Manitoba v. Canada (Attorney General)

Manitoba v. Canada (Attorney General)
Court (s) Database
Federal Court Decisions
Date
2021-10-21
Neutral citation
2021 FC 1115
File numbers
T-685-19
Notes
Digest
Decision Content
Date: 20211021
Docket: T-685-19
Citation: 2021 FC 1115
Ottawa, Ontario, October 21, 2021
PRESENT: The Honourable Mr. Justice Mosley
BETWEEN:
HER MAJESTY THE QUEEN IN RIGHT OF MANITOBA
Applicant
and
ATTORNEY GENERAL OF CANADA
and ATTORNEY GENERAL OF ONTARIO,
ATTORNEY GENERAL OF SASKATCHEWAN,
ATTORNEY GENERAL OF ALBERTA
Respondents
and
ASSEMBLY OF FIRST NATIONS
Intervener
JUDGMENT AND REASONS
I. Overview
[1] This is a challenge on administrative law grounds to the Governor in Council’s (federal Cabinet’s) decision to include Manitoba on the list of provinces in Schedule 1 of the Greenhouse Gas Pollution Pricing Act, SC 2018, c 12, s 186 (the GGPPA or the Act). It was heard prior to the release of the Supreme Court of Canada’s decision in the References re Greenhouse Gas Pollution Pricing Act, 2021 SCC 11 (Reference Decision), but not decided pending further submissions from the parties. In the Reference Decision released on March 25, 2021, the Supreme Court upheld the constitutionality of the Act under Parliament’s jurisdiction over matters of national concern under the peace, order and good government (POGG) clause of s 91 of the Constitution Act, 1867.
[2] In this application, Manitoba seeks judicial review of Order in Council P.C. 2019-218, making Regulation Amending Part 1 of Schedule 1 and Schedule 2 to the Greenhouse Gas Pollution Pricing Act, SOR/2019-79 (the Part 1 Regulations), which adds Manitoba to the list of provinces in which the fuel charge under Part 1 of the Greenhouse Gas Pollution Pricing Act, SC 2018, c 12 (GGPPA) operates. The Applicant seeks an order declaring that Order P.C. 2019-218 and Regulation SOR/2019-79 are invalid or unlawful.
[3] The Applicant submits that the Governor in Council (GIC) acted unreasonably and arbitrarily by including Manitoba within Order P.C. 2019-218 and Regulation SOR/2019-79 by:
(i) Imposing a fuel charge backstop in some provinces while permitting other provinces and territories to implement greenhouse gas pricing plans that were less stringent than the minimum pricing standard set by the benchmark; and
(ii) Imposing the fuel charge backstop in Manitoba without considering the stringency of Manitoba’s proposed carbon pricing regime in terms of reducing greenhouse gas emissions.
[4] To frame the matter slightly differently, the Applicant challenges both of the decisions of the Governor in Council to add Manitoba to Part 1 of Schedule 1 of the Act, making the fuel charge in Part 1 of the Act apply in the Province of Manitoba. In its Notice of Application, Manitoba challenged only the Part 1 Regulations, not the Part 2 Order (SOR/2018-212), but included both in its written and oral arguments. The Applicant asserts that its challenge applies equally to the GIC’s decision to add Manitoba to the list of provinces in Schedule 1 to which Part 2 of the Act, the output-based pricing system (OPBS) under the federal backstop and the Part 2 Order, so both will be addressed.
[5] For the reasons that follow, this application is dismissed.
II. Facts
A. Background to the GGPPA
[6] There is no dispute between the parties that climate change is a “serious global issue”, an “urgent threat to humanity”, one that is “happening now and is having real consequences on people’s lives throughout Canada and globally” as they state in their memoranda. This was recently acknowledged by two provincial Courts of Appeal in the reference cases on the GGPPA: see Reference re Greenhouse Gas Pollution Pricing Act, 2019 ONCA 544, at paras 6-21 (the Ontario Reference) and Reference re Greenhouse Gas Pollution Pricing Act, 2019 SKCA 40, at paras 14-17 (the Saskatchewan Reference) and by the Supreme Court at paras 7-12 of the Reference Decision. The threat was underscored by the report of the United Nations Intergovernmental Panel on Climate Change (IPCC) released on August 8, 2019.
