The Carbon Tax Reference: A Primer (Part 1)

The Carbon Tax Reference: A Primer (Part 1)

The Carbon Tax Reference: A Primer (Part 1)



The carbon tax has become one of the most controversial issues in Canadian politics of the last few years. Polling suggests that a strong majority of Canadians are in favour of taking action to combat climate change,[1] and the federal government has followed this political will by implementing a federal carbon tax program that applies in any province without its own carbon tax.[2] Yet, at the same time, a number of provincial governments have taken an aggressive stance against the federal government imposing a nation-wide carbon tax. The premiers of Alberta, Saskatchewan, Manitoba, Ontario, and New Brunswick have been particularly vocal in their opposition.

Most recently, this battle between governments has percolated into a series of court challenges, started by the three most outspoken provinces—Ontario, Saskatchewan, and Alberta— in which the provinces claim that the federal government lacks the constitutional authority to impose a national carbon tax.[3]

If a government tries to pass legislation on something that falls outside of the heads of power assigned to it under the Constitution, the courts can declare that legislation to be unconstitutional, which renders it completely void.

So far, these court challenges have been heard by the appeal courts in each of the three challenging provinces. In the results, the courts of appeal in both Ontario and Saskatchewan found the federal government is within its jurisdiction under the constitution; in other words, the carbon tax is constitutional.[4] However, the Court of Appeal in Alberta came to a different conclusion, finding that the federal government was outside of its jurisdiction in imposing a carbon tax; in other words, it is not constitutional.[5]

In law, there is only one way to settle this kind of division in the courts of appeal: an appeal to highest court in the land. Accordingly, in late September, 2020, the parties presented their arguments in front of the Supreme Court of Canada, and sometime in the coming year, we should have a final decision on the constitutionality of the carbon tax.

With such an important decision about to be made by the courts, it is worth taking a look at what is going on behind the legal arguments. There have been a lot of political discussions about the carbon tax—many of which are, unfortunately, quite misleading.[6] However, there has been relatively little discussion about the law and the technical legal issues, which are not the same as the political issues and, which, ultimately, are going to carry the day in the court cases. So, to provide some remedy to this limited legal discourse, this blog post will engage in an analysis of the carbon tax court cases from a strictly legal perspective. Specifically, it will focus on the central legal issue in the appeals—whether the federal carbon tax was validly enacted under the federal government’s peace, order, and good government [“POGG”] power under section 91 of the Constitution[7].

One thing to keep in mind as you read this post is that it will not deal with the question of whether or not the federal government’s carbon pricing scheme is actually a tax. This question has occupied a lot of the public discourse but, legally, it is a far less interesting and less important issue than whether or not the carbon tax is constitutional under POGG. So, as you read, keep in mind that even though we will use the term “carbon tax”, it is for ease of reference and not to make any statement, politically or legally, about whether the federal government’s carbon pricing scheme is actually a tax. If you would like more information about why, from a legal perspective, the carbon tax is not actually a tax, you can take a look at the explanations given in the Ontario and Saskatchewan Court of Appeal decisions.[8]

Onward to the law, this blog post will be divided into two parts. The first part will explain the general constitutional law behind the carbon tax court cases and will address:

  1. The Canadian constitution and the power to legislate;
  2. The federal power over peace, order, and good government; and
  3. The national concern branch of the so-called “POGG” power.

The second part of the blog post will dive into the specific legal arguments raised in the carbon tax court cases and will deal with:

  1. The subject matter of the Greenhouse Gas Pollution Pricing Act;
  2. Whether that subject matter is a national concern; and
  3. The potential impact of the Act on provincial jurisdiction.

At the end of the second part, finally, we will say something about what the Supreme Court is likely to decide. Stay tuned for that final conclusion, but keep in mind as we go that, in law, the reasons for a decision are often as important as the final “yes” or “no”.



The Canadian Constitution

To understand the carbon tax court cases, we need to begin with a little bit of constitutional law and, specifically, an explanation of how the Constitution divides legislative powers between the federal and provincial governments.[9]

To that end, when the Constitution was drafted in 1867, the parties to confederation agreed on a federal system with two levels of government: provincial governments to take care of local matters and a federal government to take care of national matters. As part of this division, the drafters of the Constitution split up the powers of government between the provincial and federal governments. The federal government was put in charge of matters that affected the nation as a whole, such as the postal service, navigation and shipping, banks and currency, indigenous peoples, and the criminal law.[10] The provincial government was put in charge of matters that are better dealt with at a local level, such as the management of public lands, municipal governments, education, and property rights.[11] The complete list of powers, more or less, can be found in sections 91 and 92 of the Constitution.[12]

Under the constitutional division of powers, each of the two levels of government may only pass legislation on the subject matters—referred to as heads of power—that it has been assigned in the Constitution. If a government tries to pass legislation on something that falls outside of the heads of power assigned to it under the Constitution, the courts can declare that legislation to be unconstitutional, which renders it completely void.

