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Grant Bishop is the Calgary-based founder of KnightFork, which builds data-driven tools for carbon pricing and the energy transition.

Earlier this month, a 4-to-1 majority of Alberta’s Court of Appeal found the federal Impact Assessment Act, formerly Bill C-69, to be an unconstitutional overreach. Certain commentators wager that the Supreme Court of Canada will overturn this decision on appeal, noting that it has previously upheld Ottawa’s carbon-pricing system under the Greenhouse Gas Pollution Pricing Act.

The Alberta appeal court’s opinion raises nagging questions about the extent of federal jurisdiction to regulate greenhouse gases (GHGs). Indeed, this case is likely a preview of further constitutional challenges, as Ottawa pushes ahead on a Clean Electricity Standard and a cap on oil and gas emissions. A critical unresolved issue is whether the federal government has jurisdiction to micromanage industries and projects in pursuit of national climate goals.

There’s history here. In a 1992 case involving a dam project on the Oldman River in Southern Alberta, the Supreme Court found that a federal environmental-assessment process could apply to a provincial government infrastructure project. But the court emphasized a limit on how far federal assessments could wade into provincial jurisdiction.

Writing for the majority, Justice Gérard La Forest cautioned against such reviews becoming “a constitutional Trojan horse enabling the federal government, on the pretext of some narrow ground of federal jurisdiction, to conduct a far ranging inquiry into matters that are exclusively within provincial jurisdiction.”

For the constitutionality of the Impact Assessment Act, a key issue is whether the federal government can consider, for example, the GHGs of a proposed in situ oil sands’ facility. The Alberta appeal court’s holding highlights that the Supreme Court has not recognized general federal jurisdiction over GHGs and regards the assessment of a specific project’s GHGs as trespassing on provincial turf.

Importantly, when upholding the constitutionality of Ottawa’s carbon-pricing system, the Supreme Court’s majority defined “establishing minimum national standards of GHG price stringency to reduce GHG emissions” as a “national concern” under the federal peace, order and good government power. It expressly did not confer general federal jurisdiction for regulating GHGs.

Further, the dissenting justices in the Supreme Court decision were particularly alert to carbon pricing being misused for “picking winners and losers” between industries. These justices regarded the federal output-based pricing system for large emitters as industry-by-industry regulation outside the federal purview.

Similar constitutional questions could arise for the proposed federal Clean Electricity Standard – which aims for all electricity to be net-zero by 2035 – and a cap on GHGs from the oil and gas industry.

Ottawa has not unveiled its exact designs, but it has indicated these measures will be imposed as regulations under the Canadian Environmental Protection Act. The Supreme Court has previously held that CEPA is criminal law and therefore falls under federal jurisdiction. Ottawa would likely rely on its “criminal” power under the Constitution as jurisdiction for those regulations.

But such measures will presumably spark challenges from provinces that perceive them as an invasion of their exclusive jurisdiction over resource extraction and power generation under the Constitution. A Clean Electricity Standard or industry-specific emissions cap is arguably more like industrial policy than criminal law.

Moreover, the Supreme Court has required that criminal legislation consist of a prohibition backed by a penalty for a valid criminal purpose. The Supreme Court hasn’t yet determined whether an effectively permissive regime can be “criminal” – for example, if regulations include markets for tradable credits or option for payments into a government fund.

So how can courts prevent climate policy from being a “Trojan horse”? I suggest that GHGs be recognized as a “national concern” that, like aeronautics, radio communications or nuclear power, is exclusive federal jurisdiction. However, federal jurisdiction for GHGs must also be restricted from intruding into industrial regulation by, for example, applying different carbon costs for different industries or imposing emission standards on specific projects.

Indeed, as Ottawa seeks to implement border carbon adjustments (that is, a tariff on the embodied carbon emissions of imports), it will have to standardize costs for carbon across Canada. International trade law requires that a charge on imports not be discriminatory. Therefore, for a carbon tariff on imports to be legal, Canada cannot maintain a patchwork system where the same product faces different costs for carbon between provinces.

This all means more constitutional wrangling awaits Canadian climate policy. Such continuing uncertainty risks paralysis for industry. Therefore, if new legislation is challenged, Ottawa should expedite references to the Supreme Court to resolve unsettled questions promptly. In turn, the court likely faces more work to adapt the “living tree” of our Constitution to the existential challenge that humanity faces in climate change.

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