[7] Climate records show that atmospheric concentrations of carbon dioxide (CO2), the most abundant greenhouse gas emitted by human activity, are higher today than at any time in the past million years and continue to rise. IPCC has found that global net human-caused (anthropogenic) greenhouse emissions must fall rapidly by 2030 and reach “net zero” around 2050 to avoid significantly more deleterious impacts of climate change. Some of the existing and anticipated impacts of climate change in Canada include:
Changes in extreme weather events such as droughts, floods, longer fire seasons and increased frequency and severity of heat waves, causing illness and death;
Degradation of soil and water resources;
Expansion of the ranges of life-threatening vector-borne diseases such as Lyme disease and West Nile virus; and
Melting permafrost in the Canadian Arctic, which will undermine infrastructure (foundations) and winter roads and jeopardize the lifestyles, safety and living conditions of Canada’s Northern Indigenous peoples.
B. Canada’s International Climate Change Obligations
[8] In 1992, emerging international concern about the risks associated with climate change caused by greenhouse gas emissions (GHGs) led to the adoption of the United Nations Framework Convention on Climate Change (UNFCCC). The UNFCCC’s objective is the “stabilization of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system:” (Art 2). To implement this goal, a decision-making body was created under the UNFCCC called the Conference of the Parties (COP). All State Parties to the UNFCCC are represented at the COP, which oversees the implementation of the Convention and makes decisions “necessary to achieve its objectives”.
[9] Canada signed and ratified the UNFCCC in December 1992. It came into force domestically and internationally on March 21, 1994. Under the UNFCCC, Canada committed itself internationally to mitigating GHG emissions.
[10] In December 2015, the COP adopted the Paris Agreement, which committed its signatories to strengthening the global response to the threat of climate change by “holding the increase in the global average temperature to well below 2 [degrees] Celsius above pre-industrial levels and pursuing efforts to limit the temperature increase to 1.5 [degrees] Celsius above pre-industrial levels:” (art 2, para 1(a) and art 4). The signatories acknowledged that
climate change represents an urgent and potentially irreversible threat to human societies and the planet and thus requires the widest possible cooperation by all countries, and their participation in an effective and appropriate international response, with a view to accelerating the reduction of global greenhouse gas emissions.
Moffet Affidavit, Exhibit M (Paris Agreement), RAR vol. 2 at p 464.
[11] Canada ratified the Paris Agreement on October 5, 2016, after consulting with the provinces.
[12] The Paris Agreement requires its signatories to establish, report and account for their progress toward achieving their nationally determined contribution of global greenhouse gas emissions reduction. Canada first communicated its intended nationally determined contribution prior to ratifying the Agreement. On May 15, 2015, Canada announced that its intention was to reduce Canada’s GHG emissions by 30% below 2005 levels by 2030. When Canada became a Party to the Agreement, it reaffirmed that target. Along with the other State Parties, Canada must communicate its next, more ambitious target by 2025.
[13] Under the UNFCCC Reporting Guidelines, Canada is required to prepare annual GHG inventory reports. Canada’s 2019 National Inventory Report (NIR) reported Canada’s emissions estimates between 1990 and 2017 and showed that Canada’s 2017 GHG emissions had decreased by 2% from 2005 levels.
[14] Between 2005 and 2017, GHG emissions increased in Alberta, Saskatchewan, Manitoba, Newfoundland and Labrador and Nunavut. Emissions decreased in all other provinces and territories. Alberta and Saskatchewan were the provinces with the largest percentage increase and the highest GHG emissions during the reporting period. Ontario’s emissions decreased by 22% during this period, due largely to the closure of coal-fired electricity plants.
C. The Vancouver Declaration
[15] Before Canada signed the Paris Agreement, Prime Minister Justin Trudeau met with all provincial and territorial premiers in Vancouver to discuss climate actions. Collectively, the First Ministers committed to implementing GHG mitigation policies in line with Canada’s Paris Agreement target. To this end, on March 3, 2016, the First Ministers entered into the Vancouver Declaration on Clean Growth and Climate Change.
[16] The signatories to the Vancouver Declaration committed to implementing GHG emission policies in support of Canada’s 2030 target of a 30% reduction of GHG emissions below 2005 levels. The First Ministers agreed to work together to develop an integrated pan-Canadian framework on clean growth and climate change.
[17] The Vancouver Declaration expressed the intent of the signatories that provincial and territorial legislatures would have legislative flexibility to design their own policies to meet emissions reduction targets.
[18] Four joint Federal-Provincial-Territorial working groups were created out of the Vancouver Declaration, including a Working Group on Carbon Pricing Mechanisms. The mandate of this group was to “provide a report with options on the role of carbon pricing mechanisms in meeting Canada’s emission reduction targets, including different design options taking into consideration existing and planned provincial and territorial systems”.
