The Premiers of Alberta and Saskatchewan are certainly not fans of Canadian’s efforts to reduce its greenhouse gas pollution (to say the least). The Canadian government has just unveiled some of the details of its long-promised and much-delayed cap on oil and gas emissions, and Premiers Danielle Smith and Scott Moe are vowing to use all legal steps – some of dubious legality – to fight it.
This federal announcement comes on the heels of a proposed regulation to cut methane emissions and before that the draft Clean Energy Regulation. In response to each, Premier Smith has complained loudly, for a long time, that this is an unconstitutional intrusion on provincial jurisdiction and it will be challenged – either in the courts or through Alberta’s controversial Sovereignty Act (or both).
In an interview shortly after unveiling the proposed Emissions Cap Framework, federal Environment Minister Steven Guilbeault said that he has no doubts that the Emissions Cap will be upheld as constitutional if it is challenged in the courts. But his critics point to recent losses in which the courts have overturned other federal environmental laws (for example, the Impact Assessment Act reference case and the listing of plastics as a toxic substance under the Canadian Environmental Protection Act (CEPA, discussed further below).
Canadians may be wondering: what is the Emissions Cap, and is it on firm constitutional ground?
At this point Canada has not drafted the regulations that will implement the Emissions Cap, so we don’t yet have key details. Nonetheless, in our opinion there is plenty of room for the Canadian government to enact a constitutionally valid Emissions Cap law.
And in fact, we think that the Canadian government may have gone too far in trying to accommodate the provinces – resulting in a weaker approach that risks failing to achieve the greenhouse gas reductions that Canada needs.
Why an emissions cap, and how will it work?
We’ve written about the case for an emissions cap before: Canada has set a number of greenhouse gas emissions reduction targets. It has failed to meet a single one, largely due to increasing emissions from the oil and gas industry (despite industry promises from at least 1995 to reduce their emissions).
As a result, emissions from the oil and gas industry now represent 26% of the country’s emissions, the largest of any sector. And without a cap on emissions, this figure is expected to grow.
In 2021 the Liberal Party of Canada was re-elected on a pledge (in Prime Minister Trudeau’s words) to “cap oil and gas sector emissions today and ensure they decrease tomorrow at a pace and scale needed to reach net-zero by 2050.”
The Framework finally unveiled earlier this month at the COP28 climate conference in Dubai explains in more detail what this means: the government will enact a “cap and trade” system through regulations under CEPA. The government will specify the maximum emissions that the oil and gas industry in Canada can emit in 2030 (the “cap”), with the intention of lowering this cap in the years that follow. If particular oil and gas companies emit less than their share of the cap, then they can trade their surplus emissions to others that emitted more, rewarding the company for their lowered emissions (the “trade”).
We’ve written before about the key pieces of an emissions cap that we wanted to see. The proposed Emissions Cap has some of these features: the government adopted a cap and trade model, and it applies to most (although not all) oil and gas operations and all emissions from those operations.
Less positively, the proposed framework has:
- A weak emissions trajectory (at least initially) – as we wrote in our blog posted last year, it’s important that the oil and gas industry does its fair share to reduce emissions. We proposed a reduction in line with Canada’s global fair share of a 60% reduction compared with 2005 levels by 2030, or at a minimum consistent with Canada’s overall commitment of a 40-45% reduction by 2030 (compared to 2005 emissions). The Emissions Cap proposed by the government would reduce emissions by about 30% relative to 2019 levels (which equates to only about 18% relative to 2005 levels) by 2030, even before the offsets and other loopholes discussed below kick in. According to senior government officials, this Emissions Cap assumes that production is maintained at 2019 levels and all “viable” emissions reduction technologies are implemented.
- Many loopholes and free rides – We have called for a strict regime that does not give oil and gas companies authorization to pollute for free, or allow them options to avoid complying with the cap. Unfortunately, pressure from industry and some provinces has resulted in a framework that bends over backwards to give the industry loopholes in the name of “flexibility.” These include giving the companies free credits to pollute (at least initially), as well as the right to buy offsets and to pay into a “decarbonization fund” instead of meeting the strict cap requirements. When all of these loopholes are included, the government says that the framework could actually allow companies to increase their production while emitting “up to a level about 20 to 23 percent below 2019 levels,” or only slightly below the industry’s 2005 levels.
Clearly the oil and gas industry is not doing its share of the work to achieve Canada’s greenhouse gas reduction targets (despite reaping astronomical profits from its contribution to the climate crisis) – meaning that other sectors will need to do more, or the country will fail in its commitments. There seems to be little doubt that these weaknesses are the result of pressure from the oil and gas industry and some provinces, and particularly the claim by some provinces that Canada cannot regulate the production of oil and gas (which is discussed further below).
Climate change is a joint federal/provincial responsibility
Canada’s Constitution divides governmental responsibilities and powers between the federal and provincial governments. However, since it was originally written over 150 years ago, the Constitution Act, 1867 does not assign “the environment” or “climate change” to any one level of government. The Supreme Court of Canada (SCC) (in R. v. Hydro-Quebec at para 112) described the environment as “a diffuse subject that cuts across many different areas of constitutional responsibility, some federal, some provincial.” Both the provinces and the federal government have roles to play in protecting the environment on which we all depend, and ideally they should cooperate with one another to do so.
Premier Smith is correct when she says that the provinces have jurisdiction over most natural resources, including oil, gas and coal. However, the Constitution has assigned the federal government its own roles, and as the SCC indicated in Hydro-Quebec, if a federal action falls “into one of these areas of federal jurisdiction, it has the power to act even if those actions also have an incidental effect on provincial matters.”
