Ottawa to press ahead with oil and gas emissions cap despite Supreme Court decision

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Ottawa will press forward with a pair of contentious new regulations aimed at reducing greenhouse gas emissions, despite last Friday’s Supreme Court of Canada decision that the government overstepped its constitutional bounds with one of its existing environmental laws.

The message from federal officials on Monday was that they believe neither their plan to cap greenhouse gas emissions from the oil and gas sector, nor their proposed Clean Electricity Regulations to restrict emissions from power generation, will be significantly affected by the court’s finding that the 2019 Impact Assessment Act (which enables Ottawa to review whether major projects meet environmental standards) violates provincial jurisdiction.

“The opinion of the court does not call into question other regulatory initiatives under development, and we are confident that they are within the purview of the federal government,” Environment Minister Steven Guilbeault said in a statement provided to The Globe and Mail.

That response could further inflame tensions with Alberta’s government, which was behind the legal challenge to the Impact Assessment Act, and is widely expected to test the electricity rules and emissions cap in the same way. Premier Danielle Smith has already seized on last week’s ruling to call on Ottawa to drop its other plans, which she predicted would meet a similar fate.

Mr. Guilbeault’s assessment is predicated on the planned regulations for the oil and gas and electricity sectors drawing on different federal powers from the Impact Assessment Act. Unlike that stand-alone legislation, both are widely expected to be implemented through amendments to the existing Canadian Environmental Protection Act. Drawing a comparison to the electricity regulations specifically, which are effectively intended to restrict the use of natural gas plants absent carbon capture technology starting in 2035, he noted that a phase-out of coal power already well under way was implemented the same way.

But while environmental law experts agreed with that distinction, the ruling against the federal environmental assessment rules has served reminder of the unpredictability of how the court will treat other elements of the federal government’s efforts to regulate emissions, undermining a sense of confidence in Ottawa after its national carbon-pricing system was upheld in a 2021 decision.

And it has underscored the challenge that Ottawa faces in drafting climate policy that is central to its commitment to reduce national emissions at least 40 per cent from 2005 levels by 2030, and achieve net-zero emissions by 2050, but touches on sensitive constitutional turf and has no clear precedent.

Such efforts “always involve a certain degree of crystal ball gazing by the federal government” when it comes to withstanding court challenges, said Stewart Elgie, a law and economics professor who is director of the Institute of the Environment at the University of Ottawa.

Complicating matters are differing interpretations of language in the court’s ruling about the extent to which greenhouse gas emissions are within Ottawa’s purview at all, and the narrowness of the leeway given in that regard in its earlier carbon-pricing decision.

In assessing that the decision contains nothing that should prevent Ottawa from proceeding with its other climate laws, so long as it’s mindful of staying within its constitutional powers, Prof. Elgie pointed to language affirming that Ottawa broadly has authority to pass laws protecting the environment, including those aimed at limiting emissions.

But Brad Gilmour, who heads the regulatory department at the law firm Bennett Jones, pointed to other sections of the ruling stating that greenhouse gas emissions that transcend borders have not been sufficiently proven to meet national-concern requirements – historically applied to localized pollution impacts around projects – to justify related regulatory powers afforded by the Impact Assessment Act. (Mr. Gilmour represented Alberta in the court proceedings, but said he was not speaking on behalf of the province in an interview.)

That makes it an “open question,” he said, how narrowly Ottawa’s authority to regulate emissions will be interpreted in future judgments.

One way that Ottawa might be able to reduce that uncertainty would be by adjusting its current plans for how to implement the oil and gas emissions cap, for which draft regulations are expected by the end of this year.

It could do so by increasing the stringency of carbon pricing specifically for the oil and gas sector, which was one of the two implementation models Ottawa initially said it was considering, and could place the policy within the broader pricing system that has already been green-lit by the Supreme Court.

However, Mr. Guilbeault has made it known that the government is leaning instead toward the other option of introducing a separate cap-and-trade system for that sector, which – as with the Clean Electricity Regulations, for which draft regulations were released in August – would be under the Canadian Environmental Protection Act. And there was no indication from federal officials on Monday that the court decision is prompting a change of course.

One risk of that approach noted by Andrew Leach, a professor at the University of Alberta’s department of economics and faculty of law, is that it could lead the protection act to be more broadly opened up to judicial review.

Multiple federal governments have asserted authority for an array of environmental policies by layering them into the act. That’s because its provisions are enforceable under the Criminal Code, which is federal jurisdiction. But the Supreme Court has not weighed in on the act in decades, and could conceivably judge more than just the newest amendments to be overreach, Prof. Leach suggested.

As it tries to avoid such outcomes, Ottawa’s immediate imperative is to ensure it crafts the new regulations more cautiously than it did the Impact Assessment Act.

The undoing of that law, Prof. Elgie said, was “broad drafting” that raised concerns about its application exceeding federal powers.

“They have to be careful not to do that.”