again, this is beyond dispute. Part 2 aims to affect the behaviour of large

emitters by imposing economic incentives for them to limit and reduce GHG emissions.

[93] The third Westbank factor concerns actual or properly estimated costs of the regulation.

As is the case with the Part 1 fuel charge, this factor has no application to the obligation to pay

compensation under Part 2. It is not intended to raise funds to defray the costs of regulation.

Instead, the excess emissions charge itself, because it increases the cost of GHG emissions, is the

means of advancing the regulatory purpose.

[94] As for the fourth Westbank factor, I repeat my earlier comment made in connection with

Part 1. This factor engages awkwardly when the charge in issue is itself the regulatory tool.

Nonetheless, there is an undeniable connection here between those persons being regulated,

i.e., those persons required to pay excess emissions charges, and the regulation. It exists by virtue

of the payments themselves. There is also a connection, perhaps more in the sense of what is

contemplated in Westbank, because the operations of large industrial facilities “cause the need

for the regulation”.

[95] In light of all of this, the Westbank analysis points clearly to a conclusion that

compensation collected pursuant to Part 2 of the Act is tightly integrated into a regulatory

scheme.

[96] Moreover, just as with the fuel and combustible waste charges under Part 1, it is

important to note that the excess emissions charge is not intended to raise revenues for general

purposes. Rather, by virtue of s. 188 of the Act, the Minister of National Revenue must distribute

such revenues either to the province where the covered facility is located, or to persons in that

province, or to a combination of both. Further, the objective of Part 2 can be realized without the

Minister of National Revenue collecting any funds by way of the charge if provinces implement

adequate regimes of their own. In other words, if provinces were to put sufficiently rigorous

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emission standards in place, Part 2 would not come into operation. In any event, even when

Part 2 does apply, the operator of a facility can pay any required compensation to the Minister by

way of credits, not cash. And, if all covered facilities stay below their prescribed emissions

limits, no compensation of any sort is payable. This is not the statutory profile of a tax, i.e., of a

levy that has a primary purpose of raising revenue for general purposes.

[97] Taking all of the relevant factors into account, it is evident that the excess emissions

charge imposed under Part 2 of the Act is not a tax.

4.

If Part 1 or 2 does impose a tax, is s. 53 of the Constitution Act, 1867

offended?

[98] In light of the conclusion that the Act does not impose taxes, it is not strictly necessary to

consider the arguments based on s. 53 of the Constitution Act, 1867. However, in the interest of

completeness, I will deal with the impact of s. 53 should the Act be seen as imposing a tax.

[99] As noted above, s. 53 requires that bills “for imposing any Tax or Impost” must originate

in the House of Commons. In interpreting s. 53, the Supreme Court has focussed on its root

constitutional purpose. Thus, in 620 Connaught Ltd. v Canada (Attorney General), 2008 SCC 7

at para 4, [2008] 1 SCR 131 [Connaught], the Court indicated that s. 53 gives effect to the basic

democratic principle that the Crown may levy taxes only with the consent of elected

representatives. Justice Major explained this as follows in Eurig Estate:

30

In my view, the rationale underlying s. 53 is somewhat broader. The provision

codifies the principle of no taxation without representation, by requiring any bill that

imposes a tax to originate with the legislature. My interpretation of s. 53 does not prohibit

Parliament or the legislatures from vesting any control over the details and mechanism of

taxation in statutory delegates such as the Lieutenant Governor in Council. Rather, it

prohibits not only the Senate, but also any other body other than the directly elected

legislature, from imposing a tax on its own accord.

31

In our system of responsible government, the Lieutenant Governor in Council

cannot impose a new tax ab initio without the authorization of the legislature. As

Audette J. succinctly stated in The King v. National Fish Co., [1931] Ex. C.R. 75, at p.

83, “[t]he Governor in Council has no power, proprio vigore, to impose taxes unless

under authority specifically delegated to it by Statute. The power of taxation is

exclusively in Parliament.”

32

The basic purpose of s. 53 is to constitutionalize the principle that taxation

powers cannot arise incidentally in delegated legislation. In so doing, it ensures

parliamentary control over, and accountability for, taxation. As E. A. Driedger stated in

“Money Bills and the Senate” (1968), 3 Ottawa L. Rev. 25, at p. 41:

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Through the centuries, the principle was maintained that taxation

required representation and consent. The only body in Canada that meets

this test is the Commons. The elected representatives of the people sit in

the Commons, and not in the Senate, and, consistently with history and

tradition, they may well insist that they alone have the right to decide to

the last cent what money is to be granted and what taxes are to be

imposed.

(Emphasis added)

As stated in Ontario English Catholic Teachers’ Assn. v Ontario (Attorney General), 2001 SCC

15 at para 74, [2001] 1 SCR 470, “[t]he animating principle [of s. 53] is that only the legislature

can impose a new tax ab initio”.

[100] Saskatchewan does not challenge Parliament’s legislative authority to enact the Act under

its s. 91(3) taxation power. Indeed, it takes the initiative in arguing that the levies imposed by the

Act fall under s. 91(3). Saskatchewan’s real point lays one step down the road from this

characterization of the Act. It takes issue with the authority of the Governor in Council to

determine the provinces and areas to which the Act will apply. This authority is said to make the

Act non-compliant with s. 53.

[101] The relevant sections of the Act concerning the Part 1 fuel charge, ss. 166(2) and (3), read

as follows:

(2) For the purpose of ensuring that the pricing of greenhouse gas emissions is applied

broadly in Canada at levels that the Governor in Council considers appropriate, the

Governor in Council may, by regulation, amend Part 1 of Schedule 1, including by

adding, deleting, varying or replacing any item or table.

(3) In making a regulation under subsection (2), the Governor in Council shall take into

account, as the primary factor, the stringency of provincial pricing mechanisms for

greenhouse gas emissions.

Subsections 189(1) and (2) use the same language in conferring an authority on the Governor in

Council to decide the provinces and areas where Part 2 of the Act will apply.

[102] Saskatchewan’s submissions on the s. 53 issue are not persuasive. The situation

concerning the Governor in Council’s authority to determine where the Act will apply is readily

distinguishable from the one considered in Eurig Estate, the key authority invoked by

Saskatchewan on this wing of its argument. In Eurig Estate, the Administration of Justice Act

authorized the Lieutenant Governor in Council to make regulations requiring the payment of

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“fees” in respect of anything done by any person in the administration of justice. In purported

reliance on this authority, the Lieutenant Governor in Council put in place a regulation setting

out a schedule of ad valorem charges that had to be paid in order to obtain a grant of probate.

