Waiting for Peace, Order and Good Government

Estragon: Charming spot. Inspiring prospects. Let's go.
Vladimir: We can't.
Estragon: Why not?
Vladimir: We're waiting for Godot.

Waiting for Godot by Samuel Beckett

The Saskatchewan Court of Appeal found the Greenhouse Gas Pollution Pricing Act constitutional. The court also proclaimed that climate change caused by anthropogenic greenhouse gas emissions is one of the great existential issues of our time.

Perhaps Becket’s play on existentialism may not be the first reference that pops to mind for some people, but it certainly seems to apply here. As existence proceeds essence, the play asserts that the individual must discover the meaning of life through personal experience. Everyone talks, but our actions define what we are.

The federal government created the GGPP Act to ensure a minimum national price on GHG emissions to encourage their mitigation. This did not sit well with some of the provinces that attempted to show the act as being unconstitutional. The main players included the attorney general for Canada and the attorneys general for Saskatchewan, Ontario, British Columbia and New Brunswick. However, the court stated that the pressing importance of limiting such emissions was accepted by all of the participants.

Significantly, the court stated that the act operates as a backstop and applies only in provinces where GHG emissions are not priced at an appropriate level. The general character of the GHG phenomenon and the basic science of climate change were not contested by any of the interveners. So, the lawyers appear to be on side that there is an issue to be dealt with here.

The decision included substantial quotes from the affidavit of Assistant Deputy Minister of Environment and Climate Change Canada John Moffet. He included parts from the United Nations Intergovernmental Panel for Climate Change 2014 report. Part of the report concluded: “Human influence on the climate system is clear, and recent anthropogenic emissions of greenhouse gases are the highest in history. . . . Recent climate changes have had widespread impacts on human and natural systems. . . . Anthropogenic greenhouse gas emissions have increased since the pre-industrial era, driven largely by economic and population growth, and are now higher than ever. . . .Their effects, together with those of other anthropogenic drivers, have been detected throughout the climate system and are extremely likely to have been the dominant cause of the observed warming since the mid-20th century. . . . Continued emission of greenhouse gases will cause further warming and long-lasting changes in all components of the climate system, increasing the likelihood of severe, pervasive and irreversible impacts for people and ecosystems.”

The court stated that none of these conclusions was challenged by the participants.

The federal government attempted to justify the act on numerous grounds, including taxation. Interestingly, where the Constitution Act of 1867 empowers Parliament to raise money “by any mode or system of taxation,” the court held that the applicable parts of the act do not impose taxes in the constitutional sense of the term. This finding does not appear to be changing the anti-carbon tax rhetoric from the various opposition parties.

The federal government also argued that the act was a valid exercise under the national concern branch of peace, order and good government, as allowed under the Constitution Act. One would suppose that GHGs would then be a matter national concern. The provinces tried to suggest that the federal government could then regulate all aspects of life within the province right down to cattle feed. Cattle burps come to mind. (This is actually a front-end, not a back-end emissions problem.) The court did find that trying to regulate GHG emissions was too much of an overreach.

The province of B.C. helped save the day and perhaps all of the ones in the future. As the Attorney General of British Columbia suggested, the act could instead provide “the establishment of minimum national standards of price stringency for GHG emissions.” Stringency includes the scope of application to the fuels, operations and activities to which the charge applies and the necessary regulatory regimes. The court thought that there was a good deal to recommend this approach. Cow burps could continue unabated.

No one argued to the court that the general question of GHG emissions and of climate change were not issues of superordinate consequence. The court also noted that no one challenged Moffet’s affidavit that “There is widespread international consensus that carbon pricing is a necessary measure, though not a sufficient measure, to achieve the global reductions in GHG emissions necessary to meet the Paris Agreement targets.” The court then stated that minimum national standards of price stringency for GHG emissions are matters of sufficient consequence for inclusion under the national concern branch of POGG.

The reach of the act appears to be reconcilable with the federal and provincial distribution of power. Apparently, establishing minimum national standards of price stringency still allows individuals and businesses the freedom to choose based on market signals.

