Uncertainty for clients due to carbon pricing

Putting a price on carbon means business will have to take seriously their carbon emissions

‘Businesses would be wise to quantify and verify greenhouse gas emissions’

Jennifer King says emitters will continue to be subject to greenhouse gas emission reporting requirements, whether that is through a provincial or federal pricing system.

On April 1, the federal carbon price backstop came into effect, which meant that a $20/tonne charge for greenhouse gas emissions is being applied in Ontario.

Meanwhile, the Ontario government continues to wage a legal battle at the provincial Court of Appeal against the federal government, calling the carbon price legislation unconstitutional.

Lawyers say that, while their Ontario-based clients are advised to comply with the federal rules, there remains uncertainty as to what they should expect going forward.

Jennifer King, a partner at Gowling WLG in Toronto and a member of the firm’s environmental law group, represented the Canadian Public Health Association in both the Saskatchewan and Ontario courts of appeal during their respective reference cases on the federal carbon price.

The Saskatchewan government had asked the Saskatchewan Court of Appeal whether the federal price was constitutional, followed by a similar reference from the Ontario government at the Ontario Court of Appeal.

In early May, the Saskatchewan Court of Appeal ruled in Reference re Greenhouse Gas Pollution Pricing Act 2019, 2019 SKCA 40, that the federal price was constitutional in a 3-2 decision.

The court also agreed that the federal price was a regulatory charge and not a tax.

“It is likely that the decisions of the Ontario and Saskatchewan Courts of Appeal will be appealed to the Supreme Court of Canada,” says King.

“There are other provinces now who have indicated that they may challenge the [Greenhouse Gas Pollution Pricing Act] in some way or the other. The Manitoba government filed its own court challenge of the act in Federal Court.”

King says it’s important to remember that businesses in Ontario did have a cap-and-trade system, which was ended in July 2018.

The cap-and-trade system used emissions credits trading to impose a price on carbon in the province.

The uncertainty around the carbon pricing system in Ontario is not new, she says.

Tyson Dyck, a partner at Torys LLP in Toronto, says his clients in the energy, infrastructure and mining sectors are asking about both the short-term and long-term carbon pricing issues.

His clients tend to be industries that are subject to emissions regulations, he says. They have questions about the immediate compliance obligations required by the federal Greenhouse Gas Pollution Pricing Act, but the more difficult questions are about the long-term outlook of carbon pricing. MORE