Steven Guilbeault speaks to The Associated press at the COP28 UN Climate Summit, on Dec. 11, in Dubai, United Arab Emirates.Peter Dejong/The Associated Press
Grant Bishop is the Calgary-based founder of KnightFork, which builds data-driven tools for carbon pricing and the energy transition.
The federal government has proposed to cap greenhouse gases from oil and gas. For reducing emissions nationally, these federal forays into activity-specific micromanagement are economically inefficient and constitutionally risky.
Economically, this sector-by-sector approach jettisons principles behind carbon pricing and distorts carbon markets. Constitutionally, these new regulations assert a scope for the federal “criminal” power that would eviscerate provincial jurisdiction.
First, the core rationale for pricing carbon is that any and all greenhouse gases contribute to climate change. Every gram of carbon dioxide emitted into the atmosphere inflicts this “negative externality” (in the language of economists). Any carbon dioxide has the same impact whether emitted from petroleum extraction or a cement plant, a steel mill or a power plant, your SUV’s tailpipe or your furnace.
The very point of pricing the externality is to internalize the costs of climate change into all decisions by households and firms about what to consume and where to invest. There is no economic rationale to differentiate the carbon price between these different activities.
Instead, Ottawa’s new sector-specific regulations reek of industrial favouritism – particularly after the federal government’s cynically unprincipled exemption of heating oil from the carbon price. Such discrimination between different sources of greenhouse gas isn’t about economic efficiency. It’s about picking winners and losers.
This comes to the constitutional concern. It will fracture our federation if Canadian climate policy is seen as a cudgel against certain regions – or the industries concentrated in particular provinces – that don’t vote for the governing party in Parliament. A purpose of our constitution is to safeguard against such tyrannies of majorities.
The expanded “criminal” jurisdiction asserted by Ottawa to underpin new regulations under the Canadian Environmental Protection Act would be viewed as ripe for such abuse. Briefly, a valid “criminal” law requires a prohibition backed by a penalty to suppress a public threat or “evil.” The Supreme Court has found the act broadly to be such a criminal law. However, if the proposed oil and gas emission cap is to be considered a valid exercise of the federal criminal power, Ottawa would gain practically unbounded jurisdiction to micromanage any activity that might emit greenhouse gases. For example, under the guise of criminal legislation, Ottawa could write rules for building codes, public transit or home heating.
The federal “criminal” power cannot be given such scope to eviscerate provincial jurisdiction. Climate change cannot be pretext for contorting our constitution and endowing such far-reaching federal authority.
Reading through Ottawa’s published “regulatory framework,” these regulations do not appear concerned with prohibiting a well-defined threat to the public interest. Rather, the proposed regulations are concerned with how oil and gas production might grow, what decarbonization technologies are available, and what greenhouse gas reductions are prioritized. The proposed regulations would create an intricate system for allocating allowances, which could then be bought and sold on an emissions trading market.
For the federal criminal power, the Supreme Court has admittedly relaxed the strict requirement for an absolute prohibition. However, the proposed regulations would make a mockery of this flexibility. The tradable allowances are clearly a scheme to manage complex economic trade-offs. Indeed, the very ability to buy allowances refutes the fiction that the purpose of the oil and gas cap is to prohibit a public threat. How can greenhouse gases from oil and gas be an “evil” worthy of criminal sanction if a perpetrator can buy indulgences?
This cap on oil and gas emissions presents constitutional questions that the Supreme Court will ultimately have to decide. Alberta and Saskatchewan contend these regulations are federal overreach. The federal government’s recent losses concerning the constitutionality of its Impact Assessment Act and its plastics ban under the Canadian Environmental Protection Act exposed Ottawa’s overconfidence about the extent of its jurisdiction. Until this uncertainty about federal jurisdiction is resolved, industry will delay investments in decarbonization.
The federal government could expedite this resolution by referring questions around the constitutionality of these regulations directly to the Supreme Court. If Ottawa was truly certain of its jurisdiction, it would do so without delay. But, if Ottawa continues to rag the puck, provinces should force the play with their own legal challenges.