Last week, the Saskatchewan Court of Appeal upheld the federal carbon backstop, ruling that it is not a tax, but a regulatory charge. We spoke to Nathalie Chalifour, an associate professor at the University of Ottawa’s Faculty of Law, about the split decision, what it means for the court to have recognized the gravity of climate change, and how the decision will have an impact on climate policies generally in Canada.
CBA National: What is the one big takeaway from the Saskatchewan ruling, in your view?
Nathalie Chalifour: For me, it is that the court upheld this legislation under the national concern branch of POGG. That is something that hasn’t happened in over 30 years in the context of the environment. It’s important because, in some respects, environmental legislation doesn’t fit neatly within the powers that have been enumerated either provincially or federally, and there is a need for legislation at the national level.
N: The court also recognized the gravity of climate change. Why is that so important from a legal vantage point that the courts are doing this?
NC: It is pretty significant. The court was unequivocal in its language, saying that climate change is doubtless an emergency and that it presents a genuine threat to Canada. That’s powerful language. I think that’s going to be helpful to litigants who are thinking about or have already launched challenges to pressure governments to take action on climate change mitigation.
N: So you think that this can open other pathways for climate litigation, in other matters?
NC: Every case will stand on its own merits. But here, the court very clearly cited and relied on basic facts about climate change by the [Intergovernmental Panel on Climate Change]. It accepted a lot of the climate science on record. And that’s an important signal to litigants who are thinking about how to establish some of that record in a different case.
N: The court also held that carbon pricing – as contemplated here in the federal law – is not about generating revenue but that it’s a regulatory charge. Is that the right call in your view?
NC: The courts have chewed on that distinction for a long time. In this case, a lot of people have this instinct to say ‘Well, this is a tax’ because we call it a carbon tax or a carbon price. But when you look at the tests that the courts have established to distinguish, constitutionally, between taxes and regulatory charges, we see that this is really a regulatory charge. Now, there was a 3-2 split on that issue. The majority was satisfied that it is a regulatory charge because one of the hallmarks of taxation is that it raises revenue for general purposes, and that really is missing here. In fact, all the revenue that is generated is returned to the provinces, and the majority highlighted that point. The other important distinction is that the carbon price is part of a broader regulatory scheme, the Greenhouse Gas Pollution Pricing Act, which is within the pan-Canadian framework.
N: How did the dissenting judges view it?
NC: They characterized it as a tax. But they did this by dissecting the act into its components, Part 1 versus Part 2, and they analyzed these in isolation. When they looked at Part 1, the carbon levy, they found that it was better characterized as a tax than a regulatory charge. But they had to look at it in its components to come to the conclusion that it wasn’t tied to a broader regulatory scheme.
N: Why is it so important for the levy not to be designed as a tax, beyond the political reasons for selling it?
NC: Obviously the federal government doesn’t want to be seen as taxing consumers. But most importantly, section 125 of the Constitution exempts provincially owned property from federal taxation. If the levy, constitutionally speaking, had been designed as a tax, that would have created this exemption which could have undermined the effectiveness of the carbon price, especially in jurisdictions where there are considerable Crown-owned GHG generating utilities, like in Saskatchewan.
N: The decision is going to be appealed to the Supreme Court of Canada, and we are expecting another decision on the matter from the Ontario Court of Appeal. What will you be looking for in terms of how this all plays out?
NC: It’ll be interesting to see if the Ontario Court of Appeal decides the matter in the same vein, and if there are other provincial challenges also decided that way. Then, the Supreme Court won't have that big a job to do. But if the Ontario Court of Appeal decides differently, or should it uphold the levy, but under a different power, or based on different reasoning, then the Supreme Court will play an important role in resolving some of the outstanding issues. And one of them may be this ongoing issue about exclusive jurisdiction. Both the majority and the minority opinions in the Saskatchewan Court of Appeal decision took the older-fashioned view that there isn't space for both jurisdictions to be legislating on greenhouse gas emissions. The majority narrowed the characterization of the subject matter under POGG from GHG emissions to a minimum national standard for carbon pricing to address this concern about overlap or concurrency in regulation. In my view, under current application of constitutional law, there is more scope for concurrency through the double-aspect doctrine and the increasingly narrow application of the paramountcy doctrine.
N: Which means that the federal government would always ultimately have the upper hand.
NC: Under paramountcy, only where there is a direct conflict, or a real frustration of the federal purpose, does federal law prevail.
N: Looking at the decision as a whole, is this decision going to mark a turning point for Canadian environmental law?
NC: It could very well, given that the Act was upheld under POGG. But this federal legislation is just one small step in addressing climate change. And while all the attention devoted to this litigation is perhaps to be expected in our federation, it’s also a distraction from the bigger issue. We would be better off moving on from this, focusing on intergovernmental cooperation and finding the most effective ways to transition our economy and address climate change in a way that’s going to benefit all Canadians. Instead of interjurisdictional fighting, we could be putting our energies towards coming up with Canadian, non-partisan, successful solutions to dealing with what the court characterized as an existential crisis.