The GOVSK sets out to answers the following questions:

1. Is there an unwritten constitutional principle that prevents the FEDGOV from applying federal laws to override decisions in a single province on matters under provincial jurisdiction?
2. Is the carbon price paid for by consumers a regulatory fee or a tax?
3. Does delegating major aspects of carbon pricing violate s. 53 of the Constitution Act, 1867?

They ultimately conclude that the FEDGOV’s current carbon pricing plan is unconstitutional for the following reasons:

1. Legislation that applies only in provinces who chose not to implement their own carbon pricing violates the principles of federalism;
2. The legislation deals with matters that fall under provincial responsibility and is therefore outside of the FEDGOV’s areas of responsibility; and
3. The carbon price is a tax, and is therefore in violation of s. 53 of the Constitution Act, 1867.

The remedy the GOVSK is asking for is for the SKCA to declare the GGPPA unconstitutional and ultra vires.

1. The Carbon Pricing Legislation Offends the Principles of Federalism

The GOVSK’s first question in their factum is:

Is there an unwritten constitutional principle that prevents the federal government from applying federal laws to override decisions in a single province on matters under provincial jurisdiction?

In other words, does an unwritten constitutional rule allow the federal government to enact a type of legislation that, under a more traditional constitutional analysis, would be illegal? The GOVSK answers in the negative.

One of the GOVSK’s main arguments is that the GGPPA is unconstitutional for violating the unwritten rules of federalism, a pillar of the Constitution, specifically the following:

1. federal-provincial cooperation;
2. the balance of powers between the two levels of government; and
3. a respect for provincial autonomy.

The GOVSK makes it clear that the determining factors in this case are not the importance of the issue at hand (ie. the environment), the merits of the legislation itself, or what the FEDGOV thinks is “best for the country”. Rather, maintaining the jurisdictional balance between federal and provincial powers is “always more important” (para 50).

The GOVSK relies on SCC cases; privy council decisions; the preamble to the Constitution Act, 1867; and historical evidence of the framers’ intentions behind the Constitution Act, 1867, to establish that federalism determines the issue (see: pages 10-11).

Respecting the balance of powers and provincial autonomy

The GOVSK argues that based on the principle of federalism, laws should respect the balance of powers between governments and provincial autonomy (paras 22-23). The GOVSK relies on the following definition of “provincial autonomy”:

… provinces being free to define their own policies within their own spheres of jurisdiction without being obligated to conform to policies set down by the central government.

(para 33)

This provincial authority is the “essence” of federalism and limits federal powers. The GOVK argues that laws that do not uniformly apply across the country and instead target single provinces due to their personal choices on matters within their jurisdiction offends this autonomy (paras 35-37).

The GOVSK clarifies that a federal law does not have to apply uniformly to be constitutional, as the government must be able to take into account objective “social and economic differences” between provinces (para 38). Therefore, the GOVSK does not believe a national carbon pricing regime would be unconstitutional, including one that applied differently across the country, so long as the application is based on objective criteria:

39. Therefore, in this case, the Attorney General would have no constitutional objection if the federal government adopted a national carbon tax that applied uniformly all across the country. The Attorney General would also have no constitutional objection if the national carbon tax provided for variations based on objective criteria. The Attorney General’s fundamental objection to the application of the federal carbon tax is that it is directly tied to how Provinces have chosen to exercise or not exercise their own legislative jurisdiction. The carbon tax will apply in Saskatchewan only because the Government of Saskatchewan has decided not to impose its own carbon tax. This is constitutionally illegitimate.

Federal-Provincial Cooperation

The GOVSK also argues that the GGPPA undermines federal-provincial cooperation, another principle of federalism. They state that the issue of climate change requires coordination between the two governments, but the FEDGOV in this case has instead unilaterally imposed their own approach on Saskatchewan:

48. … the Court should show no deference to unilateral approaches with respect to matters that clearly cry out for cooperative measures. There will, quite simply, be no need for cooperative federalism if the federal government can unilaterally pursue its policy objectives with respect to matters falling within provincial jurisdiction without the need for the willing and voluntary participation of the provinces.

The GOVSK further argues that cooperative federalism also includes the right not to cooperate, which is in line with provincial autonomy, the principle of federalism discussed above (para 49):

49. … Federalism recognizes that there may be more than one way to solve problems and that “one size fits all” approaches are not necessarily the best.