The majority of the Supreme Court found the probate charge to be a tax, not a fee, because (a) it

was enforceable by law, (b) it was levied by a public body, (c) it was intended for public

purposes, and (d) there was no connection between the amount of the levy and the cost of the

service of granting letters probate. Justice Major then went on to find the probate levy to be non-

compliant with s. 53, and hence unconstitutional, because it sought to impose a tax “without

clear and unambiguous authorization from the legislature to do so” (at para 41).

[103] This is not the situation with respect to the Act. Subsections 166(2) and 189(1) expressly

provide that the Governor in Council may amend Schedule 1 and, in so doing, make Parts 1 and

2 of the Act applicable to a province or area. Indeed, those provisions are the centerpiece of the

backstop feature of the Act. In other words, while placing a measure of discretion in the hands of

the Governor in Council, the Act leaves no doubt that the Governor in Council is authorized to

exercise that discretion and to decide if Part 1 or Part 2 should operate in respect of any given

province or area. In making a decision in this regard, the Governor in Council does not impose a

tax “on its own accord”, to use the words of Major J. in Eurig Estate.

[104] Nor is this a circumstance where, to reference paragraph 32 of Eurig Estate, taxation

powers are claimed to arise “incidentally in delegated legislation”. The Governor in Council is

specifically authorized, in the Act itself, to amend Schedule 1 and thereby extend the application

of the Act. Read in context, this is a clear and unambiguous authorization to adjust the reach of

the Act and to impose the obligation to pay the levies in issue. As a consequence, this situation is

also different than the one considered in Confédération. In that case, the Supreme Court found

charges collected under certain provisions of the Employment Insurance Act to be

unconstitutional because, in the absence of a clear delegation of taxing authority from

Parliament, the Governor in Council had used those provisions to collect funds for general

purposes.

[105] The breadth of the discretion conferred by the Act on the Governor in Council to

determine where the Act should apply was referred to by Saskatchewan in its submissions but not

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raised as a distinct issue. In any event, I am not persuaded that this aspect of the scope of the

Governor in Council’s authority is constitutionally problematic. Its discretion in this regard is

confined in three ways and is far from open ended. First, ss. 166(2) and 189(1) provide that the

Governor in Council may only add or delete a province or area from Schedule 1 “[f]or the

purpose of ensuring that the pricing of greenhouse gas emissions is applied broadly in Canada at

levels that [it] considers appropriate”. Second, ss. 166(3) and 189(2) provide that, in exercising

this authority, the Governor in Council must take into account “as the primary factor” the

stringency of provincial pricing mechanisms for GHG emissions. Third, and more generally,

basic administrative law principles preclude the Governor in Council from making decisions

about the application of the Act to provinces or areas if those decisions are based on irrelevant

considerations or reasons at odds with the purpose of the Act. See: Katz Group Canada Inc. v

Ontario (Health and Long-Term Care), 2013 SCC 64 at para 24, [2013] 3 SCR 810.

[106] Another possible dimension of the s. 53 issue involves the suggestion that the delegation

of authority to the Governor in Council in relation to the particulars of the Part 1 fuel charge is so

wide that, while express, it nonetheless offends s. 53. The point, as I understand it, is that the

very generous authority enjoyed by the Governor in Council under Part 1 would allow it, in

effect, to cut a new tax out of whole cloth. The key sections of the Act underpinning this concern

are ss. 26, 166 and 168. They are reproduced in Appendix A.

[107] The response to these concerns has several layers. First, the governing case law indicates

that, so long as a taxing authority is delegated expressly and unambiguously, it may be exercised

to establish the “details and mechanisms” of the tax. See: Confédération at para 92; Eurig Estate

at para 30. Although they are broadly worded, the sections of the Act in issue here would seem to

be aimed at enabling the Governor in Council to do this very thing: to work out and establish

some of the details and mechanisms of the fuel charge scheme that are not addressed by the Act

itself.

[108] Second, and more fundamentally, if regulations made pursuant to the provisions noted

above did, in fact, attempt to implement a wholly or substantially new tax, then the obvious legal

response would be to strike down those regulations because they offend s. 53 of the Constitution

Act, 1867 or because they are ultra vires the Act in administrative law terms. The invalidity of

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the regulations would not impact the constitutionality of the Act just as (a) in Connaught, where

the validity of the business licence fees imposed under s. 24 of the Parks Canada Agency Act

was not seen as affecting the validity of s. 24 itself, and (b) in Eurig Estate, where the validity of

the probate fee imposed under s. 5 of the Administration of Justice Act was not considered to

impugn the validity of s. 5.

[109] Third, I note that, even assuming arguendo that there is a problem with the constitutional

validity of the sections of the Act conferring wide regulation-making authority on the Governor

in Council, this would seem to be a circumstance where the doctrine of severance could be

engaged or the offending wording would be read down so as to avoid constitutional problems. In

other words, any problems with these provisions could be addressed while leaving the fuel

charge and combustible waste regime under Part 1 intact.

[110] In summary, therefore, it is not apparent how the authority granted to the Governor in

Council by virtue of ss. 26, 166 and 168 can render the Act, or more particularly Part 1 of the

Act, unconstitutional.

[111] In the end, Saskatchewan’s argument about the application of s. 53 of the Constitution

Act, 1867 cannot succeed. The charges in issue here are not taxes in the constitutional sense of

that term. However, if the charges are characterized as taxes, they do not violate s. 53. This is not

a case where the levies in question are imposed ab initio by the Governor in Council or imposed

by the Governor in Council of its own accord.

C.

Is the Act sustainable under the national concern branch of POGG?

[112] Saskatchewan contends that, if the Act is not an invalid tax, it is nonetheless

unconstitutional because it must be seen as concerning property and civil rights or other matters

within exclusive provincial jurisdiction. Canada’s argument in reply, and its key position in these

proceedings, is that the Act is a valid exercise of Parliament’s authority under the national

concern branch of POGG. Canada is supported in this position by several intervenors.

[113] In order to address these arguments, it will be useful to begin by confirming the basic

principles informing the POGG analysis. That done, I will consider the pith and substance of the

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Act and then turn to the identification of the matter said to come within Parliament’s POGG

authority. All of this done, it will be possible to make a final determination about whether the Act

can be sustained under the national concern branch of POGG.

1.

Basic principles

[114] Section 91 of the Constitution Act, 1867 gives Parliament the power:

… to make laws for the Peace, Order and good Government of Canada, in relation to all

Matters not coming within the Classes of Subjects by this Act assigned exclusively to the

Legislatures of the Provinces …

The POGG power is usually considered to have three branches: the “gap” branch, the “national

concern” branch and the “emergency” branch. See: Peter W. Hogg, Constitutional Law of

Canada, loose-leaf (2018-Rel 1) 5th ed Supp, vol 1 (Toronto: Thomson Reuters, 2016) at c 17.1.

