Federal Carbon Tax and the Constitutional Division of Powers

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The question of whether the federal or a provincial government has legislative authority to implement climate change mechanisms, such as a "cap and trade" or "carbon tax", has been an important and decisive issue in political arenas across Canada.  Until very recently, Ontario Premier Doug Ford had launched a constitutional challenge against the Federal carbon tax which, absent any new provincial program to replace the now canceled provincial cap and trade program, is set to come into force in  Ontario on April 2019.  While Doug Ford recently conceded to the federal government's position on the matter, examining whether his initial stance had any strong sense of constitutional justification remains, and will continue to remain of outmost importance to future climate change-related debates.

Constitutional Distribution of Legislative Powers

Section 91 and 92

The starting point to this discussion are sections 91 (Federal) and 92 (Provincial) of Canada's Constitution Act, 1867 to 1982.  As a general guiding principle, subject-matters that have nation-wide implications (e.g. national security) fall under federal jurisdiction, and subject-matters confined within provincial borders (e.g. liquor licensing) fall under provincial jurisdiction. Both provisions are reproduced immediately below for ease of reference. 

Powers of the Parliament

Legislative Authority of Parliament of Canada
 It shall be lawful for the Queen, by and with the Advice and Consent of the Senate and House of Commons, to make Laws for the Peace, Order, and good Government of Canada, in relation to all Matters not coming within the Classes of Subjects by this Act assigned exclusively to the Legislatures of the Provinces; and for greater Certainty, but not so as to restrict the Generality of the foregoing Terms of this Section, it is hereby declared that (notwithstanding anything in this Act) the exclusive Legislative Authority of the Parliament of Canada extends to all Matters coming within the Classes of Subjects next hereinafter enumerated; that is to say,

Exclusive Powers of Provincial Legislatures

Marginal note:Subjects of exclusive Provincial Legislation
 In each Province the Legislature may exclusively make Laws in relation to Matters coming within the Classes of Subjects next hereinafter enumerated; that is to say,

1.       Repealed(44)
1A.     The Public Debt and Property. (45)
2.       The Regulation of Trade and Commerce.
2A.      Unemployment insurance. (46)
3.       The raising of Money by any Mode or System of Taxation.
4.       The borrowing of Money on the Public Credit.
5.       Postal Service.
6.       The Census and Statistics.
7.       Militia, Military and Naval Service, and Defence.
8.       The fixing of and providing for the Salaries    and Allowances of Civil and other Officers      of the Government of Canada.
9.       Beacons, Buoys, Lighthouses, and Sable       Island.
10.      Navigation and Shipping.
11.      Quarantine and the Establishment and           Maintenance of Marine Hospitals.
12.      Sea Coast and Inland Fisheries.
13.      Ferries between a Province and any British or Foreign Country or between Two Provinces.
14.      Currency and Coinage.
15.      Banking, Incorporation of Banks, and the       Issue of Paper Money.
16.      Savings Banks.
17.      Weights and Measures.
18.      Bills of Exchange and Promissory Notes.
19.      Interest.
20.      Legal Tender.
21.      Bankruptcy and Insolvency.
22.      Patents of Invention and Discovery.
23.      Copyrights.
24.      Indians, and Lands reserved for the               Indians.
25.      Naturalization and Aliens.
26.      Marriage and Divorce.
27.      The Criminal Law, except the Constitution     of Courts of Criminal Jurisdiction, but            including the Procedure in Criminal Matters.
28.      The Establishment, Maintenance, and             Management of Penitentiaries.
29.      Such Classes of Subjects as are expressly     excepted in the Enumeration of the      Classes of Subjects by this Act assigned exclusively to the Legislatures of the Provinces.

1.       Repealed(48)
2.       Direct Taxation within the Province in order to the raising of a Revenue for Provincial Purposes.
3.       The borrowing of Money on the sole Credit of the Province.
4.       The Establishment and Tenure of Provincial Offices and the Appointment and Payment of Provincial Officers.
5.       The Management and Sale of the Public Lands belonging to the Province and of the Timber and Wood thereon.
6.       The Establishment, Maintenance, and Management of Public and Reformatory Prisons in and for the Province.
7.       The Establishment, Maintenance, and Management of Hospitals, Asylums, Charities, and Eleemosynary Institutions in and for the Province, other than Marine Hospitals.
8.       Municipal Institutions in the Province.
9.       Shop, Saloon, Tavern, Auctioneer, and other Licences in order to the raising of a Revenue for Provincial, Local, or Municipal Purposes.
10.     Local Works and Undertakings other than such as are of the following Classes:
(a) Lines of Steam or other Ships, Railways, Canals, Telegraphs, and other Works and Undertakings connecting the Province with any other or others of the Provinces, or extending beyond the Limits of the Province:
(b) Lines of Steam Ships between the Province and any British or Foreign Country:
(c) Such Works as, although wholly situate within the Province, are before or after their Execution declared by the Parliament of Canada to be for the general Advantage of Canada or for the Advantage of Two or more of the Provinces.
11.     The Incorporation of Companies with Provincial Objects.
12.     The Solemnization of Marriage in the Province.
13.     Property and Civil Rights in the Province.
14.     The Administration of Justice in the Province, including the Constitution, Maintenance, and Organization of Provincial Courts, both of Civil and of Criminal Jurisdiction, and including Procedure in Civil Matters in those Courts.
15.     The Imposition of Punishment by Fine, Penalty, or Imprisonment for enforcing any Law of the Province made in relation to any Matter coming within any of the Classes of Subjects enumerated in this Section.
16.     Generally, all Matters of a merely local or private Nature in the Province.

