The Liberal government’s recent announcement that it is exempting home heating oil from its carbon pricing scheme has prompted significant criticism. This criticism has come from the environmental left, the taxation-skeptical right, the business community and leaders of all major provincial political parties, both left and right.
The critiques include the carve-out being the antithesis of what the policy is intended to do; creating business uncertainty; privileging comparatively ‘dirty’ home heating oil over comparatively ‘clean’ natural gas; and demonstrating clear regional favouritism despite the policy as a whole being intended to create an equal national playing field.
Saskatchewan premier Scott Moe has made an extraordinary demand to the federal government: extend the exemption to all home heating fuels, or he will instruct SaskEnergy not to remit the carbon tax to Ottawa beginning January.
Moe admits that such an order would “probably” be illegal. But that “probably” is important. Because flying underneath the radar of the federal government’s recent policy reversal are at least three arguments that could imperil the carbon tax’s legality.
First, the carve-out for home heating oil undermines the federal government’s arguments as to the tax’s constitutionality.
The Supreme Court, in the Carbon Tax References, explicitly left open the possibility that regulations under the Greenhouse Gas Pollution Pricing Act could be unconstitutional, even if the act itself is constitutional. The act being constitutional was largely based on the “indivisibility” of a minimum price on greenhouse gas pollutants.
In other words, some sort of federal backstop is necessary to ensure that there are no ‘free riders’ in Confederation regarding greenhouse gases, which do not respect provincial borders. The carve-out undermines this argument, by suggesting that prices of greenhouse gases can be divided depending on their source, irrespective of the pollution caused.
To be sure, exemptions to the carbon tax have been contemplated and enacted before and have not been constitutionally problematic. This most recent carve-out, however, is of such a magnitude that a constitutional challenge would raise serious issues.
Second, even if the legislation is constitutional, granting a carve-out to home heating oil but not natural gas may be unreasonable as a matter of administrative law.
Administrative actors, such as the federal cabinet, need to exercise their discretion in accordance with the purpose of the statute that gives them that discretion. The primary purpose of the Greenhouse Gas Pollution Pricing Act is to price greenhouse gases in accordance with how much they contribute to climate change. The discrepancies in the present treatment of natural gas and home heating oil run roughshod over that purpose.
Again, the federal government has a response to this, based on the legislation’s secondary purposes. The government claims the exemption is necessary because home heating oil infrastructure is comparatively expensive to transition away from compared to cleaner forms of energy. Some time is allegedly needed to allow that to occur. Only then can the carbon pricing work its magic.
But this in turn leads to the third problem.
Is the need to transition home heating oil infrastructure the real reason that the federal government gave the exemption for home heating oil? Or might it be political motivation to save seats in rural Atlantic Canada, where home heating oil is disproportionately used and MPs have been in revolt?
What should we make of the fact that the pause will expire just after the next election? Minister Gudie Hutchings’s statement that the Prairies should elect more Liberal MPs if they want to receive similar treatment undermines the statutory purpose and indicates animus — which can doom an administrative decision.
To be fair, courts are reluctant to find that administrative decision-makers acted for improper motives. Moreover, Minister Hutchings was not the ultimate decision-maker. She is, however, part of the administrative apparatus, and her statement adds to reasonable suspicions about the motivations underlying the government’s decision-making.
All these arguments are uphill battles, for various reasons. But all are plausible, and it only takes one to defeat the legality of the status quo. And regardless of whether these arguments are ultimately successful, their plausibility further undermines the political, policy and constitutional capital that the government has spent in this area.
Canada’s most famous case about administrative discretion involved Quebec Premier Maurice Duplessis, who revoked Frank Roncarelli’s liquor licence for bailing Jehovah’s Witnesses out of jail. Despite the very broad statutory language delegating discretion to Duplessis to revoke licences, Supreme Court Justice Ivan Rand famously held that “there is no such thing as absolute and untrammeled discretion” in Canadian administrative law.
The recent carbon tax carve-out raises new questions about the limits of such discretion.