[115] The national concern branch has a deep history running back to Russell. Its contours

began to clearly emerge when Lord Watson wrote as follows at page 361 of Attorney-General

for Ontario v Attorney-General for the Dominion, [1896] AC 348 (PC):

… Their lordships do not doubt that some matters, in their origin local and provincial,

might attain such dimensions as to affect the body politic of the Dominion, and to justify

the Canadian Parliament in passing laws for their regulation or abolition in the interest of

the Dominion. But great caution must be observed in distinguishing between that which

is local and provincial, and therefore within the jurisdiction of the provincial legislatures,

and that which has ceased to be merely local or provincial, and has become matter of

national concern, in such sense as to bring it within the jurisdiction of the Parliament of

Canada. …

[116] For present purposes, it is sufficient to pick up the jurisprudential story with Re: Anti-

Inflation Act, [1976] 2 SCR 373. A majority of the Supreme Court upheld that Act on the basis

of the emergency doctrine of POGG. Justice Beetz disagreed on the point and therefore went on

to consider the national concern doctrine. He wrote for himself and de Grandpré J. but his

analysis was endorsed by a majority of the Court. Justice Beetz concluded that “containment and

reduction of inflation” did not qualify as a basis of federal jurisdiction because it was totally

lacking in specificity and was no more than an aggregate of several subjects, some of which

formed a substantial part of provincial jurisdiction (at 458). He suggested a subject needed to

have a “degree of unity that made it indivisible, an identity which made it distinct from

provincial matters and a sufficient consistence to retain the bounds of form” (at 458). In addition,

Beetz J. stressed that, in considering the national concern doctrine, it was necessary to have

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regard to the extent to which a new power would allow Parliament to touch on what had been

recognized to be provincial jurisdiction and thus upset the equilibrium of the Constitution

(at 458).

[117] R v Crown Zellerbach Canada Ltd., [1988] 1 SCR 401 [Crown Zellerbach], is now the

leading case in this area. Justice Le Dain, writing for the majority of the Court, surveyed the

relevant jurisprudence and, drawing significantly on what Beetz J. had said in Re: Anti-Inflation

Act, summarized the law as follows at pages 431–432:

1. The national concern doctrine is separate and distinct from the national emergency

doctrine of the peace, order and good government power, which is chiefly

distinguishable by the fact that it provides a constitutional basis for what is necessarily

legislation of a temporary nature;

2. The national concern doctrine applies to both new matters which did not exist at

Confederation and to matters which, although originally matters of a local or private

nature in a province, have since, in the absence of national emergency, become

matters of national concern;

3. For a matter to qualify as a matter of national concern in either sense it must have a

singleness, distinctiveness and indivisibility that clearly distinguishes it from matters

of provincial concern and a scale of impact on provincial jurisdiction that is

reconcilable with the fundamental distribution of legislative power under the

Constitution;

4. In determining whether a matter has attained the required degree of singleness,

distinctiveness and indivisibility that clearly distinguishes it from matters of

provincial concern it is relevant to consider what would be the effect on

extra-provincial interests of a provincial failure to deal effectively with the control or

regulation of the intra-provincial aspects of the matter.

These are the principles that must inform the analysis of Canada’s argument about the national

concern branch of POGG.

2.

The pith and substance of the Act

[118] Consideration of whether the Act can be sustained under the national concern branch

begins with the identification of its pith and substance. This, of course, is the first step in any

division of powers inquiry. It is not linked specifically to POGG or the national concern

question. As explained above, both the purpose and effect of the Act are relevant in determining

its pith and substance. Let me begin with the question of purpose.

[119] In very general terms, the Act is self-evidently aimed at GHG pricing. This is revealed by

several considerations. The first is the broad context in which it was enacted. That context can be

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traced directly back to the Framework Convention ratified by Canada in 1992 and the Kyoto

Protocol, the Copenhagen Accord and the Paris Agreement, which followed. All had the same

central objective, i.e., the limitation of global GHG emissions. The Act is the product of

Canada’s efforts to meet its commitments under the Paris Agreement.

[120] All of this noted, the relevant legislative history also reveals, in more particular terms,

that the purpose of the Act is to ensure minimum national standards of price stringency for GHG

emissions. This is apparent from (a) the Vancouver Declaration, which referenced the use of

carbon pricing mechanisms to address climate change and established a Working Group on

Carbon Pricing Mechanisms, (b) the Final Report of the Working Group, (c) the federal

government’s Pan-Canadian Approach to Pricing Carbon Pollution that concluded economy-

wide carbon pricing was the most efficient way to reduce GHG emissions and proposed a pan-

Canadian benchmark approach, and (d) the federal government’s Technical Paper on the

backstop and its related Supplemental Benchmark Guidance paper.

[121] This focus on pan-Canadian GHG pricing is also apparent in the preamble of the Act. It

expressly links the Act to the impact of anthropogenic GHG emissions on climate change, the

Framework Convention and Canada’s commitments under the Paris Agreement. The preamble

then goes on to provide as follows:

Whereas greenhouse gas emissions pricing is a core element of the Pan-Canadian

Framework on Clean Growth and Climate Change;

Whereas behavioural change that leads to increased energy efficiency, to the use of

cleaner energy, to the adoption of cleaner technologies and practices and to innovation is

necessary for effective action against climate change;

Whereas the pricing of greenhouse gas emissions on a basis that increases over time is an

appropriate and efficient way to create incentives for that behavioural change;

Whereas greenhouse gas emissions pricing reflects the “polluter pays” principle;

Whereas some provinces are developing or have implemented greenhouse gas emissions

pricing systems;

Whereas the absence of greenhouse gas emissions pricing in some provinces and a lack

of stringency in some provincial greenhouse gas emissions pricing systems could

contribute to significant deleterious effects on the environment, including its biological

diversity, on human health and safety and on economic prosperity;

And whereas it is necessary to create a federal greenhouse gas emissions pricing scheme

to ensure that, taking provincial greenhouse gas emissions pricing systems into account,

greenhouse gas emissions pricing applies broadly in Canada[.]

(Emphasis added)

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[122] The substantive provisions of the Act, in both Part 1 and Part 2, reflect this goal or

purpose of establishing minimum national standards of price stringency for GHG emissions.

They do not dictate specific maximum levels of GHG reductions either generally or by reference

to particular classes of individuals or operations. Nor do they directly impose a GHG emissions

price across the country. Rather, the Act serves only as a backstop in the sense that it defers to

the regulatory efforts of the provinces and comes into play only when those efforts do not meet

minimum standards.

