By Colleen Collins and Marla Orenstein
Published in the Financial Post
October 8, 2020
Last week the Supreme Court of Canada heard arguments on whether Ottawa’s Greenhouse Gas Pollution Pricing Act (GGPPA) is constitutionally valid. The GGPPA authorizes the federal carbon tax in provinces that do not meet the federal government’s minimum requirements for climate policy. The governments of Canada and British Columbia, citing the constitution’s “Peace, Order and Good Government” clause, argue that climate change is an issue of national concern that requires a minimum national standard since any province’s failure to regulate would have adverse effects everywhere. Alberta, Saskatchewan and Ontario disagree — as did the Alberta Court of Appeal, as well as several dissenting judges in the Saskatchewan and Ontario Courts of Appeal, when this case was heard in lower courts.
It’s important to understand that the case is not about whether carbon taxes are good policy — it’s about whether the federal government has the authority to impose minimum national standards to manage greenhouse gases.
This is a tricky problem because the constitution does not assign responsibility for the environment to either the federal or provincial governments. In these situations, the responsibility is deemed to be related to other powers set out in the constitution or responsibility is shared. So, who decides?
National standards can be a good idea. For example, they make sense when it is costly and inconvenient for people to adapt to different standards as they travel and do business across the country. Standardized trucking requirements are an example. National standards may also make sense if there is a “race to bottom” in which each province lowers its own standards in order to attract investment.
But national standards can be a problem when they don’t allow for adaptation to regional needs. The energy mix in each province is very different. Quebec has inexpensive hydroelectricity. It also chooses to charge lower prices to customers in Quebec than outside. Alberta, Saskatchewan and B.C. have plenty of inexpensive natural gas and coal and are world leaders in carbon capture and sequestration.
In its quest to reduce emissions, the GGPPA picks only two tools: broad carbon taxes and cap-and-trade. But other approaches exist and can be equally legitimate ways to meet the same objective. Saskatchewan’s Boundary Dam project and the carbon capture technology it developed over the past decade — with a billion-dollar investment by the people of that province — is an example. It should be compared to broad carbon taxes like those set in B.C., taxes on high-emitters, as in Alberta, or the cap-and-trade systems Quebec uses. This is where the GGPPA fails — its narrow definition of how to reach the objective doesn’t allow for local adaptation that makes the various approaches regionally relevant.
But don’t we need national standards because provinces aren’t “doing enough?” That depends on how you define “enough.”
In August, the Canada West Foundation released a 36-page Compendium of GHG Reduction Legislation and Regulations Across Canada. Our report shows that while every province and the federal government has legislation, regulations and policies to reduce emissions, the approaches taken differ across the country, and with good reason. For example, provinces without oil and gas resources obviously don’t need to regulate the upstream exploration and production sector.
More is not always better. When policies complement each other, opportunities to achieve emission reduction goals are enhanced. But when policies overlap or contradict each other, that creates confusion, increases costs, reduces competitiveness and can even result in provinces taking the federal government to court. Having multiple, overlapping policies in the same space contributes to a perception of regulatory “pancaking”: an excessive compliance burden borne by businesses. When it introduced the GGPPA without support of all provinces, the federal government did not make the case that it understood the current regulatory landscape, how existing regulations interacted or whether the carbon price backstop would be effective or merely add red tape and increase costs.
The Supreme Court will hear other reasons why the GGPPA may exceed the federal government’s powers under constitution. But on the question of provincial action on reducing greenhouse-gas emissions there is no shortage of effort.
Colleen Collins is vice-president and Marla Orenstein director of the Natural Resources Centre at the Canada West Foundation.