The federal government has reluctantly agreed to allow both Ontario and New Brunswick to use their own carbon pricing systems for big industrial emitters, rather than adopting the federal program.
The decisions come on the eve of a Supreme Court of Canada hearing that will decide if Ottawa has the jurisdiction to set a national standard for carbon pricing and impose federal programs on any provinces that don’t comply.
Federal Environment Minister Jonathan Wilkinson wrote to his counterparts in both New Brunswick and Ontario on Sept. 20 to acknowledge their proposals to tax greenhouse gas emissions from heavy industry.
In his letter to Ontario Environment Minister Jeff Yurek, he said N.B.’s proposal meets the federal rules in theory but is “significantly weaker than the federal backstop, and it will result in fewer emissions reductions.”
A similar letter was sent to New Brunswick Environment Minister Jeff Carr.
The federal Greenhouse Gas Pollution Pricing Act was passed in June 2018 and sets minimum national thresholds for a price on carbon. It requires any industrial facility that produces more than 50,000 tonnes of greenhouse-gas emissions a year to be part of the big industrial emitters system, and pay the carbon tax on a portion of its emissions.
That price is currently $30 a tonne and goes up $10 in each of the next two years until it hits $50 in 2022. Ottawa intends to review the program after 2022 and is indicating that it will be tightening the rules for big emitters at that point because provinces have found loopholes that allow them to meet the federal benchmarks without cutting the same amount of emissions.
Wilkinson asked Yurek and Carr to work with Ottawa to beef up their programs or risk having the federal backstop reimposed after 2022.
Yurek said in a written statement that the province is phasing in the limits but that nobody will get a free pass.
“It is a more tailored program for Ontario’s environment and economy because it helps us achieve emission reductions from big polluters and achieve our share of Canada’s 2030 emissions reduction target without driving away business and job creators,” he said.
On Tuesday, the Supreme Court will begin two days of hearings to decide whether Ottawa had the jurisdiction under the Constitution, to impose a national carbon price the way it did.
The case is to be heard over two days, including submissions from at least seven provinces, the federal government, the Assembly of First Nations, and nearly two dozen intervenors that include provincial utilities, environment groups, and unions.
Stewart Elgie, director of the Environment Institute at the University of Ottawa, says the case is not going to decide if carbon pricing is good policy, but rather who has jurisdiction over it.
“The basic issue is who has the constitutional power to price carbon,” he said.
The federal carbon levy came into effect on April 1, 2019, beginning at $20 per tonne of CO2 emissions and imposed on provinces that either didn’t have their own greenhouse gas (GHG) pricing schemes or had one that didn’t completely meet Ottawa’s requirements.
Citing its power under the Constitution Act’s peace, order, and good government (POGG) principle in endeavours of national concern is the federal government’s central argument that its carbon levy on dissenting provinces is constitutionally sound.
However, the provinces that object—namely Alberta, Saskatchewan, and Ontario—argue that imposing the levy on what is effectively localized energy production and consumption is federal overreach, regardless of POGG, and opens the door to further regulatory intrusion by Ottawa.
Appeals courts in Saskatchewan and Ontario have upheld the law, while the Alberta Court of Appeal ruled it unconstitutional.
The Supreme Court case could be a make-or-break decision for one of the central pillars of the Liberal climate agenda. It accounts for as much as 40 percent of the cuts to greenhouse-gas emissions needed to meet Canada’s obligations under the Paris climate change agreement.
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