[123] Of course, when Part 1 or Part 2 applies in a province or area, it does not dictate a GHG

emission price and then impose that price inflexibly or blindly across the board to each and every

emission source. Part 1, for example, exempts fuel used by farmers and fishers from the fuel

charge and it makes special provision for fuel charges payable by interjurisdictional

transportation undertakings. These sorts of qualifications and nuances in the application of a

minimum price do not undermine the pith and substance of the Act. This is because a GHG

pricing system must be able to accommodate the underlying economic and other realities of the

circumstances in which it operates. Accordingly, all things considered, it is appropriate to

describe the purpose of the Act as a whole as being the establishment of minimum national

standards of price stringency for GHG emissions.

[124] Not surprisingly, the effect of the Act is consistent with this purpose. As explained

earlier, Part 1 imposes a charge on GHG-producing fuels and Part 2, in effect, puts a price on the

GHG emissions above prescribed levels for large industrial operations. Both Parts apply only in

those provinces that, in the assessment of the Governor in Council, have failed to put acceptable

pricing standards in place.

[125] Thus, to conclude and confirm on this point, the pith and substance of the Act is best seen

as being the establishment of minimum national standards of price stringency for GHG

emissions.

3.

The POGG “matter” in issue

[126] It is now necessary to turn to the POGG issue itself and, to begin, the question of how to

describe or characterize the matter said to fall within the national concern branch. However,

before doing that, let me detour briefly to underline the significance of finding a subject matter to

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be one coming within the national concern branch of POGG. The point is basic. Any such

conclusion means the matter in question comes within the authority of Parliament and Parliament

alone. As La Forest J. explained at paragraph 115 of Hydro-Québec, “[d]etermining that a

particular subject matter is a matter of national concern involves the consequence that the matter

falls within the exclusive and paramount power of Parliament”. See also: Re: Anti-Inflation Act

at 444. This means that invoking the national concern branch of POGG is necessarily a delicate

business. It carries with it the real potential of significantly altering the way powers are allocated

between Parliament and the provincial legislatures and, hence, of altering the balance of

federalism itself.

[127] In its factum, Canada took the position that the matter of national concern in issue here is

“GHG emissions”. To quote from paragraph 87 of the factum, “GHG emissions are a

quintessential matter of national concern”. Saskatchewan and several intervenors reacted to this

by pointing out that recognizing a general Parliamentary authority over GHG emissions would

open the door to federal regulation of an extraordinarily broad swath of life, upset the

constitutional balance and thereby be offside the test prescribed in Crown Zellerbach. This was

said to be so because almost every kind of human action generates GHG emissions.

[128] The significance of Saskatchewan’s argument was not that recognizing GHG emissions

as a matter of federal authority would give Parliament comprehensive jurisdiction over every

GHG-producing activity. Rather, it was that the production of GHGs is so intimately and broadly

embedded in every aspect of intra-provincial life that a general authority in relation to GHG

emissions would allow Parliament’s legislative reach to extend very substantially into

traditionally provincial affairs. A general legislative authority over GHG emissions would, for

example, presumably include such things as (a) the specification of materials and production

techniques used in manufacturing and processing, (b) the control of any variable affecting the

fuel efficiency of vehicles including tire pressure, engine size and speed limits on highways,

(c) the determination of construction and insulation standards for buildings of all sorts, (d) the

content of livestock feeds and the size of livestock operations, and (e) the prescription of matters

affecting electricity consumption such as the hours of operation of business and service

providers. Given the absolutely pervasive nature of GHG emissions, the boundaries of possible

regulation in respect of such emissions are limited only by the imagination.

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[129] The other side of the jurisdictional coin is also important here. Because any

Parliamentary authority over GHG emissions would be exclusive, recognizing such authority

would foreclose provinces from legislating directly in relation to such emissions. Canada and

some of the intervenors attempt to discount this concern by pointing to the double aspect

doctrine. They contend its application would prevent provinces from being frozen out of the field

of GHG regulation should Canada succeed in having GHG emissions brought under the national

concern branch of POGG. This view is substantially misplaced.

[130] As Peter Hogg explains in Constitutional Law of Canada at chapter 5.1(g), the double

aspect doctrine applies when the federal and provincial characteristics of a law are roughly equal

in importance with the result that both Parliament and a provincial legislature may enact laws of

that kind. The classic example is highway safety where provincial laws on the subject have been

upheld as being in relation to “Property and Civil Rights in the Province” (s 92(13)) and federal

laws have been upheld as being in relation to “Criminal Law” (s 91(27)). At present, when GHG

emissions are not recognized as being a matter coming within exclusive federal jurisdiction,

there is plenty of scope for the double aspect doctrine to operate. A province can regulate GHG

emissions by enacting laws in relation to property and civil rights, for example, and Parliament

can regulate GHG emissions by, for instance, passing laws in relation to taxation. But, if GHG

emissions are recognized as a matter of exclusive federal jurisdiction, any provincial law would

be unconstitutional if, in pith and substance, it was in relation to such emissions.

[131] In other words, the problem is not only that recognizing federal jurisdiction over

something as broad as GHG emissions would give Parliament wide authority in positive terms. It

is that, in negative terms, provincial legislatures would be significantly denied the authority to

deal with GHG emissions. Provinces could address such emissions only to the extent laws

enacted in relation to provincial matters such as property and civil rights had an incidental

impact on them. As the Supreme Court observed in Reference re Securities Act, 2011 SCC 66 at

para 66, [2011] 3 SCR 837, “the double aspect doctrine, allows for the concurrent application of

both federal and provincial legislation, but it does not create concurrent jurisdiction over a

matter (in the way, for example, s. 95 of the Constitution Act, 1867 does for agriculture and

immigration)” (emphasis in original).

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[132] It is true of course that, in recent years, the Supreme Court’s jurisprudence has promoted

a flexible federalism tending to allow for interplay and even overlap between federal and

provincial powers. But, the doctrinal tools used to promote flexible federalism have limits. They

cannot “sweep designated powers out to sea”. See: Reference re Securities Act at para 62.

[133] Let me return now to the main track of the analysis and the question of the

characterization of the POGG matter at issue in these proceedings. There is a great deal of merit

in the concerns raised by Saskatchewan and its supporting intervenors as to the impact that

bringing “GHG emissions” under the national concern branch would have on the balance of

federalism. Put simply, an unqualified jurisdiction in relation to such emissions would lead

Parliament deeply into areas of historically exclusive provincial authority.

[134] In oral argument, Canada reacted to these concerns by changing its position and asserting

that the matter to be included under Parliament’s POGG authority should not be “GHG

emissions” but rather “the cumulative dimensions of GHG emissions”. Perhaps because it was

introduced so late in the day, the “cumulative dimensions” idea was not well developed. Canada

referred to cumulative atmospheric concentrations, cumulative global and national impacts and

the cumulative effect of emissions from each province but did not fully explain these notions.