Of course, in practice, many of the subjects listed in the constitution are very broad, which sometimes allows the federal and provincial government to pass overlapping pieces of legislation. For example, the federal government has the power to regulate impaired driving under its criminal law power, while the provinces also have the power to regulate impaired driving under their power over property and civil rights in the provinces.[13] This overlap is acceptable in Canadian law, so long as each government is genuinely passing its legislation under one of its assigned heads of power.

Deciding if a Law is Constitutional

To figure out if a piece of legislation has been validly enacted under an assigned head of power, the courts have adopted a two-step process. The first step is to characterize the “pith and substance” of the legislation in question. This means identifying what the legislation is really about or, put otherwise, its core subject matter.[14] To do this, the courts will look at the purpose of the legislation, as well as its legal effect.[15] The courts do this by examining the legislation itself, as well as any evidence of parliamentary intent such as Hansard or minutes of parliamentary debates.[16]

Once the courts have decided what a piece of legislation is really about, the second step of the process is to see if it falls under a head of power belonging to the government that passed it.[17] To do this, the courts look to the list of powers assigned to each level of government under the Constitution and, quite simply, see which head of power the legislation falls under.

If there is no clear head of power that a piece of legislation falls under, the courts may look to the residual power of the federal government. Specifically, section 91 gives the federal government the power to:

“make Laws for the Peace, Order, and good Government of Canada, in relation to all Matters not coming with the Classes of Subjects by this Act assigned exclusively to the Legislatures of the Provinces”.[18]

In other words, section 91 gives the federal government the power to legislate over any subject that is not otherwise assigned to the provinces or the federal government. This power is referred to as the “Peace, Order, and Good Government” power of the federal government—or, more commonly, the POGG power—and it is at the very heart of the carbon tax court cases.

The Peace, Order and Good Government Power

Over time, the courts have developed specific criteria for when the federal government may invoke the POGG power to pass legislation. According to Professor Peter Hogg, POGG has evolved into three branches or categories, each of which has its own criteria: the gap branch, the emergency branch, and the national concern branch.[19] We will look at each of these three branches in turn.

The first branch of POGG is the emergency branch, which—as its name would suggest—allows the federal government to pass legislation in an emergency. Legislation that is passed under the emergency branch must be time limited, meaning that it can only last as long as the emergency it is intended to deal with.[20] Examples of legislation passed under the emergency power include the War Measures Act[21] and the Anti-Inflation Act[22].

The second branch of POGG is the gap branch, which allows the federal government to legislate over any subject matter that does not fall under one of the headings under section 91 or 92. Matters that fall under the gap branch are usually matters that are recognized by the Constitution, but, for whatever reason, the drafters failed to directly articulate the power to legislate over them.[23] Accordingly, the gap branch of POGG closes the gap in drafting by granting legislative power over these matters. Examples of subjects that have been passed under the gap power are the incorporation of federal companies,[24] the management of federal government institutions,[25] and the management of offshore minerals.[26]

The third branch of POGG is the national concern branch. This branch of POGG allows the federal government to legislate any subject that demands coordinated federal attention, because it is a concern to the nation as a whole. This may be something that was previously under provincial jurisdiction but for some reason has become a matter of national concern.[27] It may also be something that is entirely new—that is, that was not even mentioned in the Constitution—and requires attention at a national level. Examples of matters found to fall under the national concern branch of POGG include aviation[28], the national capital region[29], and marine pollution[30].

The National Concern Branch

In the carbon tax reference, the central legal question is whether the federal government has validly enacted its carbon-pricing legislation under the national concern branch of POGG. For this reason, we will take a closer look at the criteria that specifically apply to this branch of POGG.

The Supreme Court of Canada set out criteria for the national concern branch of POGG in a case called Crown Zellerbach. There, the Court wrote:

For a matter to qualify as a matter of national concern in either sense it must have a singleness, distinctiveness and indivisibility that clearly distinguishes it from matters of provincial concern and a scale of impact on provincial jurisdiction that is reconcilable with the fundamental distribution of legislative power under the Constitution.[31]

This is certainly not the clearest statement the Court has ever made. However, it is possible to break it down into three distinct requirements.

The first requirement for a matter to be a national concern is that it must be single, distinct and indivisible in a way that distinguishes it from provincial matters. In its simplest form, this means that the matter cannot be an aggregate of other matters that have already been assigned to the provinces or the federal government under the Constitution. Broadly, this refers to the fact that some subjects may appear to be one thing, but are actually a collection of other, existing matters that are already assigned under the Constitution. To give an example, the environment, even though it seems like one thing, is actually a collection of already-assigned subjects under the Constitution, such as wildlife, water, forests, mining, and fishing.[32] Thus, the first requirement for a matter to be a national concern is that it must be a single subject matter rather than an aggregate of existing subject matters.