[19] The Working Group’s Final Report was prepared on a consensus basis among all participants. Important takeaways from the Final Report include the following:
Many experts see carbon pricing as a necessary policy tool for efficiently reducing GHG emissions, meaning there is a direct correlation between carbon pricing and GHG emission reductions: Final Report at p 5 (Section 1.3);
Provincial governments have developed a variety of approaches to carbon pricing, both explicit (e.g. carbon tax or cap-and-trade system) and implicit (e.g. caps on emissions, closing coal-fired power plants; clean energy standards and other regulatory measures): Final Report at p 2;
Carbon pricing modelling showed that widespread carbon pricing in Canada would significantly reduce GHG emissions at a national level; and
There is “no clear best option” to compare the stringency of carbon pricing mechanisms: Final Report at p 3.
[20] Manitoba points out that another of the working groups created under the Vancouver Declaration, the Specific Mitigation Opportunities group, examined other options for achieving ambitious GHG reductions in key sectors, including how such mitigation opportunities might interact with carbon pricing regimes. The report stated that, while carbon pricing is regarded as one of the most efficient policy tools for reducing GHG emissions, alternative policy tools (e.g., regulations) could be designed to achieve similar outcomes as a carbon price.
D. The Pan-Canadian Approach to Pricing Carbon Pollution
[21] On October 3, 2016, Canada announced its approach to carbon pricing by releasing the Pan-Canadian Approach to Pricing Carbon Pollution, a document based on the final recommendations of the Carbon Pricing Working Group.
[22] Rather than imposing a single carbon pricing system throughout Canada (including the four provinces with then-existing systems, British Columbia, Alberta, Ontario and Quebec), the Pan-Canadian Approach articulated a commitment to ensuring a consistent approach to carbon pricing across Canada that accommodated for carbon pricing policies already implemented or in development by provinces and territories.
[23] The approach and its accompanying document presented the pan-Canadian Benchmark for carbon pricing (the Benchmark) and its underlying principles. According to the Respondents in this matter, the Benchmark “provides guidance on the core set of carbon pricing stringency criteria adopted by the Government of Canada, including legislated increases in stringency.”
[24] The Benchmark also provided that the Government of Canada would implement an explicit price-based carbon pricing system throughout the country as a “backstop” (the Backstop). The Backstop would apply in jurisdictions that do not develop a system that at least meets the Benchmark criteria, or where a province or territory requested it. The Backstop would also apply to “top up” provincial and territorial systems that do not meet the Benchmark criteria, such as by expanding the sources covered by a provincial or territorial system or by increasing the price of emissions.
E. The Pan-Canadian Framework on Clean Growth and Climate Change
[25] On December 9, 2016, the First Ministers adopted the Pan-Canadian Framework on Clean Growth and Climate Change (the Framework). The Framework is a First Ministers’ agreement that commits the federal, provincial and territorial governments of Canada to taking action to reduce GHG emissions. It was developed collaboratively by the Canadian federal, provincial and territorial governments, with input from Indigenous nations, businesses, and non-governmental organizations.
[26] Pricing carbon pollution is one of the four main pillars of the Framework. The other pillars are: (1) complementary actions to further reduce emissions across the economy; (2) measures to adapt to the impacts of climate change and build resilience; and (3) actions to accelerate innovation, support clean technology and create jobs.
[27] The Framework included a federal Benchmark for carbon pricing in Annex 1. The Benchmark for carbon pricing includes the following elements:
Common scope: Pricing will be applied to a common and broad set of GHG sources;
Two systems: Jurisdictions can implement (i) an explicit price-based system (e.g., a carbon tax) or (ii) a cap-and-trade system;
Legislated increases in stringency of carbon reduction mechanisms, based on modeling, to contribute to the national target and provide market certainty:
o Explicit price-based systems must start at a minimum of $10/tonne of CO2 in 2018 and rise by $10 each year to $50/tonne in 2022;
o Cap-and-trade systems must have (i) a target to reduce GHG emissions to at least 30% below 2005 levels by 2030; and (ii) declining annual caps that correspond to the projected emission reductions from the carbon price in price-based systems.
[28] On December 9, 2016, all three territories and eight provinces (all but Manitoba and Saskatchewan), adopted the Framework. Manitoba adopted the Framework on or about February 23, 2018, but expressly rejected the price schedule set out in the Benchmark on the basis that it did not meet the Government of Canada’s commitment to flexibility for provinces to design their own policies.