Nonetheless, Canada’s submission did, in its own way, represent an effort to avoid what all of

the participants in these proceedings appeared to see as undesirable: a result that would restrict or

preclude provincial efforts to address GHG emissions and GHG pricing.

[135] The “cumulative dimensions” concept advanced by Canada appears to carry with it

something of the approach developed by the Supreme Court in connection with the regulation of

the securities industry. That approach endorsed the notion of “systemic risk” as a tool for

distinguishing, in the trade and commerce context, between matters that are national in scope and

those that are local or intra-provincial. See: Reference re Securities Act; Reference re Pan-

Canadian Securities Regulation.

[136] On the face of things, this idea has some attraction. But, a substantial difficulty lies just

below the surface. There is no practical or operational break point between individual GHG

emissions and cumulative GHG emissions. The reality is that the latter is no more than the direct

and simple sum of the former. Regulating cumulative emissions is only possible through the

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regulation of specific or individual emissions. Thus, recognizing federal authority over “the

cumulative dimensions of GHG emissions”, if that authority is to be meaningful, amounts to the

same thing as recognizing Parliamentary authority over “GHG emissions” in the general sense.

[137] In the result, therefore, there is no difference of consequence between jurisdiction over

“GHG emissions” and jurisdiction over “the cumulative dimensions of GHG emissions”.

[138] Where does this lead? All things considered, it is not possible to conclude “GHG

emissions” or, as Canada puts it in oral argument, “the cumulative dimensions of GHG

emissions” fall within federal jurisdiction by virtue of the national concern doctrine. Even

assuming a matter framed in this way has the sort of singleness, distinctiveness and indivisibility

demanded by the Crown Zellerbach test, the fundamental distribution of legislative power under

the Constitution Act, 1867 would be upset if it were allocated to Parliament. As a result, this

approach to federal jurisdiction in respect of GHG emissions does not survive the second part of

the test prescribed by Crown Zellerbach. It follows that the POGG argument advanced by

Canada cannot succeed.

[139] But, this does not end the inquiry. There is an alternative way to characterize the subject

matter said to come under the national concern branch. As the Attorney General of British

Columbia [British Columbia] suggests, it can also be seen as being in the nature of “the

establishment of minimum national standards of price stringency for GHG emissions”.

“Stringency” in this context must be taken to embrace not just the charge per unit of GHG

emission but also the scope or breadth of application of the charge in the sense of the sorts of

fuels, operations and activities to which the charge applies. It must also include the authority to

put in place such regulatory regimes as are necessary to operationalize a minimum pricing

program and to make those regimes workable and appropriate in the economic and business

environments where they apply. On that understanding of things, there is a good deal to

recommend this approach.

[140] It might be useful to begin, however, by acknowledging that framing federal jurisdiction

in this way could appear, at first blush, to involve a rather tight or narrow formulation of the

matter in question. This is because the reach of the national concern doctrine is often described

in more generalized subject matter terms. The obvious examples are: “aeronautics” (Johannesson

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v Rural Municipality of West St. Paul (1951), [1952] 1 SCR 292 [Johannesson]; “atomic energy”

(Ontario Hydro v Ontario (Labour Relations Board), [1993] 3 SCR 327); and “marine pollution”

(Crown Zellerbach). Seen from this angle, “the establishment of minimum national standards of

price stringency for GHG emissions” might seem to be a somewhat constricted characterization

of a POGG subject matter. But, this ultimately does not detract meaningfully from the approach

advanced by British Columbia.

[141] First, identifying an area of jurisdiction by using terminology such as “the establishment

of ...” is wholly consistent with the Constitution. There are several examples of this very thing in

the enumeration of matters assigned to Parliament and the provincial legislatures by the

Constitution Act, 1867: “The Establishment, Maintenance, and Management of Penitentiaries”

(s 91(28)); “The Establishment, Maintenance, and Management of Public and Reformatory

Prisons in and for the Province” (s 92(6)); and “The Establishment, Maintenance, and

Management of Hospitals, Asylums, Charities, and Eleemosynary Institutions in and for the

Province, other than Marine Hospitals” (s 92(7)).

[142] Second, although marine pollution, aeronautics and atomic energy might come to mind

first when thinking about how to characterize matters falling within the scope of the national

concern branch, not all matters coming within that branch have been described in that same style.

In Munro v National Capital Commission, [1966] SCR 663 [Munro], the matter said to be of

national concern was identified as follows at page 671:

I find it difficult to suggest a subject matter of legislation which more clearly goes

beyond local or provincial interests and is the concern of Canada as a whole than the

development, conservation and improvement of the National Capital Region in

accordance with a coherent plan in order that the nature and character of the seat of the

Government of Canada may be in accordance with its national significance. Adopting the

words of the learned trial judge, it is my view that the Act “deals with a single matter of

national concern”.

(Emphasis added)

[143] Third, and more fundamentally, the real point is that the national concern doctrine is not

designed to bring matters of some predetermined breadth under Parliamentary authority. Rather,

it is concerned with matters which have, to use the words of Lord Watson, “attain[ed] such

dimensions as to affect the body politic of the Dominion”. The challenge in the application of the

national concern doctrine is to delimit its reach. In this regard, there is no constitutional logic in

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requiring all matters falling within its scope to have the same general complexion or breadth. If a

narrowly definable matter is of national consequence and satisfies the Crown Zellerbach test, it

should be no less eligible for inclusion under the national concern branch of POGG than broadly

defined matters. Indeed, given the potentially disruptive impact of the national concern doctrine

on the balance of federalism, there is much to recommend casting matters narrowly so long as

that narrow cast still meets the Crown Zellerbach criteria and is not so confining as to preclude

Parliament from having a meaningful or effective scope of authority.

[144] Finally, it is important to remember what lies behind the legal issues before the Court.

The record indicates climate change has emerged as a major threat, not just to Canada, but to the

planet itself. As Viscount Sankey famously observed in Edwards v Attorney-General for Canada

(1929), [1930] AC 124 (PC) at 136, the Constitution Act, 1867 is “a living tree capable of growth

and expansion within its natural limits” and, as La Forest J. noted in Hydro-Québec at paragraph

86, “the Constitution must be interpreted in a manner that is fully responsive to emerging

realities”. If it is necessary to apply established doctrine in a slightly different way to ensure both

levels of government have the tools essential for dealing with something as pressing as climate

change, that would seem to be entirely appropriate. It is also in keeping with what the Supreme

Court has said about the utility of, where possible, allowing both Parliament and the provincial

legislatures jurisdictional room to act in relation to the environment. See: Hydro-Québec at

para 154. The choices of whether and how to use the tools available to Parliament or a legislature

will, of course, be made by elected officials, not by judges.

