Federal government's climate policy hangs in the balance as Supreme Court considers carbon tax

The battle over Ottawa's decision to impose a national price on carbon pollution is heading for a final showdown in front of Canada's highest court this morning.

The Supreme Court of Canada will hear arguments over the next two days on the constitutionality of the carbon pricing system — a critical part of the Liberal government's plan to cut Canada's carbon emissions by 30 per cent below 2005 levels by 2030.

The court is hearing three separate appeals from Saskatchewan, Ontario and Alberta — three provincial governments that argue the federal government is overstepping its authority and encroaching on provincial jurisdiction.

The debate over the carbon tax intensified last fall when then-Conservative leader Andrew Scheer campaigned against the policy during the federal election, which saw the Liberals' majority government reduced to a minority.

Since then, the issue has drifted from the spotlight. Hearings at the high court were postponed by six months due to the pandemic.

"Once the pandemic is in the rearview mirror ... environmental responses to climate change are going to be the pressing political, legislative issues for the foreseeable future, " said Eric Adams, a law professor at the University of Alberta.

Is Ottawa overstepping its authority?

The federal government says it derives the ability to impose a carbon tax from the section of the Constitution that gives Ottawa the power to legislate in the interests of "peace, order and good government" in areas not exclusively reserved to the provinces. That clause, the federal government argues, allows it to enact laws to address national concerns that are beyond the scope of one or more provinces.

Ottawa contends that the need to tax fuels that produce greenhouse gas emissions is a matter of national concern and should be recognized as coming under the authority of Parliament.

"A plan that doesn't include the pollution pricing element of it is going to be a far more expensive plan for Canadians," said federal Environment Minister Jonathan Wilkinson.

"If you're going to try to do this fully through regulatory means or through spending money, it is going to be far more difficult."

But the governments of Alberta, Saskatchewan and Ontario argue the policy is inconsistent with the Constitution's division of powers.

"This case raises an important constitutional question because the environment itself is a subject that is not expressly mentioned in the Constitution," said Carissima Mathen, a law professor at the University of Ottawa.

The provincial governments all separately asked their courts of appeal for a constitutional reference on the matter.

In Saskatchewan and Ontario, appeal courts upheld the law. Alberta's Court of Appeal ruled it unconstitutional.

With a win in hand, the Alberta government took the reference to the Supreme Court of Canada for a final determination.

"This is about a lot more than carbon pricing and GHG [greenhouse gas] policy," said Alberta's Energy Minister Sonya Savage. "Fundamentally, it's about how the country is governed."

Savage called the carbon tax a "power grab" and said a win for the provinces would ensure Ottawa is kept out of their lane.

Farmers divided over carbon pricing

The federal government issues carbon rebates on tax returns that exceed the amount most Canadians pay through the carbon tax.

Farmers operate heavy equipment; since they're disproportionately affected by the carbon tax, they get an exemption for most of the fuel they use. But propane, which some producers use to dry grain, does not qualify.

Markus Haerle is the owner of Chicken Little Farm in St. Isidore, Ont., about 75 kilometres southeast of Ottawa. He said his gas bill doubled from $8,500 to $17,000 over the last year and he fears his family farm could be in jeopardy.

"We cannot offset that cost into the marketplace because we are actually price takers, not price makers, on all the commodities that we grow," said Haerle, who is also the chair of Grain Farmers Ontario.

"Our commodities have to be dried to market specifics ... otherwise, the market won't take those commodities or they will spoil either in the field or in the bins."

Glenn Wright is a grain farmer in Vanscoy, Sask., 31 kilometres southwest of Saskatoon. He said he sees carbon pricing not as a tax but as an opportunity.

"I'm more open-minded, I guess, than most people are," said Wright, who wrote an affidavit in favour of the policy for the National Farmers Union, which is one of the interveners in the case.

"I've found that this is actually not something to fear, but actually of benefit to me."

Wright said carbon pricing has forced him to find ways to become more energy-efficient.

Instead of using fossil fuels to dry grain, Wright said he uses an electric heater as a small supplement to natural aeration through a hopper bin. It's expensive, but Wright has a solar panel to offset the cost.

"Necessity is the mother of invention," Wright said. "Where there's a will there's a way to do things differently."

Wright said he'll be watching the hearings at the top court very closely.

"The argument that I hear from the provinces is that this isn't the federal government's jurisdiction and, boy, I find that hard to take," Wright said.

"I hope the Supreme Court [of Canada] issues a decision that they won't regret."

Alberta to continue challenging

The carbon tax only applies to provinces that don't have an equivalent price on carbon pollution of their own.

Eight justices at the appeal level have sided with Ottawa. Seven have agreed with the provinces.

"It's possible we will get a split decision," Mathen said of the Supreme Court of Canada's hearings.

"I think that the results in the lower courts indicate the federal government has a strong defence, but it's not ironclad."

A rejection of the federal carbon tax at the Supreme Court could deal a blow to regulation of carbon emissions at the national level and to the Liberals' overall climate agenda.

"It really is time to stop all this regional and partisan fighting over climate change and come together to meet what is probably the biggest global, economic and environmental challenge of our time," said Stewart Elgie, professor of law and economics at the University of Ottawa.

"We need to come together as Canadians around this issue and stop squabbling."

But even if the federal government wins, the debate about its green economic initiatives is unlikely to end.

Alberta is preparing already for another fight over the Liberal government's energy regulatory law, known as Bill C-69.

"We will be fighting this growing pattern of expansionism by Ottawa," Savage said. "We will be fighting against everything they do."