The statue representing justice looks out from the Supreme Court of Canada over the Parliamentary precinct, in Ottawa, on March 25, 2021.Adrian Wyld/The Canadian Press
The debate about the legality of the federal government’s carbon-pricing system is finally settled.
If only the political debate about it could at long last be resolved now, too, the policy might be able to live up to its potential in helping steer Canada toward a low-emissions economy.
Even with the Supreme Court having ruled that the Greenhouse Gas Pollution Pricing Act passes constitutional muster, neither the provinces that challenged it nor the federal Conservatives that have vehemently opposed it are under any obligation to embrace it. Many of their supporters will expect quite the opposite.
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But often lost in discussion of the conflict around carbon pricing, which tends to focus on its electoral implications, is why the continued uncertainty over its future impedes it from achieving its intended purpose.
More than just causing day-to-day changes in behaviour, carbon pricing is supposed to drive longer-term investment decisions. If it works as intended, high-emissions industries will be incentivized to prioritize decarbonizing their operations; low-emissions businesses and clean-technology providers will gain competitive advantage that makes it easier for them to attract capital; electricity utilities will have added reason to prioritize renewables; households will have more cause to reduce their fossil-fuel usage through electric-vehicle purchases or home retrofits.
That impact stands to be blunted if there is uncertainty about whether carbon pricing is here to stay (let alone whether Ottawa will be able to see through its planned increase to $170 a tonne from $30 by 2030), and a lingering possibility that the value it adds to low-emissions products or services could be removed at any time.
Thursday’s Supreme Court decision goes some distance toward removing that problem. Most legal observers had predicted the court would find that imposing a carbon price in provinces that don’t have their own is a reasonable use of the federal government’s powers. But there was no way of being sure, amid a legal process that dragged on for about three years, and saw two provincial appeal courts rule in Ottawa’s favour and one against.
Even with that shadow of doubt lifted, the prospect that national carbon pricing could come to an abrupt end following the next federal election very much remains, and, if anything, recently became more pronounced.
Just last weekend, at their national convention, Conservative Party members defeated a motion that merely called on them to take climate change seriously and hold polluters responsible for their actions. Although Conservative Leader Erin O’Toole said afterward that he won’t allow that vote to shape his policy platform, it looks more difficult than ever for him to include carbon pricing in it, even if he wants to.
No matter how many economists and pundits wearily explain that this market-based mechanism is more in line with Conservative values than more regulatory or heavy-spending approaches to emissions reduction, that party has spent a great deal of time conditioning its support base to view it as a Liberal tax grab.
The stamp of approval from a high court that many party members view with some degree of suspicion won’t suddenly change that perception. So it came as little surprise when Mr. O’Toole’s immediate response to the ruling was to reiterate that he intends to repeal the carbon price if he reaches the Prime Minister’s Office.
What the ruling could do is set in motion events at the provincial level that eventually lead to carbon pricing’s depoliticization nationally.
Now that they’ve lost their constitutional fight, the three premiers who led it – Alberta’s Jason Kenney, Saskatchewan’s Scott Moe and Ontario’s Doug Ford – have to consider replacing Ottawa’s backstop carbon-pricing plan with their own. Mr. Moe, for one, expressed some interest in going that route on Thursday, even as he bashed the court’s decision.
Doing so would allow those premiers to tailor carbon pricing somewhat to their preferences, as in other provinces such as Quebec with its cap-and-trade model and British Columbia with its carbon tax, rather than having Ottawa’s one-size-fits-all version imposed on them. More enticing from their perspective is that they would get to collect the revenues and disperse them as they see fit. (Almost all the provinces already do that with the component of carbon pricing that involves some heavy-emitting industries, but not with the fuel price that applies to everyone else.)
If they put their own system in place, the likes of Mr. Kenney or Mr. Ford would probably take pains to portray it as something Mr. Trudeau forced on them, not that they actually wanted to do. But once implemented, those systems would stand a decent chance of remaining rather than being unwound, even if a different federal party took power subsequently. At a certain point, the acceptance at the provincial level might make it easier for the federal Conservatives to move on as well.
Not that the entire onus for forging political consensus, out of the legal resolution, should be on the carbon price’s heretofore opponents. This would also be a good time for the Liberals to consider ways to show they’ve listened to concerns about it, and hand its critics a couple of wins.
One of those, which even some of the policy’s advocates support, would be to stop adding GST to carbon-price revenues that Ottawa collects, since the current application of it takes away from the Liberals’ argument that most Canadians come out well ahead after carbon-price rebates have been applied.
Another would be to add the odd additional exemption for groups that feel particularly disadvantaged by being taxed for their emissions and lack easy ways to reduce them. That most notably includes farmers who have been in a bitter dispute with Ottawa about the impact of the price on grain-drying costs, contributing to opposition on the Prairies and across the agricultural sector.
That presumes the Liberals actually want to pursue political consensus on this file. By most appearances, they consider the contrast with the Conservatives helpful with their target voters, in places such as the Greater Toronto Area. Reducing the prospect of pricing being scrapped if they lose office wouldn’t necessarily be helpful to them, electorally.
But as a matter of national interest, it’s not good for anyone to keep carrying on with Canadians paying a carbon price that’s perpetually at risk of being temporary.
The door to it being permanent opened somewhat on Thursday. Conservative leaders would do a service to the climate and the economy by moving on, to the extent their memberships will let them, and the Liberals should try to help them do so.
In 2018, the federal government announced that all provinces would need to implement a carbon-pricing system by April 1, 2019 and those that didn't would fall under a federal carbon tax. But what is carbon pricing anyway?
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