4.

Application of the Crown Zellerbach test

[145] Let me now deal, in more focussed terms, with the consideration of whether the

establishment of minimum national standards of price stringency for GHG emissions can be

sustained as a matter of federal jurisdiction under the national concern branch of POGG.

[146] The broad starting point concerns whether this matter is something of genuine national

importance. On this front, there was no suggestion in the submissions made to the Court that the

general question of GHG emissions, and the related problem of climate change, are anything

other than issues of superordinate consequence. In light of this, it is not necessary to rehearse all

of the considerations serving to confirm the significance and impact of GHG emissions.

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[147] What then of the idea of minimum national standards of price stringency for GHG

emissions? Significantly, the factual record before the Court indicates that GHG pricing is not

just part and parcel of an effective response to climate change. It indicates that GHG pricing is

regarded as an essential aspect or element of the global effort to limit GHG emissions. The

following unchallenged features of the record are noteworthy in this regard:

(a)

“There is widespread international consensus that carbon pricing is a necessary

measure, though not a sufficient measure, to achieve the global reductions in

GHG emissions necessary to meet the Paris Agreement targets” (Moffet affidavit

at para 46).

(b)

“A well-designed carbon price is an indispensable part of a strategy for reducing

emissions in an efficient way” (High-Level Commission on Carbon Prices, Report

of the High-Level Commission on Carbon Prices (Washington, DC: World Bank,

2017) at 1).

(c)

(d)

“There is a widespread trend in favour of carbon pricing … Overall, 67

jurisdictions … are putting a price on carbon” (Moffet affidavit at para 49).

“The existing literature is highly convergent in finding that carbon prices that

have been implemented around the world have been successful in reducing

greenhouse gas emissions” (Nicholas Rivers affidavit affirmed October 5, 2018,

at para 6(b)).

[148] In light of this, it is difficult to suggest GHG emissions prices and the more specific

question of minimum national standards of price stringency for GHG emissions are anything

other than matters of sufficient consequence to warrant consideration for inclusion under the

national concern branch of POGG.

[149] With all of this by way of background or context, it is appropriate to turn now to the

analysis expressly mandated by Crown Zellerbach. That analysis begins with the question of

whether the establishment of minimum national standards of price stringency for GHG emissions

has a singleness, distinctiveness and indivisibility that clearly distinguishes it from matters of

provincial concern. This question can readily be answered in the affirmative.

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[150] The Framework Convention defines “greenhouse gases” as “those gaseous constituents of

the atmosphere, both natural and anthropogenic, that absorb and re-emit infrared radiation”

(Article 1 at para 5). In his affidavit, Mr. Moffet provides this additional explanation:

31.

Carbon dioxide, which has the molecular formula CO₂, is the gas most

commonly understood by the general public to be a GHG. However, scientists have

identified other GHGs, which are mostly, but not always, carbon containing gases. The

[Framework Convention] requires reporting on emissions of seven GHGs: CO₂, methane

(CH₄), nitrous oxide (N₂O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), sulfur

hexafluoride (SF₆), and nitrogen trifluoride (NF₃).

[151] Schedule 3 of the Act lists some 33 chemicals, more than the number referred to by

Mr. Moffet, as being GHGs. However, there appears to be no disagreement about what is, or is

not, a GHG. Certainly no such concerns were raised by any of the participants in these

proceedings. In the result, it can be said that GHGs are a very particular type of environmental

pollutant, a pollutant defined by a specific set of scientific or chemical characteristics. There is

nothing in their nature that raises any concerns whatsoever about singleness, distinctiveness and

indivisibility. They are readily identifiable and distinguishable from other gases.

[152] Further, there are no apparent difficulties in drawing distinctions between the authority to

establish minimum national standards of price stringency for GHG emissions and other aspects

of the regulatory world that might be concerned with such emissions. The Act, as a manifestation

of the POGG matter under consideration, illustrates the point. There was no suggestion by

Saskatchewan or its supporting intervenors of any operational problem in identifying the

boundaries that circumscribe the scope of application of the Act or of any murkiness or lack of

clarity in how the Act intersects with provincial areas of responsibility. Simply put, this is not a

situation of the sort that troubled La Forest J. in Crown Zellerbach when he argued against

recognizing marine pollution as a matter of national concern because, in his view, there was no

clear demarcation between salt and fresh water.

[153] As part of the singleness, distinctiveness and indivisibility inquiry mandated by Crown

Zellerbach, it is also relevant to consider, as Le Dain J. put it at page 432, “the effect on extra-

provincial interests of a provincial failure to deal effectively with the control or regulation of the

intra-provincial aspects of the matter”. In the present context, that would be the effect on extra-

provincial interests of a failure by individual provinces to adopt minimum prices for GHG

emissions.

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[154] In general terms, the obvious reality is that GHG emissions do not respect provincial

boundaries. As a result, the failure of one province to take action in respect of such emissions

will have impacts on other provinces. In this broad sense, the situation with respect to GHG

emissions parallels the situation with respect to (a) marine pollution as considered in Crown

Zellerbach (where the failure of one province to protect its waters would lead to the pollution of

the waters of other provinces), (b) the national capital region as dealt with in Munro (where the

failure of cooperation between Ontario and Québec affected the country at large), and

(c) aeronautics as considered in Johannesson (where the failure of a province to adopt

standardized air traffic procedures and protocols would endanger the residents of other

provinces). See: Hogg, Constitutional Law of Canada at c 17.3(b).

[155] More particularly, it is self-evident that, in dealing with GHG pricing, each province may

only legislate intra-provincially. This means every province, individually, is directly vulnerable

in at least two ways to the failure of other provinces to adequately price such emissions. To

begin, a province must deal with the climate change impact caused by the failure of other

provinces to adequately address GHG emissions or emissions pricing. Of course, given the

relative insignificance of any province’s emissions as compared to global emissions as a whole,

this concern is perhaps more theoretical than real. A more concrete concern for an individual

province is that the failure of other Canadian jurisdictions to adopt minimum GHG pricing could

result in what is known as “carbon leakage”. This is a phenomenon where GHG pricing increases

the cost of production, and thereby affects competitiveness, leading businesses to shift jobs or

investments to lower GHG cost jurisdictions. The question of how this concern plays out in

practical terms among provinces is not well developed in the record. However, a study by

Canada’s Ecofiscal Commission in November of 2015 entitled Provincial Carbon Pricing and

Competitiveness Pressures filed by British Columbia, and based on data analysis for four

provinces, suggests these pressures are significant for only a few sectors.

