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Ontario’s Challenge of Carbon Levy

Osgoode HallThe Province of Ontario has launched a constitutional challenge to the federal government’s imposed carbon levy.  The argument is that the federal government does not have jurisdiction over the province in regard to greenhouse gas (GHG) emissions.

A hearing at the Ontario Court of Appeal, which ended on April 18th was being watched closely by other provinces.  Manitoba, Saskatchewan and New Brunswick have not built pricing into GHG emissions.  As a result, the federal government has imposed carbon pricing on these provinces.  It is likely that the newly elected government in Alberta will scrap their current carbon pricing, forcing the federal government impose their carbon levy.

The province has steered clear of arguing against the science of global warming.  They would likely lose this argument in both the Ontario Court of Appeal and the court of public opinion.

Instead, the province’s key arguments are:

  1. The federal government does not have the constitutional right to impose a tax or levy on energy.  Energy is under jurisdiction of the provinces.
    This is the province’s strongest argument and could sway a decision in their favour.  Ever since the British North America Act of 1867, natural resources have been under provincial control.  This is understandable.  Who would have foreseen the effects of global warming 150 years ago?
  2. Ontario has done enough.
    This is a weak argument.  Any previous efforts simply go to reducing the imposed tax/levy burden.
  3. It will result in a creeping of the federal government’s power.  They could regulate where you live, how often you drive your car.
    This too is a weak argument.  A carbon tax is intended to allow market forces to reduce emissions.  It will not force anyone to relocate or to stop driving.  It is shifting a tax from your income tax (through an income tax rebate) to a consumption tax.  Economists prefer this sort of tax.
  4. The rebate could go to anything.  Someone could use it to buy a Hummer.
    This argument is the exact opposite of the argument above.
  5. The province has their own plan for the environment.
    Ontario recently released A Made-in-Ontario Environment Plan that accepts the science of climate change.  It is clear that the province’s main strategy is to adapt to the effects of climate change instead of helping reduce those effects.

Legislative Assembly of OntarioThe federal government’s key arguments are:

  1. The carbon levy is an appropriate response to the global issue of climate change and is required to meet Canada’s commitments under the Paris Accord.
  2. Any province that doesn’t partake in putting a price on carbon emissions is undermining the other provinces.
  3. Indigenous communities will suffer the most, with some areas of northern Ontario expecting temperature rises of 7°C.  This will cause great disruption to their environment, with negative consequences.  Indigenous communities are under federal jurisdiction.
  4. This is a “regulatory charge” or levy, not a tax, because it is meant to modify behaviour, not generate revenue.

It is expected that the Ontario Court of Appeals will take several months to come to a decision.  Lets hope they come to a decision that is best for Canadians and the world, not a decision based on a 150 year old document.