F. Additional Pre-Enactment Benchmark Guidance
[29] In August and December 2017, the Government of Canada published two new documents about the Framework: the Guidance on the Pan-Canadian Carbon Pollution Pricing Benchmark and a manual titled Supplemental Benchmark Guidance. The purpose of these documents was to provide further guidance on the carbon pollution pricing Benchmark to support governments’ efforts to have carbon pollution pricing in place throughout Canada in 2018. Other purposes of the documents were to clarify (1) the scope of GHG emissions to which carbon pricing should apply, (2) the minimum legislated increases in stringency for both explicit price-based systems and cap-and-trade systems, and (3) on the approach to further review.
[30] In late 2017, the federal Ministers of Environment and Climate Change and Finance wrote to their provincial counterparts. The letter outlined the process the federal government would follow to assess whether provincial pricing plans met the Benchmark, as well as the next steps from January 2018 onwards towards pricing carbon.
G. The Greenhouse Gas Pollution Pricing Act
[31] The GGPPA was enacted on June 21, 2018, when the Budget Implementation Act, 2018, No. 1, SC 2018, c 12, in which it was included, received Royal Assent.
[32] The Respondents claims that Parliament’s objective in passing the Act was to reduce Canada’s nationwide GHG emissions by encouraging behavioural change, citing evidence including Hansard from the House of Commons debates and Parliamentary Committees, and testimony by the Minister of the Environment and Climate Change before the Standing Senate Committee on Energy, the Environment and Natural Resources.
[33] According to the Respondents, “the Act provides the enabling authorities to ensure that carbon pricing that is consistent with the Benchmark stringency criteria applies broadly throughout Canada and the legal framework for the federal backstop carbon pricing system.”
[34] The GGPPA requires all Canadian provinces and territories to legislate towards reducing annual GHG emissions output in accordance with the stringency standards set out in the federal Benchmark. The Benchmark requires that all Canadian provinces and territories price their emissions at a rate of $10/tonne of CO2 in 2018, $20/tonne in 2019, increasing in price to $50/tonne in 2022.
[35] The GGPPA does not prescribe a legislative method for reducing GHG emissions. The legislative design choice is left to provinces and territories. However, Parts 1 and 2 of Schedule 1 of the Act impose a “backstop” on provinces and territories that pass emissions reduction legislation which does not meet the federal stringency standards set out in in the Benchmark. If the legislation does not meet the Benchmark stringency requirements, the Governor in Council can list that jurisdiction in Parts 1 and 2 of Schedule 1 of the Act, making the GGPPA itself apply within that province or territory.
[36] The Act is divided into two parts. Part 1 implements the fuel charge. Part 2 provides the framework for the output-based pricing system (OBPS) and establishes the excess emissions charge for large industrial emitters. Either part may apply in whole or in part to any province listed by the Governor in Council in Schedule 1. Together, Parts 1 and 2 of the Act provide a system for pricing GHG emissions from a broad set of emissions sources.
[37] Parts 1 and 2 of the Act apply in three scenarios: First, where a province or territory requests it; second, in any province or territory that passes GHG reduction legislation that fails to meet the Benchmark stringency requirements, per ss 166 and 189 of the Act; and third, to “top up” provincial emissions reduction legislation that fails to meet the Benchmark, such as by extending the application to additional fuel sources.
[38] Under ss 166 and 189 of the Act, the Governor in Council is empowered to add provinces or territories to Parts 1 or 2 of Schedule 1 of the Act, being the lists of non-federal jurisdictions to which the Act applies. The Governor in Council must make listing decisions “for the purpose of ensuring that the pricing of greenhouse gas emissions is applied broadly in Canada at levels that the Governor in Council considers appropriate”: Act, ss 166(2) and 189(1). The Act requires the GIC to “take into account, as the primary factor, the stringency of provincial pricing mechanisms for greenhouse gas emissions:” Act, ss 166(3), 189(2).
[39] Parts 1 and 2 function as follows. Part 1 creates a fuel charge that applies to GHG-emitting fuels produced, delivered or used in a “listed province,” brought to a listed province from another place in Canada, or imported into Canada at a place in a listed province. The fuels and their charge rates are set out in Schedule 2 of the Act. The charge rate for each fuel represents $20 per tonne of CO2 emitted from each fuel in 2019, rising to $50 per tonne in 2022, consistent with the Benchmark price trajectory for explicit price-based systems. Part 1 applies “most commonly” to fuel producers or wholesale level fuel distributors. The Government of Canada anticipates that importers, producers and distributors to which Part 1 applies will pass the cost on to consumers, but the Act does not require them to do so.