[156] All of this said, a good deal of the real significance of individual provincial failures to

price GHG emissions to a minimum level plays out on a different plane. Climate change is a

global problem and, accordingly, it calls for a global response. Such a response can only be

effectively developed internationally by way of state-to-state negotiation and agreement. This, of

course, is the story of the Framework Convention, the Kyoto Protocol, the Copenhagen Accord,

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and the Paris Agreement. In participating in these international processes, Canada is expected to

make national commitments with respect to GHG reduction or mitigation targets. Those

commitments are self-evidently difficult for Canada, as a country, to meet if not all provincial

jurisdictions are prepared to implement GHG emissions pricing regimes – regimes that, on the

basis of the record before the Court, are an essential aspect of successful GHG mitigation plans.

This is not to suggest Parliament must somehow enjoy a comprehensive treaty implementation

power in relation to the GHG issue. But, it is to say that the international nature of the climate

change problem necessarily colours and informs an assessment of the effects of a provincial

failure to deal with GHG pricing.

[157] It is true that the provinces, acting individually but cooperatively, could agree on a

minimum national price for GHG emissions and thereby accomplish the same goal as the one

sought by the Act. But this is not the point here. The point is that provinces could always

withdraw from such arrangements and there is, accordingly, no assurance that coordinated

provincial action would lead to a sustained approach to minimum GHG pricing. See: Reference

re Securities Act at paras 120–121.

[158] Taking all of the foregoing into account, establishing minimum national standards of

price stringency for GHG emissions can properly be seen as a matter that satisfies the Crown

Zellerbach “singleness, distinctiveness and indivisibility” requirement.

[159] The second consideration in the Crown Zellerbach analysis is whether recognizing

federal authority over the establishment of minimum national standards of price stringency for

GHG emissions would have a scale of impact on provincial jurisdiction that is reconcilable with

the fundamental distribution of legislative power under the Constitution. This question too can be

answered in the positive.

[160] The scope of federal intrusion into the realm of provincial authority is the key distinction

between a matter framed as being about minimum national pricing standards and one framed in

terms of jurisdiction over GHG emissions generally or over the cumulative dimensions of such

emissions. The authority to establish minimum national standards of price stringency does not

empower Parliament to reach into areas of otherwise intra-provincial authority to regulate things

like highway speeds and the content of livestock feeds simply because they have an impact on

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GHG emissions. Rather, the establishment of minimum national standards of price stringency is

no more than just that. Once the relevant standards are established, individual consumers and

businesses are free to choose how they will respond, or not, to the price signals sent by the

marketplace.

[161] Just as significantly, limiting federal jurisdiction to the matter of the establishment of

minimum national standards of price stringency leaves plenty of room for provincial action in

relation to GHG emissions. Unlike recognizing Parliamentary authority over GHG emissions

generally or over the cumulative dimensions of GHG emissions, this approach does not put at

risk the constitutional validity of provincial initiatives to price GHGs, either through carbon

taxes or cap-and-trade systems.

[162] It can be seen, therefore, that recognizing a federal authority to establish minimum

national standards of price stringency for GHG emissions satisfies the Crown Zellerbach

requirement that bringing a matter under the national concern doctrine must not have an impact

on provincial jurisdiction that is irreconcilable with the fundamental distribution of legislative

powers envisioned by the Constitution.

[163] By way of a bottom line on this issue, the establishment of minimum national standards

of price stringency for GHG emissions is a matter falling within federal jurisdiction by virtue of

the national concern branch of POGG.

5.

The validity of the Act

[164] Having worked through both the pith and substance of the Act and the scope of

Parliament’s jurisdiction in relation to GHG pricing, it is now possible to determine the validity

of the Act. As explained earlier, this involves an inquiry as to whether the pith and substance of

the Act comes within a head of federal authority. The answer to that inquiry is self-evident in

light of the foregoing analysis. The pith and substance of the Act is about establishing minimum

national standards of price stringency for GHG emissions. Parliament has jurisdiction over this

subject matter by virtue of the national concern branch of POGG. It follows that the Act is

constitutionally valid. This, of course, is precisely the same kind of analysis that, for example,

would lead a court to say, because the pith and substance of the Bank Act, SC 1991, c 46, is

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banking, and because Parliament has jurisdiction over “banking” by virtue of s. 91(15) of the

Constitution Act, 1867, therefore the Bank Act is constitutionally valid.

D.

Can the Act be upheld under heads of jurisdiction identified by the

intervenors?

[165] Intervenors supporting the validity of the Act advance various grounds on which they

suggest the Act, or features of it, can be found to be upheld. Canada does not make any of these

arguments itself. However, perhaps not surprisingly, Canada advises that it would not object if

the Court upheld the Act on one or more of these other grounds. With that, and in the interest of

completeness, I turn to briefly consider these additional arguments.

1.

The general trade and commerce power

[166] The intervenors Canadian Environmental Law Association and Environmental Defence

Canada, Inc. submit that Part 2 of the Act falls within Parliament’s jurisdiction over trade and

commerce as per s. 91(2) of the Constitution Act, 1867. The intervenor International Emissions

Trading Association goes further to contend the Act as a whole can be sustained by the trade and

commerce power.

[167] Subsection 91(2) confers on Parliament the authority to make laws in relation to “[t]he

Regulation of Trade and Commerce”. Despite this broad language, it is well settled that federal

authority in relation to this subject is confined to (a) interprovincial and international trade and

commerce, and (b) “general regulation of trade affecting the whole dominion”. See: Reference re

Securities Act at para 75. The second branch of s. 91(2), what has become known as the

“general” trade and commerce power, is at issue here.

[168] In General Motors, the Supreme Court identified five non-determinative considerations

to be taken into account when answering whether a subject matter comes within the general

branch of s. 91(2):

(a)

(b)

(c)

Is the law a part of a general regulatory scheme?

Is the scheme under the oversight of a regulatory agency?

Is the law concerned with trade as a whole rather than with a particular industry?

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(d)

(e)

Is the scheme of such a nature that the provinces, acting alone or in concert,

would be constitutionally incapable of enacting it?

Would a failure to include one or more provinces or localities in the scheme

jeopardize its successful operation in other parts of the country?

[169] The Court explained in Reference re Securities Act that these considerations play into the

division of powers analysis in the following way:

[109] The General Motors indicia invite the Court to examine the legislative scheme

through the lens of five interrelated inquiries to determine whether, viewed in its entirety,

it addresses a matter of genuine national importance and scope that goes to trade as a

whole in a way that is distinct from provincial concerns. The inquiry focuses on the

nature of the proposed scheme and its purpose and effects, intended and actual. It is

contextual, grounded in the record and the legislative facts. …

[170] The intervenors who invoke the general trade and commerce power to sustain the Act

submit that, seen in context, it satisfies the five General Motors indicia. As for the first indicium,

it is contended that the Act as a whole sets out a general regulatory scheme directed at reducing

GHG emissions. Second, it is argued that there is a general regulatory agency in the person of the

Minister of the Environment and Climate Change who has ultimate responsibility for the Act.