In conclusion, the GOVSK attempts to establish that the carbon pricing legislation offends the principles of federalism and is therefore unconstitutional.

2. The carbon pricing legislation does not fall within a federal head of power

The GOVSK argues that the pith and substance analysis⁴ is not necessary because the legislation is already unconstitutional for undermining the principles of federalism, as outlined above.

However, in case the “pith and substance” analysis is required, the GOVSK’s position is that the GGPPA does not fall under a federal head of power and is therefore unconstitutional.

The GOVSK first addresses Part I of the GGPPA, which is the carbon price for registered producers and distributors. Again, the GOVSK admits that a national carbon pricing regime would be constitutional under the federal taxation head of power, s. 91(3). However, the GGPPA in effect and purpose targets only Saskatchewan (or other like provinces), which, the GOVSK argues, the FEDGOV has no constitutional authority to do (para 44).

The GOVSK argues that Part II, the application of carbon pricing to large-scale emitters, is unconstitutional for targeting local industries, such as oil and gas, which fall under the province’s responsibility (paras 44 – 46). The GOVSK argues that regulating these industries is a provincial head of power under

1. 92(1), Local Works and Undertakings;
2. 92(13), Property and Civil Rights in the Province; and
3. 92(16), Generally all Matters of a merely local or private Nature in the Province.

As such, the GOVSK says the federal government does not have any constitutional authority to enact this legislation:

46. … While the purpose of the legislation may be aimed at reducing carbon emissions, the effect of the legislation is a massive intrusion by the federal government into an area of jurisdiction that has always been provincial. Therefore, under a traditional pith and substance analysis, the legislation is ultra vires.

The GOVSK further argues that the court should interpret the division of powers to give responsibility of the matter at issue to the government closest and most able to respond to the citizens affected (para 24):

24. … With respect to regulating carbon emissions by individuals and businesses, this is clearly the provincial governments.

In conclusion, the GOVSK argues that the carbon pricing legislation is unconstitutional largely because the FEDGOV does not have the legal authority to:

1. Apply a carbon pricing regime to single provinces, and
2. Touch on local matters and industry, both of which the GOVSK submits are under the province’s authority.

3. The carbon pricing legislation violates s. 53 of the Constitution Act, 1867

Before addressing this question, the GOVSK first establishes that the carbon pricing regime imposes a tax in the province.

a) The legislation imposes a tax

The GOVSK’s position is that the carbon price is a tax. First, the GOVSK argues that applying a tax to a single province is particularly offensive to the principles of federalism, given the type of authority the taxation powers give to governments:

51. … The authority to tax is one of the most powerful tools that governments possess. As noted by Laforest J. in the GST Reference, the power to tax is the power to destroy. 56 The potential for misuse of a power to tax in one province, but not others, is manifestly apparent. The power to tax therefore must be confined to its strict constitutional limits.

If the FEDGOV tries to argue that the carbon price is part of a constitutional regulatory regime, and is therefore legal, the GOVSK argues they should fail. First, from the perspective of the consumer, the carbon price is a tax. Second, the law distinguishing taxes from regulatory charges suggests that the carbon price is a tax (para 52). As stated in Westbank First Nation v. British Columbia Hydro and Power Authority, 3 SCR 134 (1999), a constitutional regulatory regime must have the following characteristics:

1. A clear regulatory purpose;
2. A complete and detailed code of regulation; and
3. A clear relationship between the person being regulated and the regulated activity.

(at para 54)

The GOVSK argues that whether the carbon price is called a “tax” or “charge” is irrelevant (para 53). Focusing on the character of the carbon price, the GOVSK concluded that it is a tax because:

• Consumers of carbon are required to pay money to the state;
• Part 1 is administered by the Minister of Finance;
• The money collected are paid into the “Consolidated Revenue Fund”; and
• Any disputes regarding the payments are dealt with by the Tax Court of Canada.

(at para 54)

The GOVSK anticipates the federal government also making the arguments that the carbon price is constitutional for:

1. being part of a regulatory regime in Part 2; and
2. setting out to alter behaviour and therefore not a tax; and
3. Being revenue neutral.