There are several federal powers that can provide a basis for various types of climate action, but the two most likely to apply in relation to the Emissions Cap Framework are:
- the Criminal Law power; and
- Peace, Order and Good Governance.
The federal Criminal Law power
The criminal law power may seem like an odd basis for justifying a federal environmental law, but in fact this power has been interpreted by the courts very broadly, and has previously been applied to uphold the toxic materials provisions of CEPA. As discussed above, CEPA is the legislation that the federal government has said will be used to implement the Emissions Cap framework.
Originally enacted in 1988, CEPA is a sweeping piece of federal environmental legislation primarily intended to reduce the production and release of toxic substances into Canada’s environment. In 1997 the regulation of toxins known as PCBs was challenged as unconstitutional in Hydro Quebec (quoted above).
The SCC reasoned that the federal government has broad discretion to “determine what evil it wishes by penal prohibition to suppress and what threatened interest it thereby wishes to safeguard.” In other words, the federal government can declare pollution to be criminal. Rejecting the argument that CEPA’s regulation of toxins was more in the nature of regulation than a criminal prohibition, the majority concluded that the federal authority over criminal law should be interpreted broadly, and that the regulation of PCBs was a valid use of the criminal law power.
We recently wrote about a federal court decision concerning plastic pollution, in which regulations under CEPA were struck down as unconstitutional. In that case, the judge found that that regulation of some of the plastics may not fall within the criminal law power because the federal government had failed to demonstrate that all of the different types of plastics regulated actually caused harm. This decision is under appeal, but even if that decision stands, the courts have almost universally recognized the harm caused by greenhouse gases, with the SCC describing reduction of GHGs as “critical to our response to an existential threat to human life in Canada and around the world.”
It is important to note that the criminal law power can (and often does) regulate the production of materials that could otherwise be regulated under provincial authority. In Hydro-Quebec the SCC said that the only constraint on the federal government’s ability to regulate activities that cause harm is that the government may not attempt to improperly intrude on a provincial jurisdiction under the guise of regulating a harmful activity. As the SCC said in Hydro-Quebec (at para 121, quoting an earlier decision) the criminal law power cannot be used to “permit Parliament, simply by legislating in the proper form, to colourably invade areas of exclusively provincial legislative competence.”
In the case of the Emissions Cap, it is clear that the federal government is focused on the harm caused by oil and gas industry greenhouse gas emissions, rather than an attempt to interfere in provincial matters.
The federal power related to Peace, Order and Good Governance
The leading case on the Canadian government’s authority to regulate greenhouse gas emissions is the SCC’s decision in References re the Greenhouse Gas Pollution Pricing Act (the GGPPA Reference Case), another case that came about because the Premiers of Alberta, Ontario and Saskatchewan, objected to a federal climate law (in that case the so-called “carbon tax”). The SCC ruled 5-3 that Canada had the authority to establish a climate law by enacting a price on carbon pollution.
To the surprise of many, the Canadian government defended that law not as a federal tax, or under the criminal law power, but as a national issue to be regulated under the federal government’s Constitutional powers related to “Peace, Order and Good Governance” (POGG).
We’ve written about the Court’s decision before, but to summarize, the SCC was obviously very concerned that inferring a new national authority over greenhouse gas emissions could lead to intrusions into provincial areas of authority. The POGG powers have a potentially massive reach and should not be allowed to “effectively [eviscerate] provincial power.”
Ultimately, the Court ruled that Canada was only setting a national standard for carbon pricing. Given the inability of any one province alone to achieve Canada’s targets for reducing greenhouse gas emissions, the SCC found this national coordination role to be an appropriate exercise of the Peace, Order and Good Governance power.
It is not entirely certain how a defence to the Emissions Cap as an exercise of the POGG power might play out, but many of the factors that the SCC relied upon in the GGPPA Reference Case apply equally. Once again, provincial inaction threatens to undermine Canada’s ability to achieve its climate target – something that the SCC clearly weighed heavily in that decision. Moreover, Canada has taken special care to ensure that the Emissions Cap has minimal impacts on oil and gas production, to the point of weakening its emissions targets to such an extent that production may actually increase under the proposed framework.
On the other hand, the SCC placed considerable emphasis on the fact that the national carbon price considered in the GGPPA Reference Case was a “backstop” – ensuring a minimum standard. According to the Court: “Parliament acted with a remedial mindset in order to address the risks of provincial non-cooperation on GHG pricing by establishing a national GHG pricing floor.” Time will tell whether the courts will accept the Framework’s cap and trade system as analogous to a minimum standard.
Conclusion
In our view, in the case of a constitutional challenge by one of more provinces, the Canadian courts are likely to uphold the Emissions Cap: most likely under the federal government’s criminal law power, but possibly also as an exercise of the Peace, Order and Good Governance power.
At the same time, such a legal challenge would demonstrate yet again the disconnect between Ottawa’s current efforts to reduce greenhouse gas emissions and the role of Alberta and Saskatchewan in championing the ongoing growth in production (and emissions) from oil and gas operations. While there have always been tensions between the provinces and the federal government, Confederation is based on a certain level of shared interests and sense of responsibility between the two senior levels of government.
The approach to this challenge is not an abstract legal question. Climate change is an existential crisis that is quite literally violating the legal rights, including the constitutional rights, of Canadians. The inaction of some provinces, and the resulting pressure on Ottawa to scale back its climate ambition, is already contributing to deaths around the world.
Canada desperately needs to get its collective act together. The Emissions Cap is a weak first step in the right direction – and Canada needs to quickly move to strengthen the cap and remove its loopholes. Take action now to send a message to your MP!
Top photo: Parliamentary press conference announcing the federal Emissions Cap Framework (screenshot).