Supreme Court rules carbon backstop constitutional

After an almost three-year legal saga, the federal carbon backstop has been affirmed as the law of the land, with the country's top court declaring it an issue of national concern.

The 6–3 legal decision from the Supreme Court of Canada seals the fate of a marquee federal Liberal government environmental policy that has been vociferously opposed at every turn by Doug Ford's Progressive Conservative government.

The PC government portrayed its loss as an example of it fighting for everyday families. "As we have from the very first day we took office, we will continue to do everything we can to make life more affordable for families and businesses, especially during this pandemic," said Environment Minister Jeff Yurek.

At the same time, he tried to burnish the government's environmental bona fides, which have been roundly criticized by experts and advocates.

"Further cementing our efforts to protect Ontario’s environment, our government is also investing $20 million in the Greenlands Conservation Partnership to expand protected areas, $30 million to protect and restore important wetlands, and we have launched consultations that could lead to the largest expansion of the Greenbelt since its creation."

The crux of the legal issue was whether the carbon backstop was a tax rather than a policy program. Counsel for the federal Crown argued that the vast majority of funds collected under the carbon backstop go back to Canadians in the form of carbon rebate cheques, a redistributionist policy meant to incentivize low carbon emitters while economically punishing the worst emitters. Some of the funds are also used to address regional disparities in the program.

Ontario, Saskatchewan and Alberta each launched legal cases to declare the carbon backstop unconstitutional. They argued that the federal program overstepped into provincial jurisdiction and that it was effectively a tax, not a regulatory charge.

But that did not sway the majority of the justices.

In a critical paragraph, the justices explained their thinking on the matter of whether the policy amounted to a matter of national concern due to greenhouse gases being a measurable item that crosses borders and affects all of Canada.

"Canada has adduced evidence that clearly shows that establishing minimum national standards of GHG price stringency to reduce GHG emissions is of sufficient concern to Canada as a whole that it warrants consideration in accordance with the national concern doctrine," the majority wrote. "The history of efforts to address climate change in Canada reflects the critical role of carbon pricing strategies in policies to reduce GHG emissions. There is also a broad consensus among expert international bodies that carbon pricing is a critical measure for the reduction of GHG emissions. This matter is critical to our response to an existential threat to human life in Canada and around the world. As a result, it passes the threshold test and warrants consideration as a possible matter of national concern."

Legal observers had expected the case to go the federal government's way, citing the latitude the judiciary usually extends the government on taxing and policy matters.

The ruling added clarity on the instances where the federal government can intervene on a matter of national concern. "Finding that this matter is of national concern is appropriate only because the matter amounts to a real, and compelling, federal perspective on GHG pricing, focused on addressing only the well-established risk of grave extraprovincial harm, and doing so in a way that has a qualified and limited impact on provincial jurisdiction." The majority opinion also pointed out that the federal program is a backstop, leaving jurisdictional discretion for the provinces to implement a different program of their choosing provided it meets stringency requirements.

Federal Environment and Climate Change Minister Jonathan Wilkinson celebrated the legal ruling. "This decision is a win for the millions of Canadians who believe we must build a prosperous economy that fights climate change," he stated.

I issued the following statement on today’s ruling from the Supreme Court of Canada. // J'ai fait la déclaration suivante sur la décision rendue aujourd'hui par la Cour suprême du Canada. pic.twitter.com/RPgNNSajlT

— Jonathan Wilkinson 🇨🇦 (@JonathanWNV) March 25, 2021

The legal ruling means that the signature federal Liberal environmental policy has now survived two federal elections and a Supreme Court case. The carbon backstop pricing scheme may not go away as a political issue though, as the price is scheduled to escalate over the next decade from $30 per tonne in 2020 to $170 per tonne in 2030.

Yurek emphasized that it's the end of the road when it comes to legal pushback. "We'll respect the decision of the Supreme Court," he said in comments to reporters. He said that it ended the discussion on the argument over jurisdiction and that the provincial government will review next steps.

But he refused to directly comment on or rule out the prospect of the provincial government implementing its own carbon pricing program — aside from the one on industrial emitters — as a substitute for the carbon backstop. Instead, he focused on the government's existing environmental initiatives. "What we are going to do and continue to do is implement an environment plan that protects land, air and water," he said.

As Yurek spoke in post-question period scrums, the Liberals released a 2018 campaign video clip that sought to undermine PC credibility on the environment file. In it, Effie Triantafilopoulos, who is now the parliamentary assistant to long-term care, was asked at a local candidate debate if climate change is real and is caused by human activity and responded, "I actually don't know the answer to that question," she said to laughter and jeers.

