Janis Sarra is presidential distinguished professor and professor of law, Peter A. Allard School of Law, University of British Columbia
On Monday, the Ontario Court of Appeal will hear a constitutional challenge from the Ontario government to the federal Greenhouse Gas Pollution Pricing Act. Valuable tax dollars are being expended in this litigation at a time when it is clear that, without effective carbon pricing, investors will move their capital elsewhere and Canadian businesses will suffer. Carbon pricing is viewed by almost every international financial and business organization in the world as an essential strategy to shift behaviour and achieve necessary reductions in carbon emissions.
The insurance sector reports that in addition to harms to health and eco-systems from increasingly severe heat waves, forest fires and degradation of water supply, costs for businesses are growing in terms of investment and insurance. The Business Council of Canada, which represents 150 private-sector enterprises, has called carbon pricing the most efficient way to achieve Canada’s climate-change goals. Major Canadian companies such as Teck Resources Ltd., Suncor Energy Inc., BMO Financial Group, Desjardins Group and Barrick Gold Corp. support carbon pricing to stimulate clean technology and market innovation. The International Monetary Fund reports that carbon pricing can help redirect technological development towards investments in low-emissions transportation, building and energy use.
The Greenhouse Gas Pollution Pricing Act clearly falls within the federal government’s legislative authority to address issues of national concern. The express aim of the act is to mitigate climate change through the pan-Canadian application of pricing mechanisms to sources of greenhouse gas (GHG) emissions. It creates incentives for behavioural change and for innovations necessary to reduce emissions by ensuring that the price applies broadly throughout Canada. Its “pith and substance,” one of the criteria courts use on constitutional issues, relates to the cumulative effects of GHG emissions. Its “purposes and effects” are to ensure Canada survives economically by placing a minimum carbon price that applies across the country.
Why does the litigation misdirect our tax dollars? Supreme Court of Canada decisions have been clear for years that the federal government’s power is to be used to address issues of national concern. In previous judgments, the Supreme Court has held that where a matter has achieved a “degree of singleness, distinctiveness and indivisibility” of federal concern that distinguishes it from solely provincial matters or issues that provinces alone cannot address, federal action is constitutional. What could be more clearly of concern to us nationally than the need to mitigate the increasingly devastating consequences of climate change?
My own view is that a carbon tax is the most effective way to do that. However, in the spirit of federal-provincial-territorial co-operation, Ottawa adopted a more flexible strategy that allowed provinces and territories to choose how they address this issue of national concern, but created a mechanism to apply if they fail to act. Carbon pricing is aimed at encouraging all segments of Canadian society, including business, consumers and governments, to reduce their fossil-fuel consumption and thus their emissions. The Greenhouse Gas Pollution Pricing Act is aimed at allowing the transition to be certain and measured. It expressly accommodates particular economy activity in order to effect meaningful transition, such as exempting specified farming activities.
Provinces and territories that voluntarily adopt the system will receive the proceeds directly from the federal government, with authority to decide how best to use these resources. For those that do not, the federal system will apply, and the amounts will go to the jurisdiction of origin to help redirect resources to lower-carbon economic activity. Residents will receive 90 per cent of the proceeds of the fuel charge in the form of climate action incentive payments, the rest to be directed to schools, hospitals, and small and medium-sized businesses for investment in clean technologies. The strategy is to let provincial and territorial governments act, but if they do not meet minimum standards, to give resources directly to businesses and individuals. If anything, the federal act complements municipal, provincial and private-sector efforts to address climate change.
From governments, we want certainty and transparency, not tax dollars directed to political posturing. The principle of co-operative federalism allows interplay and overlap between federal and provincial legislation, particularly important in respect of the urgent issues posed by the effects of climate change. Businesses need the federal strategy to price carbon pollution to attract and retain capital market investors. We need to redirect resources to sustainable economic activity, including infrastructure support for a low-carbon economy. Our economic dependence on fossil fuels means that steady, realistic and effective progress is required. GHG emissions have extra-provincial impacts, and failure by one province or territory to address emissions directly harms the rest of the country.