[40] Certain fuels and uses are exempt from the fuel charge, such as gasoline and diesel used for agriculture. Industrial facilities subject to the OBPS are exempted from the fuel charge because their excess GHG emissions are priced under Part 2.
[41] Part 2 of the Act sets out the main powers and authorities for the output-based pricing system for GHG emissions of large industrial facilities. It applies to “covered facilities” and sets out registration and emissions reporting requirements. Covered facilities are required to determine the quantity of GHGs they emit and compare this against the prescribed emissions limit. Covered facilities are required to pay for the portion of their GHG emissions that exceed the applicable limit set for their specific industry or activity. The output-based standards represent a percentage of the average quantity of GHGs emitted by facilities conducting a particular activity. Schedule 3 lists the GHGs to which Part 2 applies, as defined by the UNFCCC, and their global warming potential. The excess emissions charge rates are set out in Schedule 4 of the Act and are equivalent to the escalating fuel charge rates in Schedule 2 of the Act.
[42] Part 2 entitles covered facilities to which it applies to earn or retain “credits” if their yearly GHG output falls below the prescribed emissions limit. In this circumstance, the facility may receive surplus credits, which it can use to satisfy future compliance obligations or sell to other regulated facilities. This system is designed to incentivize continuous emissions reductions. By contrast, if a covered facility’s emissions exceed the prescribed emissions limit in a given year, it may compensate for those excess emissions in three ways: It may (1) submit surplus credits it earned in the past or that it acquired from other facilities; (2) submit other prescribed credits that it acquired; or (3) pay an excess emissions charge. The end result of this system is that the more a covered facility emits above its emissions limit, the more it will have to pay, while the more a facility reduces its GHG emissions below the prescribed limit, the more it will be able to earn by selling credits.
[43] According to the Respondents, the framework of Part 2 of the Act is intended to create a pricing incentive to reduce competitiveness impacts and the risk of carbon leakage for industries that engage in trade with cross-border aspects. The Respondents submits that the OBPS in Part 2 is designed to complement the fuel charge system in Part 1 by exempting covered facilities from paying the fuel charge, and instead requiring them to pay for excess emissions determined as a percentage of the quantity of GHGs emitted on average by facilities conducting a particular activity (e.g., the production of a product).
H. Manitoba’s Plan for Reducing GHG Emissions
[44] On October 27, 2017, Manitoba released its Made-in-Manitoba Climate and Green Plan (the Manitoba Plan). On November 8, 2018, Manitoba enacted the Climate and Green Plan Act, CCSM, c C134.
[45] The Manitoba Plan was a hybrid model that consisted of a $25/tonne carbon tax from 2018-2022 and an OBPS for large industrial emitters. The Plan also contained other initiatives to reduce GHG emissions besides carbon pricing.
[46] Manitoba points out that its carbon tax ($25/tonne from 2018 to 2022) was higher than the federal Benchmark for the years 2018 and 2019. After that, Manitoba’s carbon price would fall below the Benchmark, which requires pricing stringency to increase to $30/tonne in 2020, $40/tonne in 2021 and $50/tonne in 2022.
[47] According to Manitoba, setting the tax at $25 per tonne as opposed to following the federal Benchmark reflected two important features of Manitoba’s emissions profile. First, the province generates approximately 99% of its electricity from non-emitting renewable sources, such as hydroelectricity. As a result, Manitoba can achieve few GHG emissions reductions in the energy sector. However, Manitoba has the highest proportion of agricultural emissions in Canada, mostly produced through biological processes. These processes are not subject to carbon pricing under the GGPPA, and neither are marked fuels used in agriculture. Carbon pricing in Manitoba would therefore cover fewer emissions compared to other provinces and may not work in the same way to reduce GHG emissions in Manitoba.
[48] Manitoba pointed out that it has invested “billions of dollars” in creating a clean hydro-electricity grid such that escalating carbon prices would have a negligible impact on GHG emissions. In its view, its provincial emissions profile makes the federal policy ill-suited to Manitoba’s circumstances.