"There are a lot of experts on both sides of that issue," she added, despite the fact that the extensively studied subject has a clear scientific consensus that holds climate change is real and anthropogenic.

Triantafilopoulos did not respond to a request for comment.

The legal ruling ensures the carbon backstop remains the law of the land and marks a significant blow to the premier's vow to stop the policy that he dubbed a "tax on everything."

Axing the policy had been a signature promise for Ford. Previous PC leader Patrick Brown, in an effort to signal a moderate and pragmatic approach to governance, said he would have scrapped the Liberal cap-and-trade program in order to opt in to the federal carbon backstop. After a leadership race was triggered, Ford quickly made carbon pricing a core part of his message, a stance that was popular with the party's base and forced other leadership contenders Christine Elliott and Caroline Mulroney to adopt a similar position.

Upon taking office the PCs rushed to scrap the cap-and-trade regime that had been established by the previous Liberal government, which funded various environmental initiatives. In the absence of a market-based program to disincentivize carbon emissions, the federal carbon backstop kicked in, setting up a showdown with Ottawa.

The PC government set aside $30 million to wage legal battles, including a failed effort at the Ontario Court of Appeal. Its messaging on the issue was also full throttle. Premier Ford warned that Prime Minister Justin Trudeau was reaching into the pockets of Ontarians and that the "tax  on everything" would cause a "carbon tax recession." The latter fear did not come to pass.

The PC government also passed a law mandating that gas stations post stickers that detailed the cost of the carbon backstop, although it did not come with accompanying information about rebates. The PCs lost a court battle over that too, with a ruling that it was an unconstitutional attempt by the government to compel partisan speech from private companies.

The Supreme Court ruling is just the latest legal rebuke for the Ford government, which has often stumbled when trying to overturn established environmental policies. And while the government insists it is committed to its 2030 greenhouse gas emissions targets, analysis by both Auditor General Bonnie Lysyk and green group Environmental Defence suggests that the path to meet that goal will be difficult, especially in light of policy decisions made on the file by the PC government.

Stakeholders immediately responded to the landmark decision, with environmental groups praising it and some business groups expressing concern.

"This is good news for Ontarians," Keith Brooks, the executive director of Environmental Defence, told QP Briefing. With legal avenues exhausted, Brooks said that the provincial government will have to make some important policy choices on the environmental file.

"The provincial government is going to have to do some thinking about what this means for them," he explained. That includes whether it wants to create its own carbon pricing scheme so that the provincial government can choose how the money gets spent.

But Brooks added that the carbon backstop alone is not sufficient to meet either Ontario's or Canada's climate change goals and that more needs to be done to get on track to hit those targets.

Clean Prosperity Executive Director Michael Bernstein depicted carbon pricing as an enshrined Canadian policy and urged right-leaning leaders to embrace market-based incentives. "With carbon pricing here to stay, Conservative leaders — both federally and provincially — should use this moment to think creatively about conservative versions of carbon pricing," he stated. "After all, carbon pricing is the lowest-cost way to reduce emissions, and the only climate policy that generates revenue that can be used to compensate households."

"Today's decision is important. It's a victory for women and girls and all Canadians. It ushers in an era of climate legislation and regulation unimpeded by the fossil fuel industry and its political surrogates," stated Beatrice Olivastri, CEO, Friends of the Earth Canada, a group that was an intervenor in the case.

The NDP portrayed the Supreme Court loss as the product of the premier's choices and attempted to draw a contrast with how they would make different decisions. "We only have two choices: the federal price on carbon, or a provincial climate plan that benefits the people of this province," Opposition Leader Andrea Horwath said. "Doug Ford chose the federal carbon tax. We choose our climate plan to tackle the climate crisis and create hundreds of thousands of jobs right here in Ontario," she said, a reference to the party's recently-launched environmental campaign plank for the next election.

Green Leader Mike Schreiner slammed the PC government for its approach on the file. "This $30 million lawsuit was a politically motivated waste of public dollars," he stated. "I’m calling on the premier to stop wasting our hard-earned tax dollars sabotaging climate solutions with stickers that don’t stick and politically motivated lawsuits."

There was some criticism too.

"This ruling, while disappointing, confirms only that the Trudeau carbon tax is legal – it doesn’t make it good policy," said Canadian Taxpayers' Federation Executive Director Aaron Wudrick. "The legal battle may be over, but we will proudly continue our fight against this tax in the policy arena."

Dan Kelly, the president of the Canadian Federation of Independent Businesses, had a similar reaction. "Small firms simply cannot afford a further increase in their overall tax burden, especially as many remain in full lockdown or subject to significant COVID-19 related restrictions."