First, the GOVSK once again reiterates that Part 2 is unconstitutional for regulating matters of local concern, as previously explained, and an unconstitutional regulatory regime cannot support a valid regulatory charge (para 56).

Even if Part 2 was constitutional, they argue the legislation must still fail as there is no connection between the regulation of businesses in Part 2 and the taxation of consumers under Part 1 (para 56):

56. … there is simply no connection between the regulation of businesses called for by Part two of the Act and the taxation of consumers under Part one of the Act. The two parts of the Act are separate and distinct just like the different parts of the Assisted Human Reproduction Act were separate and distinct, Consumers are not being regulated in any way. They are only being asked to pay a tax. The Act contains no provisions aimed at reducing the amount people drive their cars or how warm they keep their houses in the winter. Consumers of carbon are simply not part of any regulatory regime.

Regarding the second anticipated argument, the GOVSK posits that the FEDGOV should not be allowed to avoid the implications of a tax, such as sections 53 and 125 of the Constitution Act, 1867, simply by arguing that its purpose is to change someone’s behaviour (para 57):

57. … To do so would largely wipe out the distinction between taxes and regulatory charges in the federal sphere and goes far beyond anything recognized in previous cases…

As for the argument about the carbon price not being a tax for being revenue neutral, the GOVSK suggests that this doesn’t change the fundamental nature of being a tax. Incorporating revenue neutrality in the legislative scheme is simply the FEDGOV choosing how to spend the revenue from the carbon pricing. They cite Winterhaven Stables Limited v Canada (Attorney General), 1988 ABCA 334 to show that revenues collected by the federal government and paid back to provinces remained federal taxes under s. 91(3) of the Constitution Act, 1867 (para 58). The GOVSK argues that this aspect of the carbon price seems more like “wealth distribution”, which is a consideration under tax regimes, not regulatory ones (para 58).

b) As a carbon tax, it violates s. 53

Now that the GOVSK has explained why the carbon price is a tax, they suggest that the legislation would be unconstitutional for being contrary to s. 53 of the Constitution Act, 1867. Section 53 states:

Appropriation and Tax Bills

53. Bills for appropriating any Part of the Public Revenue, or for imposing any Tax or Impost, shall originate in the House of Commons.

The intent behind s. 53 is inherently democratic – that a government should not be able to impose a tax without the authority of Parliament or the legislature (para 60). To do otherwise would mean imposing “taxation without representation” (para 59).

The GOVSK cites Eurig Estate (Re), 2 SCR 565 (1998), which states that taxes must be imposed by Parliament, not the executive, and only the “details and mechanisms” could be delegated to other bodies like the Governor in Council (para 62). Otherwise, the legislation should cover the “who, what and where” of the tax (para 62).

As such, the GOVSK argues that the carbon price goes well beyond delegating just the “details and mechanisms” to the Governor in Council (para 63). The power to determine in which provinces the carbon price is to apply is one such example of an over-extension of power (para 63):

63. … For example, it provides that the determination of which provinces and territories the carbon tax will apply in is a decision to be made by the Governor in Council. The Governor in Council has an almost unfettered discretion when it comes to making this decision. The only limitation is that the Governor in Council must take into account the stringency of provincial pricing mechanisms for greenhouse gas emissions. But the term “stringency” is not defined in the Act. The decision to impose the carbon tax in one province but not another can be based on a political decision as opposed to the application to any objective criteria. It is submitted that who the tax applies to and where geographically the tax applies (as opposed to merely setting the rate of taxation) 66 are critical components of any taxation scheme and are not mere matters of “details and mechanisms”. Therefore, Parliament’s failure to set out in the Act itself which provinces and territories the tax will apply in is, constitutionally, a fatal flaw.

Also stated in Eurig Estate, the taxing power must be “clear and unambiguous” (para 64). Any legislation which purports to impose a fee, when it is actually a tax (such as the carbon pricing regime, as suggested by the GOVSK), is a violation of this principle:

64. … Accordingly, if the statute does not acknowledge that it is delegating taxing powers but rather purports to delegate powers concerning regulatory fees, once a court finds that the fees are in fact taxes, this rule will be, ipso facto, violated. This is precisely the case here. The Act does not purport to delegate any taxing powers but rather pretends that the taxes are regulatory charges. Therefore section 53 is violated.