[49] Manitoba asserts that it conducted independent modeling, which projected that its plan (the $25/tonne carbon tax combined with the OBPS for large industrial emitters) would reduce GHG emissions in the province by 80,000 tonnes more than under the federal Benchmark price from 2018-2022. Further, Manitoba’s plan was projected to have a less intense impact on the province’s GDP than the federal Benchmark. The modeling indicated that opportunities to cost-effectively reduce carbon emissions stop below $30 per tonne, and that above that price, costs to consumers rise fast while incremental GHG emissions “fall off”.
[50] The Respondents takes issue with some of the Applicant’s factual assertions about its Climate and Green Plan, in particular with regards to its efficacy. The Respondents says the Applicant’s description of its plan is flawed in three ways.
[51] First, Manitoba withdrew its Plan in October 2018. The efficacy of a withdrawn plan is arguably irrelevant to the matters before this Court.
[52] Second, Manitoba relies on a misreading of its own evidence. Manitoba claims that the Manitoba Plan would reduce GHG emissions by 80,000 tonnes more than under the federal Benchmark between 2018 and 2022. But Manitoba’s own report submitted to the Government of Canada asserts that, under Manitoba’s own model, a “$50 per tonne carbon price in 2022” (the minimum price per the Benchmark for 2022) “would result in additional emissions reductions of just over 76,000 tonnes of CO2E”: Federal Benchmark Assessment Report (Including Attachments A-5) at p 521. Furthermore, Paris Agreement targets are denominated annually, not cumulatively. According to Manitoba’s own evidence, Manitoba’s plan is 76,000 tonnes of CO2E less effective in 2022 than a price in accordance with the Benchmark.
[53] Third, Manitoba is not on track to reduce its emissions by 30% below 2005 levels by 2030 as required by the Pan-Canadian Framework. Under either the Manitoba Plan or the federal Backstop, Manitoba’s 2022 forecasts for annual GHG emissions are higher than its 2005 emissions. In 2005, Manitoba’s GHG emissions were 20.1 Mt CO2E. As of 2017, its emissions had increased to 21.7 Mt CO2E. The Respondents submits that Manitoba’s goal is to reduce GHG emissions from 2018 to 2022 by 1 MT CO2E cumulatively, not on an annual basis, relative to the GHG emissions that would have occurred with no additional GHG emissions reduction measures. Manitoba’s benchmarking submissions forecast that in 2022 its annual emissions would increase to 22.5815 Mt CO2E under the Manitoba Plan, compared to 22.5052 Mt CO2E with the federal Backstop in place. In either scenario, Manitoba’s 2022 annual GHG emissions will be higher than its 2005 emissions. Manitoba is therefore a long way off to reducing its emissions to the level required in 2030 by the Pan-Canadian Framework.
I. Retraction of Manitoba’s Proposed Carbon Pricing Plan
[54] On October 27, 2017, the same day Manitoba released its Made-in-Manitoba Plan, then-Minister of Environment and Climate Change (ECCC) Catherine McKenna wrote in a public Facebook post that Manitoba’s $25/tonne carbon price would meet the federal standard, set out in the Benchmark, for the first two years (2018 and 2019), but after 2019 it would no longer meet the standard.
[55] In a letter dated February 22, 2018, to Manitoba Minister R. Squires, then-Minister McKenna repeated her position that Manitoba’s $25/tonne carbon tax would need to be strengthened to meet the federal Benchmark after 2019.
[56] On October 3, 2018, the Premier of Manitoba advised the Legislative Assembly that the government would withdraw its proposed carbon tax and OBPS.
[57] Manitoba asserts that the cancellation of the proposed carbon pricing plan occurred after Manitoba sought, and the Government of Canada refused to give assurances that it would not impose the Backstop despite Manitoba’s claims that its Plan was “projected to reduce GHG emissions in Manitoba by 80,000 tonnes more than the federal [B]enchmark”. According to Manitoba, the Premier’s decision to withdraw the proposed carbon pricing plan was motivated by a desire to avoid having the Government of Canada “top up” that plan with a second layer of taxation in the province.
[58] In response to Manitoba’s assertion that Canada refused to assure Manitoba that its proposed carbon pricing plan met the federal benchmark, the Respondents points out that neither the Facebook post nor the letter are the decision at issue on this application, as the Minister is not the GIC that is charged by the Act with assessing the stringency of provincial pricing mechanisms.