No Clairvoyance Powers for the Framers of Our Constitution

While their political clout was certainly great, the framers of the Canadian Constitution were devoid of any clairvoyance powers, i.e. they did not and could not have foreseen, anticipated or conceived of every possible legislative subject-matter.  For that reason, it is recognized that sections 91 and 92 of the Canadian constitution offer a non-exhaustive list of legislative powers. A federal carbon tax designed to curb green house gas emissions as a response to global warming is a prime example of a legislative subject-matters that the framers of the Constitution did not anticipate. Perhaps more perplexing is why the framers of the Constitution omitted the more general legislative subject-matter of the "environment".

Constitutional Doctrines of Pith and Substance and Federal Paramountcy

For either provincial or federal governments to assume legislative power over a subject-matter not expressly listed in sections 91 or 92 (such as the environment, climate change, or the implementation of a carbon tax), the government must relate the subject-matter at issue by tying it to at least one expressly enumerated head of power enumerated in section 91 (for the federal government) or 92 (for the provincial government).

Relating the subject-matter of a legislation to an expressly enumerated head of power in section 91 or 92 requires a careful examination of the "pith and substance doctrine", a fundamental principle of constitutional interpretation that seeks to uncover the "true meaning or essential character" of a legislation.  Courts will examine the legislation, the social and economic purposes for which the legislation was enacted, the circumstances surrounding the enactment of the legislation, the legal effects of the legislation and, sometimes, the practical or anticipated effects of the legislation. A legislative power may fall within both sections 91 and 92. In case of shared jurisdiction, federal legislation will have paramountcy over provincial legislation but only to the extent of any inconsistency. 

Is a Carbon Tax Really a Tax?

Using Trudeau's federal carbon tax as an example, a carbon tax is a multiplex subject-matter. It is first and foremost a tax. Under s. 91(3) the federal government is conferred with the power of "The raising of Money by any Mode or System of Taxation". S. 91(2) also confers provinces with the power of "Direct Taxation within the Province in order to the raising of a Revenue for Provincial Purposes." One difference between a "carbon tax" and (e.g.) an income tax or a tax on goods and services is that a carbon tax is not made "in order to the raising of a revenue".  A "carbon tax" is implemented primarily as a means of reducing greenhouse gas emissions by making it more expensive for polluters to pollute.  The underlying reason or, motive for wanting to reduce green house gas emissions is to tackle a problem that is global in nature, namely, climate change. Either government could potentially justify a carbon tax under section 91-92 if they could demonstrate that the primary purpose or reason behind the carbon tax is to raise money to invest in the research and development of clean energy technologies.

Is Carbon Tax an Environmental Matter?

However tempting it may be to characterize a carbon tax as a subject-matter falling under the broader and more general scope of the environment, the carbon tax is only indirectly tied to the environment. That is to say, it is  not the primary object of a carbon tax. A carbon tax applies directly to commercial and industrial activities that generate green house gas emissions. Worded differently, a legislation cannot ask the environment to pay a carbon tax. So what might be a more likely characterization of a carbon tax for constitutional purposes?

A More Likely Characterization of a Carbon Tax

Apart from being an environmental issue, carbon emissions are, at their very source, the result of commercial and industrial activities. Even if one considers means of transportation like automobiles, automobiles are ultimately the end product of heavy and massive commercial and industrial manufacturing activities. The extent to which an automobile emits green house gas emissions, for instance, is ultimately a question of how the vehicle is designed and built at the factory. For these and many other reasons, a carbon tax is more likely to be characterized as, on the federal side, a subject matter that falls with the scope of section 91(2), the "regulation of trade and commerce" or, on the provincial side, s. 92(13) "Property and Civil Rights in the Province". 


In sum, where commercial or industrial activities are conducted beyond provincial borders, the federal government would have jurisdictions, and a federal carbon tax would most likely be characterized as falling under s. 91(2) of the constitution, namely, the regulation of trade and commerce.  Provincial governments would have jurisdiction under s. 92(13) over commercial or industrial activities, including properties that emit green house gas emissions. For this reason, and aside from being a shared responsibility in our communities, climate change-related legislation, like the federal carbon tax, is a subject-matter of shared competency between federal and provincial governments. Where a province omits to implement any legislation to curb green house gases being emitted from within the province, the federal government is well within its powers to implement its carbon tax through its powers to regulate trade and commerce.