Third, the intervenors who rely on s. 91(2) argue that the Act is directed at trade as a whole

because it does not target a particular industry and because it implements international

commitments to reduce GHG emissions. As for the fourth General Motors indicium, it is argued

that the provinces, acting on their own, would not be able to implement a national scheme of the

sort found in the Act. Finally, and with respect to the fifth General Motors indicium, it is

contended that the scheme of the Act would be jeopardized if one or more provinces were left

outside of its reach.

[171] There are some reasonably self-evident difficulties with several aspects of this argument

but I find it unnecessary to examine them in detail. This is because the trade and commerce

argument advanced by the intervenors cannot succeed for a very basic reason. The Act, in its pith

and substance, does not concern trade and commerce. It concerns the mitigation of GHG

emissions and, more specifically, the establishment of minimum national standards of price

stringency for such emissions. In this regard, I take the same general view as did Lamer C.J.C.

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and Iacobucci J. in Hydro-Québec when they dismissed an argument that the Canadian

Environmental Protection Act could be sustained under the trade and commerce power:

82

We reject these submissions for two main reasons. First, it is clear that the “pith

and substance” of the impugned legislation does not concern trade and commerce, even if

trade and commerce may be affected by the application of these provisions. The

interveners Pollution Probe et al. seem to recognize this insofar as they submit that the

trade and commerce power merely provides “supplemental authority” for upholding the

Interim Order and the enabling provisions.

83

Secondly, even if it could be assumed that certain parts of s. 34(1) of the Act

were aimed at the regulation of trade and commerce (e.g. those paragraphs dealing with

importing and exporting), the remainder of s. 34(1) would, based on the arguments

adduced above, be ultra vires Parliament and would have to be struck down. Assuming

that the “trade and commerce” elements could be saved, therefore, they would have to be

“severed” from the paragraphs of s. 34(1) that would be struck down. It is not altogether

clear that this could be done, particularly since the portion of the statute remaining after

severance must be capable of standing independently of the severed portion. In this case,

the paragraphs are too “inextricably bound” to be able to survive independently (see

Hogg, supra, at p. 15-21). For these reasons, we cannot agree with the interveners’

submission that the impugned legislation can be justified as an exercise of the federal

trade and commerce power.

(Emphasis in original)

The majority of the Court did not consider the general trade and commerce power.

[172] There can be no doubt, of course, that the Act has economic impacts or, indeed, that it

attacks the GHG problem by using economic tools. The charge imposed pursuant to Part 1 will

raise fuel costs and the output-based performance standards system established by Part 2 will

affect business decisions and create tradeable offset credits. But, all of this is wholly incidental to

the core purpose and effect of the Act – the establishment of minimum national standards of price

stringency to promote the mitigation of GHG emissions. Although their comments were not

offered with the precise details of the Act in mind, I agree with the observations made by Shi-

Ling Hsu and Robin Elliot in “Regulating Greenhouse Gases in Canada: Constitutional and

Policy Dimensions” (2009) 54 McGill LJ 463 at 490:

… At bottom, it seems that the trade and commerce power is intended to vest the federal

government with jurisdiction over economic matters. This is especially true with respect

to the second branch of that head of power, the “general” trade and commerce branch.

The leading case on that branch, City National Leasing, uses the word “economic”

repeatedly. If City National Leasing were not limited to economic cases, there would be

little to distinguish the trade and commerce power from the national concern branch of

the POGG provision. While Professor Elgie has argued that emissions trading serves an

economic purpose by seeking to concentrate compliance costs among those that can

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reduce emissions at the lowest cost, there is no denying that both cap-and-trade programs

and emissions-intensity programs have an environmental objective as their core purpose.

(Footnotes omitted)

[173] In the end, it must be concluded that neither the Act as a whole nor Part 2 of the Act, in

particular, can be sustained by Parliament’s trade and commerce power.

2.

Treaty powers

[174] Ecofiscal Commission of Canada and International Emissions Trading Association

suggest Canada’s power to implement treaties may provide the necessary authority to sustain the

Act. They submit that, because the Act is intended to assist Canada in meeting its obligations

under the Paris Agreement, it falls within this federal authority.

[175] This line of argument cannot succeed. Section 132 of the Constitution Act, 1867 grants

Parliament the power to enact legislation necessary to implement “[t]reaties between the Empire

and such Foreign Countries”. However, its scope was significantly limited by the Privy Council

in Attorney-General for Canada v Attorney-General for Ontario, [1937] AC 326 [Labour

Conventions].

[176] Writing in Labour Conventions, Lord Atkin reached three critical conclusions. First,

treaties are not self-executing. In other words, they do not have the force of law by virtue of their

ratification. Implementation requires legislative action. Second, s. 132 authorizes only the

performance of obligations arising by virtue of treaties between the British Empire and foreign

countries. It does not, and cannot, extend to authorize the performance of treaties between

Canada and foreign countries. Third, there is no such thing as “treaty legislation”. Whether the

federal government or the provinces have jurisdiction to implement a treaty is determined by

considering the distribution of legislative powers found in ss. 91 and 92 of the Constitution Act,

1867. In the words of Lord Atkin, “[t]he Dominion could not, merely by making promises to

foreign countries, clothe itself with legislative authority inconsistent with the constitution which

gave it birth” (at 327).

[177] For these reasons, there is no federal treaty implementation power that can be relied upon

in the present matter. Federal jurisdiction to implement legislation in accordance with Canada’s

Paris Agreement commitments must be found in the Constitution Act, 1867.

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3.

Criminal law power

[178] A number of intervenors, including Canadian Public Health Association, Athabasca

Chipewyan First Nation, Canadian Environmental Law Association, Environmental Defence

Canada, Inc., Ecofiscal Commission of Canada, Intergenerational Climate Coalition, and

International Emissions Trading Association, suggest the Act can be sustained under

Parliament’s criminal law power.

[179] Subsection 91(27) of the Constitution Act, 1867 gives Parliament jurisdiction in respect

of “[t]he Criminal Law, except the Constitution of Courts of Criminal Jurisdiction, but including

the Procedure in Criminal Matters”. As a general proposition, legislation can fall within the

ambit of s. 91(27) if it features a valid criminal law purpose backed by a prohibition and a

penalty. See: RJR-MacDonald at para 28; Reference re Firearms Act at para 27.

[180] Accordingly, the first step in deciding if the Act might be classifiable as criminal law is to