J. Federal Review of Provincial Carbon Pricing Systems and Implementation of the GGPPA in Manitoba
[59] On April 30, 2018, the Government of Canada published Estimated Results of the Federal Carbon Pollution Pricing System based on a scenario in which the federal Backstop was applied in the jurisdictions that lacked a pricing system, and on existing systems that remained in place in British Columbia, Alberta, Ontario and Quebec. The analysis estimated that carbon pricing systems throughout Canada would achieve a collective reduction of 80 to 90 Mt CO2E annually in nationwide GHG reductions by 2022. Canada’s target under the Paris Agreement is a reduction of 205 Mt CO2E by 2030, being 30% below 2005 levels. As of 2017, Canada’s GHG emissions decreased from 2% from 2005.
[60] In the fall of 2018, Environment and Climate Change Canada conducted its initial stringency assessments of existing and proposed provincial carbon pricing systems, using the Benchmark stringency criteria and the two supplemental Benchmark guidance documents.
[61] On October 23, 2018, the outcome of the GIC’s initial stringency assessments was announced. The OBPS under Part 2 of the Act would start applying in Manitoba and four other provinces (Ontario, New Brunswick, PEI and partially in Saskatchewan) on January 1, 2019. The fuel charge under Part 1 of the Act would start applying in Manitoba and three other provinces (Ontario, New Brunswick and Saskatchewan) on April 1, 2019. Parts 1 and 2 of the Act would start applying in Yukon and Nunavut on July 1, 2019.
[62] On October 18, 2018, one week prior to the announcement of stringency assessment results, the Governor in Council released an Order in Council amending Schedule 1 of the Act by adding Manitoba, and several other provinces and territories, to the list of provinces covered by Part 2 (the OBPS). The Order in Council applied Part 2 of the Act to industrial facilities in Manitoba. The GIC released a Regulatory Impact Analysis Statement to accompany PC 2018/1292.
[63] On March 25, 2019, by Order in Council PC 2019-218, the Governor in Council made Regulations Amending Part 1 of Schedule 1 and Schedule 2 to the Greenhouse Gas Pollution Pricing Act, SOR/2019-79, (2019) C Gaz II, 979-1043 (the Part 1 Regulations). This is the decision at issue in this application. The Regulation was published in the Canada Gazette on April 3, 2019. The Regulation added Manitoba, among other provinces and territories, to the list of jurisdictions covered by the fuel charge under Part 1 of the Act, beginning April 1, 2019.
[64] The GIC concluded that Parts 1 and 2 of the Act apply in Manitoba because after the October 3, 2018, announcement by the Premier, Manitoba no longer had a pricing system to assess using the Benchmark stringency criteria.
K. Procedural History
[65] The Applicant originally raised two issues on judicial review. The first concerned the constitutionality of the Act. The second was the challenge on administrative law grounds to the GIC’s decision to list Manitoba in Part 1 and Part 2 of the Act. The Application for judicial review was filed on April 24, 2019.
[66] Concurrently, the governments of Ontario, Saskatchewan, and Alberta challenged the constitutionality of the Act by way of a reference to their respective Courts of Appeal. Three decisions followed: the Saskatchewan Reference, released May 3, 2019; the Ontario Reference, released June 28, 2019; and Reference re: Greenhouse Gas Pollution Pricing Act, 2020 ABCA 74 (the Alberta Reference), released February 24, 2020. The Ontario and Saskatchewan References found the Act to be constitutional, while the Alberta Reference deemed it unconstitutional.
[67] The Supreme Court of Canada granted leave to appeal to the governments of Saskatchewan and Ontario on August 23 and September 10, 2019, respectively. Leave was later granted to Alberta. All three matters were set to be heard together in March 2020. Due to the COVID-19 pandemic, the hearings were adjourned, and the matter was heard in September 2020.
[68] In view of the ongoing constitutional litigation before the Supreme Court, the Respondents in this matter brought an opposed motion pursuant to Rule 369 of the Federal Courts Rules, SOR/98-106, to hold the application for judicial review in abeyance until the Supreme Court rendered its decision. The motion was dismissed in December 2019.
[69] In January 2020, the Respondents proposed that the judicial review be severed such that this Court would only consider the administrative law issues and not the constitutionality of the Act. The Applicant strongly opposed this suggestion. A hearing was set for December 2020 to consider both issues.
[70] On November 9, 2020, the Applicant wrote to this Court indicating that the three governments scheduled to intervene in the matter before this Court (Ontario, Saskatchewan, and Alberta) no longer intended to participate in the hearing. Furthermore, the Applicant proposed that the hearing focus solely on the administrative law issues, as the pending Supreme Court decision would clearly bind this Court on the constitutional grounds.