The second requirement for a matter to be a national concern is that it must have a national aspect that pulls it out of the merely provincial. This means that the matter must be something that needs to be dealt with on a national level and, correspondingly, could not be dealt with by the individual provinces. To help make this determination, in Crown Zellerbach, the Court set out something called the provincial inability test. Under the provincial inability test, we think about what would happen if one province failed to regulate a matter and how it would affect the interests of the other provinces.[33] In particular, if the failure of one province to regulate the matter would have negative effects on the other provinces, then the matter is something that should be dealt with nationally.

To illustrate how this works, think of the examples of drug treatment and drug trafficking. Drug treatment is not a national concern, because the failure of one province to regulate drug treatment would not really affect the other provinces. Conversely, drug trafficking is a national concern, because the failure of one province to regulate drug trafficking would have significant effects on the other provinces, due to the movement of drugs across borders.[34] Thus, the provincial inability test provides one way of determining if a matter needs to be regulated at a national, rather than provincial level.

Finally, the third requirement for a matter to be a national concern is that it must not undermine the existing distribution of powers between the provincial and federal governments under the Constitution. This means that the court should not recognize a matter under the national concern branch if it will take too much power away from the provincial governments. This is an important check on recognizing a national concern because it makes sure that it does not upset the existing balance of power between the two levels of governments.


Conclusion to Part One

That concludes the discussion of the general constitution law behind the carbon tax court cases. Drawing from this discussion, we can see that deciding if the federal government’s carbon-pricing regime is constitutional will require a determination as to whether or not the legislation is validly enacted under the national concern branch of POGG. According to the law in Canada, making this determination will require the Supreme Court to answer four questions:

  1. What is the subject matter of the legislation?
  2. Is the subject matter singular or an aggregate?
  3. Is the subject matter national or merely provincial? and
  4. Does recognizing the matter respect the balance of power between the two levels of government?

The second part of this blog will engage with each of these questions in turn, by considering the arguments raised by the parties to the carbon tax court cases and by drawing some tentative conclusions about which side has made the stronger argument.



[1] See e.g. Marco Vigliotti, “61% of Canadians want government to take action on climate change even if economy suffers: poll” iPolitics (30 July 2019), online:

[2] See Greenhouse Gas Pollution Pricing Act, SC 2018, c 12, s 186 [Act].

[3] Manitoba is challenging the federal carbon tax with an application for judicial review in federal court (Her Majesty the Queen in Right of Manitoba v Governor in Council et Al, Winnipeg T-685-19 (FC)). This is a different court procedure, which, notably, will take a longer time to wind its way through the courts. It is unlikely the Manitoba court challenge will be heard before the Supreme Court makes the final decision on the matter.

[4] Reference re Greenhouse Gas Pollution Pricing Act, 2019 ONCA 544 [Ontario Reference]; Reference re Greenhouse Gas Pollution Pricing Act, 2019 SKCA 40 [Saskatchewan Reference].

[5] Reference re Greenhouse Gas Pollution Pricing Act, 2020 ABCA 74.

[6] See e.g. “Alberta Election Fact Check: myths and misconceptions of the carbon tax” (12 April 201

9), online: Global News

[7] Constitution Act, 1867 (UK), 30 & 31 Vict, c 3, reprinted in RSC 1985, App II, No 5 [Constitution].

[8] For a discussion of these issues, see Ontario Reference at paras 142 – 163 and Saskatchewan Reference at paras 69 – 111.

[9] For a more general explanation of the Constitution and how it impacts environmental law, take a look at the ELC’s Alberta Environmental Laws website:

[10] Ibid, s 91.

[11] Ibid, ss 92, 93.

[12] See also s 92A on non-renewable natural resources, forestry resources and electrical energy; s 93 on education; s 94A on old age pensions; and s 95 on agriculture and immigration.

[13] See Canadian Western Bank v Alberta, 2007 SCC 22 at 30.

[14] Ibid at 26.

[15] Ibid at 27.

[16] Ibid.

[17] Ibid at 26.

[18] Constitution, s 91.

[19] Peter W. Hogg, Constitutional Law of Canada, vol 1, 5th ed loose-leaf (Scarborough, Ont: Carswell, 2007), ch 17 at 5.

[20] Ibid at 27.

[21] Fort Frances Pulp and Power Co v Man Free Press Co, [1923] AC 695.

[22] Re Anti-Inflation Act, [1976] 2 SCR 373.

[23] Hogg  at 7.

[24] Citizens’ Insurance Co v Parsons, (1881) 7 App Cas 96.

[25] Jones v New Brunswick (AG), [1975] 2 SCR 182.

[26] Re Offshore Mineral Rights of British Columbia, [1967] SCR 792.

[27] R v Crown Zellerbach Canada Ltd, [1988] 1 SCR 401 at 431 [Crown Zellerbach].

[28] Johannesson v West St Paul, [1952] SCR 292.

[29] Munro v National Capital Commission, [1966] SCR 663.

[30] Crown Zellerbach.

[31] Crown Zellerbach at 432.

[32] See ibid at 454-455.

[33] Ibid at 432.

[34] Ibid at 428-429.




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