This finally brings us back to the existential question of Waiting for Godot or, in this case, Waiting for POGG. Everyone has the freedom of choice, and your essence is determined by the choices you make. Or in the more familiar words generally attributed to Mark Twain, “Everyone talks about the weather, but nobody does anything about it. “ The courts have now allowed someone to do something about the changing weather.

The Pan-Canadian Framework on Clean Growth and Climate Change

arid-climate-change-clouds-60013This is the third article dealing with Canada’s legislation on climate change.


As previously discussed, Canada’s GHG Act contains two mechanisms for pricing carbon. The first involves straight taxation. The second mechanism uses cap and trade.

In a cap and trade system, the government sets carbon emission caps on the regulated sectors. The government then issues certain emission allowances by an auction process. Those businesses purchase the allowances to allow for a certain amount of carbon emissions. If the business exceeds those levels of allowances, then it has to pay a charge on the excess. However, if it is able to reduce its level of emissions to below the level of allowances, it can trade those allowances to other businesses requiring them. The government in charge of the cap and trade system then simply reduces the amount of allowances issued for each time period. The economy then reduces its overall carbon emissions.

The difficulty with a national cap and trade system would be the federal government’s potential lack of jurisdiction to issue such a system. The government’s solution involved creating the first mechanism, the carbon charge, which clearly falls into its ability to legislate. The cap and trade system becomes merely an add-on. This flexibility for the carbon charge then would justify this second mechanism.

The GHG Act allows the provinces to implement their own tax system or cap and trade system. The provincial systems must plan to achieve a certain level of emission reductions in order to be comparable to the same results that would have been achieved by the federal system. If the planning objectives are comparable, then the federal system does not apply. This achieves the ‘backstop’ type of legislation where the provinces retain sufficient authority to develop their own homegrown process for emission reductions.

A cap and trade system possesses numerous pros and cons. For example, this system shows historical success. The sulphur dioxide trading system reduced emissions to alleviate acid rain impacts. The system produced actual and substantial reductions in sulphur dioxide over a short period of time.

The European Union Emissions Trading System for carbon initially appeared to be substantially less successful. The government issued far too many emission allowances which substantially reduced their value. Businesses did not have to modify their operations in order to meet their emission caps. Presently, the EU’s $38 billion annual carbon market now seems to be operating the way intended and carbon prices have more than doubled in the past year.

A cap and trade system can result in real reductions of carbon emissions. Meanwhile, a carbon tax can simply be paid by a business as a cost of doing business instead of it trying to reduce its emissions. However, the B.C. carbon tax systems does appear to have resulted in an overall reduction of emissions from 2008 to today’s date. Ontario’s recently introduced cap and trade system required time to prove itself.

Ontario’s first 2017-2020 compliance period allowed some eligible capped emitters to receive emission allowances free of charge. This was to make the transition easier and make the system manageable for companies with competitors in jurisdictions without a carbon price. Allowances were not to be given free of charge to fuel suppliers/distributors, electricity importers and electricity generators. The rate of allowances was to be decreased over time at a rate of 4.75% per year for combustion emissions starting in 2018.

Partnering with other cap and trade systems can result in even greater savings. Ontario signed on with the Western Climate Initiative. This Initiative includes California and Quebec. Other governments had joined in, but dropped out of the Initiative. Nova Scotia recently indicted its intent to join.

The theory of comparative advantage shows that where a country has a lower opportunity cost, it can produce less expensive emission credits and this can result in a greater economic return for all countries involved. This allows countries to specialize in emission credits where they have comparative advantage.

Being involved with international trading provides organizations with the ability to source the least expensive emission credits. This somewhat resembles a free trade agreement where funds leave one jurisdiction and emission credits come back. Some politicians criticize such an arrangement which drives investment out of the country. However, business have the ability to source the least expensive emission credit to reduce its expenses and meet its overall emission cap.

Ontario recently indicated its intent to withdraw from the Initiative. Its agreement states that it has to provide one year’s notice. The Initiative then blocked Ontario businesses from any future auctions of emission credits. This prevented these business from dumping all of their credits and negatively impacting the value of credits.