[71] A hearing on the administrative law grounds took place before this Court between the Applicant, the Respondents and the sole remaining intervener, the Assembly of First Nations, in December 2020.
[72] The Supreme Court issued its decision on the three provincial references in March 2021. A six-judge majority found the GGPPA to be constitutional and that Parliament has jurisdiction to enact the Act as a matter of national concern under the “peace, order and good government” [POGG] clause of s 91 of the Constitution Act, 1867. The pith and substance of the Act was found to be “establishing minimum national standards of GHG price stringency to reduce GHG emissions” (para 80).
[73] In reaching that conclusion, the majority of the Court remarked that any decision assessing the stringency of provincial pricing mechanisms would be open to judicial review to ensure that the GIC has exercised its discretion consistently with the purpose of the Act and the constraints set out in ss 166 and 189: Reference Decision at para 73.
[74] As a result of the Supreme Court of Canada decision, and in response to an inquiry by this Court, the parties requested an opportunity to provide further written submissions and proposed a schedule which was approved. In accordance with the schedule, the parties made further written representations addressing the Supreme Court’s decision on May 28, 2021 (Applicant) and June 30, 2021 (Respondents). The intervener, AFN, did not provide additional submissions.
III. Issues
[75] In my view, having considered the parties’ submissions, the administrative law issues to be determined are as follows:
What is the applicable standard(s) of review?
Was it reasonable for the GIC to amend Schedule 1 of the Act to include Manitoba on the list of provinces and territories to which Parts 1 and 2 of the Act apply? and
3. Do the Impugned Decisions run constitutionally afoul of POGG? In particular, do they offend the POGG requirement, if one exists, that legislation promulgated under POGG must impose uniform national standards across Canada?
IV. Relevant Legislation
[76] Excerpts of the applicable legislation are found at Appendix A.
V. Analysis
Issue 1: Standard of Review
[77] The Applicant submits that the standard of review is correctness. The Respondents’ and the Intervener’s position is that the applicable standard is reasonableness. In my view, both apply.
[78] In Canada (Citizenship and Immigration) v Vavilov, 2019 SCC 65 at para 30 [Vavilov], the Supreme Court of Canada confirmed that reasonableness is the presumptive standard for most categories of questions on judicial review, a presumption that avoids undue interference with the administrative decision-maker’s discharge of its functions. The Supreme Court’s elucidation of reasonableness review retained the prior law on reviewing delegated legislation, which emphasizes that the question is primarily one of statutory interpretation to determine whether the regulation was inconsistent with the enabling statute or the scope of the statutory mandate: Vavilov at paras 111 and 143-144. Under the prior law, a constitutional challenge would attract correctness review: Katz Group Canada Inc v Ontario (Health and Long-Term Care), 2013 SCC 64 at paras 24-28, [Katz]. That has not changed under Vavilov; at paras 55-56.
[79] The parties generally agree that Vavilov has not changed the framework for judicial review of exercises of delegated legislative authority, and that those principles are applicable here. Where the parties differ is on the nature of the question at issue.
[80] In Manitoba’s view, the GIC’s discretion under ss 166 and 189 of the Act to add provinces to the federal backstop under the Act is constrained by the constitutional limitations of the POGG power. Because the GIC’s power under ss 166 and 189 is constrained by POGG, the GIC “cannot exercise its authority in a way that fails to apply a minimum national standard of carbon pricing uniformly across the country.” Whether the GIC exercised its delegated authority in a manner that exceeds the limits of the POGG power is a constitutional question, which, under Vavilov, attracts a correctness review.
[81] The Respondents submits that the Applicant pled its administrative law questions as jurisdictional in nature, in that it asked whether the GIC exceeded its authority or acted unreasonably in interpreting and assessing stringency under the Act. In Vavilov, the Supreme Court expressly dispensed with correctness review for jurisdictional questions: at paras 66-67. As a result, the Vavilov presumption of reasonableness review applies.
[82] The intervener Assembly of First Nations (“AFN”) points out that in Vavilov, the Supreme Court was clear that the reasonableness standard allows courts to fulfill their duty to ensure that administrative bodies have acted within the scope of their lawful authority without having to conduct a preliminary assessment regarding whether the interpretation raises a jurisdictional issue and the need for review based on the correctness standard: Vavilov at paras 66-67.
[83] In general, Manitoba’s arguments ask whether the G