Canada’s Rising Carbon Tax and the Supreme Court

Note to readers: A somewhat different, shorter version of this post was published on March 31, 2022 by the Macdonald-Laurier Institute (MLI) think tank.

Your Rising Cost of Energy (and everything else)

On April 1 Canada’s carbon tax increased, and when that increase works its way to the gas pumps it will add approximately 10-14 cents a litre to the price of gasoline. And it doesn’t end there. You will also, shortly, pay more for natural gas for heating and for electricity generated with natural gas. These energy price increases will work into, and increase, the price of your food, and the cost of living generally.  But the carbon tax is only the most obvious way to reduce your energy consumption.  Another, less visible technique Canada is using is to keep Canadian oil and gas in the ground. 

This second way is being done subtly, through new legislation, the Impact Assessment Act (IAA). The stated purpose of the IAA is to require proposed projects like mines, pipelines and electricity transmission lines to go through a federal assessment of their estimated environmental, financial and social impacts, to determine whether the projects will be licensed to proceed. However, the IAA makes new energy projects like pipelines prohibitively costly. I have explained why that is: pipelines, the environment and the economy. If one can’t affordably transport oil to a refinery or natural gas to consumers across Canada there is no business case to take these commodities out of the ground.

Alberta had hoped that it could end this newly legislated federal control (to lock in its petroleum resource development) though constitutional litigation.  But Alberta will probably lose its case, now before the Supreme Court of Canada (SCC).  This loss was predictable from the SCC’s decision in the 2021 carbon tax litigation. In that case, as in this one, the provinces conceded Ottawa’s position on the facts Ottawa used to justify its legislation, thereby ensuring their loss.

The Real Dispute Behind the Constitutional Litigation

Federal and provincial environmental assessments have been used, with Federal-Provincial cooperation, for large scale projects for half a century.  Some assessments have had representatives from each level of government on the assessment panel.  So why the court battle now?

Because the new IAA has greatly expanded the scope of the federal assessment process, making it practically impossible to construct any new pipelines.  That’s why Alberta politicians have called it the No More Pipelines Act. In my testimony before the Canadian Senate I proposed amendments to the IAA that would open the way for new energy projects to be assessed in less time, and with relevant criteria, summarized here: my presentation to the senate on amendments to the impact assessment act. However, the government accepted none of my proposals nor those of any other commentators that were intended to shorten and simplify the assessment process, to make it a real assessment rather than an energy barrier masquerading as an assessment.

The last pipeline assessed, the Trans Mountain Extension (TMX), demonstrated just how broken our assessment process was. The assessment process took a decade – two or three times the length of similar US assessments. After the approval, pipeline opponents subjected that decision to two successive rounds of litigation.  The frustrated investors walked away from their project while the litigation was ongoing. The message from TMX to investors is that Canada is no longer as open for business as it once was.

However, that overly-lengthy pipeline assessment was still under the old (2012) impact assessment law.  Under that law the National Energy Board had to assess 12 issues.  The new IAA almost doubled that, to 22 issues, including new ones, like the downstream impact on climate change for the entire planet, which is virtually impossible to estimate.  This massive increase in the cost, length and uncertainty of an already interminable process ensures that no new energy project of any size is likely to be built anywhere in Canada. “Keep it in the ground” is real purpose of the IAA, and why Alberta wanted to nullify it. I have explained this in greater detail here: assess the project, not the planet.

Why Ottawa Will Probably Win

Canada’s impact assessment process is broken, but Alberta’s constitutional litigation is unlikely fix it.  That’s because of the important SCC precedent set in the 2021 carbon tax case.

As the Chief Justice of the Supreme Court of Canada wrote, on behalf of the majority of the court:

“….these gases are a specific and precisely identifiable type of pollutant. The harmful effects of GHGs are known … Moreover, GHG emissions are predominantly extraprovincial and international in their character and implications. …. GHG emissions represent a pollution problem that is not merely interprovincial, but global, in scope.”

That decision effectively amended the Canadian constitution without changing any words in the written law.  The Court’s holding on the international aspects of GHG emissions left no room for provincial natural resources jurisdiction.  As all large scale industrial activity emits CO2, and has social and economic impacts, the CO2 “hook” in the IAA makes all natural resources subject to federal assessment and veto. This is not limited to interprovincial projects, but also captures projects within a province (such as any pipeline longer than 40 km) if it could potentially have any effect on a federal concern (such as increasing GHG emissions).

The Provinces’ Fatal Concession

The provinces are the authors of their own litigation misfortune. In the carbon tax case the federal government argued that Canada’s CO2 emissions needed to be reduced massively and immediately to fight the global climate crisis.  The provinces did not contest this argument, despite significant scientific controversy about the rate, the causes and the effects of climate change in Canada, and sharp policy controversy about what to do about it.  Once the provinces had effectively conceded the necessity of urgent global action to fight the global climate crisis, and that Canada as a nation had committed to certain emissions reductions in the 2015 Paris Agreement, it was all over for them. A sub-national unit like a province can never be more efficient at fighting a global crisis than a nation. Thus, the provinces conceded control over their natural resources, and possibly other areas of provincial jurisdiction.

Reference Cases Do Not Test the Facts

These two constitutional cases came to the SCC through an unusual Canadian legal procedure: the reference case.  Usually, constitutional litigation starts with a trial, with competing testimony and cross examination of witnesses, and then, perhaps, appeals up the judicial ladder, over many years, to the SCC. However, to avoid a long trial, a province can refer a case straight to its provincial Court of Appeal for a non-binding opinion; or, Ottawa can refer a case to the SCC for a binding opinion.

