Law Times

Page 12 November 21, 2016 • Law Times www.lawtimesnews.com FOCUS Provinces have taken lead, but issue is federal Carbon pricing plan likely to survive SCC test BY MICHAEL MCKIERNAN For Law Times T he federal government's new carbon pricing plan is likely to with- stand a constitutional challenge in the event Saskatch- ewan Premier Brad Wall follows through on a threat to test it in court, according to a Toronto environmental lawyer. Wall was one of the loudest critics as Justin Trudeau unveiled his plan to impose a nationwide f loor on the price of carbon pol- lution at $10 per tonne by 2018, and he said his province's justice ministry had begun exploring its legal options. If any province still has not developed its own carbon tax or cap-and-trade system by the 2018 deadline, "the govern- ment of Canada will implement a price in that jurisdiction," Trudeau told MPs in the House of Commons on Oct. 3. "Because pollution crosses borders, all provinces must play their part," the prime minister added. Baker and McKenzie LLP partner Jonathan Cocker says that although individual prov- inces have taken the lead on carbon pricing over the last de- cade, the issue still falls squarely within federal jurisdiction. Alberta and B.C. already have their own process for taxing car- bon, while Ontario and Que- bec have developed cap-and- trade systems. However, those provinces were merely filling a vacuum left by the inaction of Stephen Harper's Conservative government on the file, as well as previous Liberal governments dating back to the signing of the Kyoto Protocol in 1997, accord- ing to Cocker, the head of his firm's environmental practice group in Toronto. "It essentially falls within the federal powers. It's a matter of national importance," he says. According to the new federal plan, the price per tonne of car- bon will rise by $10 each year after the 2018 deadline. By 2022, the total will hit $50 per tonne, at which point the approach will face a fresh review. Wall outlined his opposi- tion to the idea back in July, suggesting that an attempt to tax Crown corporations in the energy business, such as Sask- Power or SaskEnergy, would violate the Constitution. He re- iterated his position in October after the formal announcement in Parliament, saying in a state- ment that his province would take a disproportionate hit from a carbon tax: "The bottom line is that the Saskatchewan economy — al- ready hurting from a downturn in commodity prices — will be one of the hardest hit by a new federal carbon tax because of our trade-exposed resource in- dustries. The carbon tax will siphon more than $2.5 billion from Saskatchewan's economy when fully implemented and make our province a less com- petitive place to [do] business," Wall wrote. "In the coming weeks, Sas- katchewan will investigate all options to mitigate the impact of one of the largest national tax increases in Canadian history." Despite the tough talk, Cock- er says he doesn't believe the is- sue will ultimately end up in front of a judge. "My sense is there will be an attempt to get Saskatchewan some specific exemptions or some degree of grandfathering," he says. "It's not in their interest to truly take this to court. Once you've got the four largest prov- inces on side, there is nowhere else to go." John Georgakopoulos, a partner at boutique Willms & Shier Environmental Lawyers LLP in Toronto, says he worries that any dispute over jurisdic- tion could delay implementa- tion of a plan that he sees as a "positive step" toward meeting Canada's obligation to reduce its greenhouse gas emissions by 30 per cent from 2005 levels, as agreed at last year's Paris Cli- mate Conference. "I think the carbon pricing plan will work, but one of the problems is knowing when it will work. Some of the prov- inces seem to want to slow the process down," Georgakopou- los says. Under cap-and-trade systems like those developed in Ontario and Quebec, credits are issued for carbon emissions up to a ceil- ing level set by the province. Polluters can then trade for credits depending on their in- dividual need, with the price f luctuating depending on the availability of, and demand for, credits. The federal plan calls for the overall number of credits issued to fall every year in line with fed- eral targets and emissions cuts achieved by a direct tax. A carbon tax, used in Alberta and B.C., sounds simpler to as- sess, since charges are simply im- posed according to the amount of greenhouse gases generated by a business. However, another wrinkle concerns exemptions and rebates for businesses in cer- tain industries, as occurs under the Alberta scheme. Cocker says the diverging ap- proaches of the provinces that have already embraced carbon pricing will make life difficult for the federal government because of the challenges involved when comparing different models. "We have apples and oranges already out there, which means the federal government will need to find a way to assess these schemes," he says. "It's going to require some new math." LT Jonathan Cocker says although provinces have taken the lead on carbon pricing over the last decade, the issue still falls squarely within federal jurisdiction. 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