In the next article, we shall examine the Ontario situation.


photo by


+Source: pixabay.com




The pan-Canadian framework on clean growth and climate change Thursday, June 28, 2018 @ 8:52 AM | By Gary Goodwin


The Canadian government now enters the final stages of implementing its Greenhouse Gas Pollution Pricing Act. The Act sets the regime for a charge on fossil fuels and for pricing industrial greenhouse gas (GHG) emissions. This provides a backstop action for other parts of the country that have not taken steps to pass their own legislation to deal GHG emissions. Concurrently, the incoming Ontario government intends to terminate its existing cap and trade legislation.

As Canadians enter interesting times with respect to federal and provincial jurisdictions and potential litigation for Ontario companies that have already started down the emissions trading path, we require some context establishing the existing socioeconomic environment. This begins a series of articles looking at how we got to this point, where we are now, and potentially what the future might look like legislatively. As others and Yogi Berra point out, it’s tough to make predictions, especially about the future.

The UN Framework Convention on Climate Change (UNFCCC) created the overall structure for 192 countries that signed and ratified this treaty dealing with GHGs. An important preamble of the treaty recognizes that the parties are concerned that human activities have been substantially increasing the atmospheric concentrations of GHGs. The importance of this should be restated in that although some commentators and politicians question the science behind climate change, we do not hear of any country wanting to withdraw from this global treaty.

We do not intend to debate the reality behind climate change, and we would only recommend self-directed research on this point. We would also recommend relying upon peer-reviewed research which is the “court of appeal” standard when it comes to climate change science. The Intergovernmental Panel on Climate Change is the international body for assessing the science related to climate change.

Historically, the 1997 Kyoto Protocol failed to fully implement the UNFCCC as it did not include the two largest emitters, China and the U.S. The Canadian government itself did not take serious steps to attempt to implement the protocol. With the legally binding obligations, the government needed to withdraw from the protocol to avoid some $14 billion in penalties.

A series of Conference of the Parties (COPs) under the UNFCCC umbrella attempted to re-establish some sort of unanimity on how to proceed further. These COPs finally culminated in the Paris Agreement in 2015. The nature of this agreement as a treaty can be somewhat questionable. President Barack Obama entered into the agreement by executive order and therefore did not require Senate approval required for treaties. This allowed President Donald Trump to provide notice by executive order of his administration’s intent to withdraw from the agreement. The U.S. can only provide notice to withdraw three years after the agreement comes into force for the country. The U.S. can then provide a one-year formal notice to withdraw. The total of all these periods finally culminates in November 2020, shortly before the end of his existing term.

As of June 2018, 195 UNFCCC members signed the agreement, and 178 became parties to it. The agreement aims to limit the increase of global average temperatures to 2 degrees C above preindustrial levels and hopefully to limit the increase to 1.5 degrees C to significantly reduce the risks and impact of climate change.

In the agreement, each country plans and reports on its own targets. The agreement does not contain any enforcement mechanism to compel countries to reach a certain level by any particular date and instead provides a method to globally drive fossil fuel divestment.

Each country determines its own “Nationally Determined Contributions” (NDCs) and that these NDCs should be ambitious.

An important aspect of the agreement includes the International Transfer of Mitigation Outcomes (ITMOS). This allows countries to use emission reductions outside their own jurisdictions. The various heterogeneous carbon trading systems require linkage in order to avoid double counting and other verification issues. The UNFCC can act as a type of global securities regulator, something that Canada was unable to do when examining a national securities regulator.

Under the agreement, Canada committed to reducing GHG emissions by 30 per cent below 2005 levels by 2030. The major strategy to reach this commitment can be found within the pan-Canadian framework. In future articles we will examine its four main pillars which include pricing carbon pollution, complementary climate actions, adaptation and innovation.

As expected, pricing carbon creates the greatest controversy. Exploring the reasoning behind pricing carbon will illuminate the further changes we can anticipate in Canada’s short-term economic future.

This is the first of a four-article series.

The pan-Canadian framework (developed with the provinces and territories and in consultation with Indigenous peoples) will ultimately impact almost all sectors of the Canadian economy. This future impact illustrates areas in which in-house counsel should be strategically reactive, and more importantly, proactive.