But reference cases do not test facts. The “evidence” presented is usually rudimentary, without cross-examination.  The court assumes the stated facts to be uncontroversial, and considers which level of government has the constitutional authority to deal with those facts.  If the facts presented are one-sided the decision will probably also be one-sided.

Looking Ahead

The SCC’s decision about the constitutional jurisdiction over natural resources will have a huge economic and social impact, not just for Alberta, but for all Canadians. This expansion of federal control over the economies of resource-rich provinces will also greatly stress Canadian national unity.  The provinces that have most of the high value natural resources will be the obvious losers.  But less obvious, thanks to the IAA, all Canadians will also be losers, through escalating energy prices raising many other prices.  It remains to be seen for how long Ottawa’s victory in this case, and the new IAA, will be sustainable.

12 replies »

  1. Can people connect the dots ?
    High energy leads to high cost of

    A Meme:
    We voted to raise taxes on property owners, not renters Why did our rent go up?


    • Sorry , correction above

      High cost of energy leads to high cost of food .

      Agree Norm ,
      Jaggy is like Greta, he goes after Galen Weston who makes $1 on $25 of groceries … the problem is in the CO2 taxes .


  2. The notion of abating fossil CO2 emissions by choking the supply while demand is high and rising is both stupid and evil.
    As Greta said, “People are DYING!” Unfortunately she got the identity of the people and the causes wrong, closer to backwards than forwards. 😦


  3. Hello Andrew

    That is a well-argued assessment you have made, but a depressing one. The Provincial Politicians have been particularly incompetent in not realizing, or challenging, the long term implications of accepting the Federal Government’s statements of the underlying science and the need for net zero 2050.

    I suspect that part of the reason they never mounted a serious attack against the Fed’s position from the outset was partly because they never carried out a serious review of the IPCC’s studies or ever realize the shortcomings of the IPCC’s studies, and partly because they did not wish to be seen as opposing positions that environmentalists were pushing strongly for.

    The Politicians likely assumed, or hoped, that somehow an acceptable political accomodation could be worked out with the environmentalists over time so that fossil fuels could continue to be used. This was wishful thinking on the politicians part as some of them are gradually realizing today. We now have a fine mess on our hands.

    Regards Ken Wilson


    • “The political accommodation worked out with politicians” and the corporate world was a Faustian deal wrapped up in Larry Fink’s ESG . It’s given credence to a religion . That can’t be fought with an SCC ruling.

      The good news is Warren Buffett and others realize that and maybe the tide is turning on wokeness and DEI and ESG .


      • Ken,

        I find it difficult to tell whether the provincial concessions on climate change were the result of the instructions from the politicians or the decisions made by the lawyers actually arguing the case.

        I was personally retained (through my law firm) to represent either federal or provincial governments on several occasions, but never met any of the politicians. My instructions for what arguments to present to the court always came from the senior lawyers in the Justice Department.

        Sometimes, when the winning legal arguments were politically sensitive, I was instructed not to make those arguments but instead to argue something most probably weak or even hopeless, but politically correct. That may have been what happened in the carbon tax case, because the politicians instructing their lawyers didn’t want to be denounced as “climate deniers”.

        On the other hand, because the carbon tax case involved constitutional law, a subspecialty staffed by a small group of special constitutional law experts within the Justice Department, it may have been that these lawyers were left to their own devices without instructions from either the political level or the senior Justice Department level. In that case, either the constitutional lawyers didn’t understand the climate science well enough to make the right arguments, or chose to avoid making them for fear that they personally, or their political masters, would be attacked as “climate deniers”.

        The carbon tax case was lost through either ignorance or political correctness, making it much more difficult, if not impossible to win the challenge against the Impact Assessment Act.

        Liked by 1 person

  4. One has to wonder whether there is a means by which objective reality will catch up to and overcome the Supreme Court’s finding (if that is the word) that there is a climate crisis and that GHG emissions in Canada can play a significant role in solving it. Both conclusions are false, as can be demonstrated through arguments based on science, economics, and analysis of geopolitical trends. If the carbon dioxide emissions that result from producing or transporting hydrocarbons are subject to federal government jurisdiction and regulation, why are not the emissions that result from my exhaled breath (almost 40,000 parts per million, horrors!)? The almost inevitable consequence of federal climate policies is the impoverishment of Canada, a radical change in Canadians’ lifestyles, and severe, perhaps fatal, strains on confederation. I assume that the election of a new federal government is an essential, but not sufficient, step towards saving us, but is even that enough to alter the position of the Supreme Court?


    • I think only the election of a government that will repeal the entire Climate Activism plan will save us. Forget the Supreme Court. The Liberals might welcome the secession of Alberta because that would guarantee them majority governments in the rest of Canada forever. But I don’t know if any other political party is up to it. Besides, all that older voting Canadians really care about is free health care. (Our children are getting fed up with what it costs, and long waits to have their children seen when sick or injured.)

      I know you are engaging in hyperbole for effect, but I do point out that the CO2 in human breath (and the emissions of all other life forms) is not from carbon that was entombed in the earth millions of years ago. Rather, it was in the atmosphere mere weeks to months ago, fixed into carbon fuel molecules by plants, and then eaten by us or by food animals. There is no net addition to atmospheric carbon dioxide by what we breathe out.

      Animals that emit methane from their digestion are a special case. The methane, too, is derived from atmospheric CO2 but because methane is more greenhouse-active while it persists, it will add net greenhouse activity in the short term. In the long term (100 years) it is oxidized back to the CO2 it started out as.

      I bring this up because the climate activists jump on things like this to prove we don’t know what we are talking about.

      None of this is to detract from the need to get rid of this government before its Net Zero folly destroys us. The United States seems to be going down the drain even more irreversibly than we are….unless the whole plan is to show that this will fail and pull back just in time, that being the only way to avoid the wrath of the environmental zealots.


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