Arguing the Economic Side of Carbon Pricing

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I’m Stewart Elgie, I’m a professor of law and economics at the University of Ottawa and Director of the Environment Institute. 

I intervened in the greenhouse gas reference case on behalf of Canada’s Ecofiscal Commission. The Commission is a group of economic experts created in 2013 specifically to do research and make the case for pricing-based approaches to solve climate change and other problems. 

The court decided the federal government has the power to set national minimum standards for pricing carbon pollution. 

We only have, you know, five minutes and 10 pages on the Supreme Court, so you have to be really precise about where you think you can have an impact. We tried to come in and define the boundaries of the federal power in a way that we thought was more bounded and more consistent with precedent. 

I think there were really two choices: the way British Columbia argued it and the way we argued it, and we wanted to give the court two options. Our argument was that the government of Canada has always had the power to deal with cross-boundary problems, that’s the nature of the federal government power, including cross-border pollution. They’ve had it over air pollution, water pollution and climate change is the poster child for a cross-border environmental problem. It’s an atmospheric pollutant that goes up into the air and has the same effect everywhere. 

We didn’t expect to win on that argument but we wanted to really emphasize the point that every other federal government in the world, including weak federations like Switzerland, Germany, Australia, every other federal government has the power to implement their Paris Treaty commitments over climate and the court really shouldn’t be leaving Canada as the only federal government in the world who can’t do that. 

I mean the court decided the case based on what was originally BC’s framing of the federal power which I think was frankly the best framing: that they have the power to set national minimum standards. 

If you look around the world the way that most federations deal with environmental standards-setting and federations being ones where there’s a federal and a state level of government, is the national level government sets national minimum standards and then states and provinces can go above those standards but they can’t go below them. The way we deal with health care in Canada is the same way.  

It’s a good solution but it’s one the Supreme Court of Canada had never recognized in constitutional jurisprudence. You never know for sure, I mean judges are humans. We lost at one of the three courts of appeal so, you know, let’s say there was a one-in-three chance they weren’t going to win.  

Had the court gone the other way, I think it would have been disastrous for climate policy and climate action in Canada, so I was relieved. I don’t think I was surprised because at the end of the day I’ve now done five cases in the Supreme Court. I think at the end of the day the Supreme Court has a good instinct for the fact that a national government has to deal with national environmental problems. But I think from a policy perspective it’s probably a better outcome to say the federal government has the ability to set national minimum standards and then states and provinces can go further because it creates this floor, it creates a minimum level of performance across the country, but it allows different provinces to innovate and go further. 

The Business Council of Canada, the biggest employers, industries in the whole country, are now dead serious about Canada being positioned to compete in a low-carbon economic future. That’s the kind of momentum it’s building, and the Court’s decision came at an important time to kind of get past the pricing fight and move on with these other fundamental issues about taking climate action seriously and taking the economic transition seriously. 

I think that the political precedent and the political momentum it built may have a more lasting effect than the legal precedent. 

It was strange for me because I had done it, I used to be an environmental litigator for the first half of my career, so I had done four cases in the Supreme Court, but I hadn’t done a case in 20 years, and I was pretty nervous. I hadn’t ridden a bicycle for 19 years as a litigator and I had real butterflies. 

One of the fun things about this case is we had two different University of Ottawa law students that played a big role in doing the research for this and they really helped us put together the nitty-gritty of our argument. I think they learned a lot in the process, they got to work with former Supreme Court judges back-and-forth on strategy, and not just do book learning but really understand how what you learn in law school gets applied in solving what was probably the most important environmental constitutional case of our generation. 

Several professors from the Faculty of Law at the University of Ottawa intervened in the References re Greenhouse Gas Pollution Pricing Act before the Supreme Court of Canada. In our new Carbon Pricing Series, we learn about their experiences and the arguments they made on behalf of their clients.  

This video features Professor Stewart Elgie, an expert in law and economics, who represented Canada’s Ecofiscal Commission as an intervener before the Supreme Court. Professor Elgie’s intervention addressed the economic aspects of the proposed carbon pricing solution. He argued that carbon and pollution pricing are among the most effective ways to counter today’s pressing environmental problems.

The Greenhouse Gas Pollution Pricing Act is an Act of the Parliament of Canada that sets a minimum national standard on greenhouse gas pricing to reduce emissions in Canada and fulfil the country’s commitments under the 2015 Paris Agreement. Some Canadian provinces challenged the constitutionality of the Act, taking the case to the Supreme Court of Canada based on the argument that it was beyond the jurisdiction of the federal government to impose a national standard on greenhouse gas emissions because natural resource regulation under the Constitution falls under provincial jurisdiction.   

On March 25, 2021, the Supreme Court of Canada, in the landmark decision References re Greenhouse Gas Pollution Pricing Act, ruled that the Greenhouse Gas Pollution Pricing Act is a valid exercise of federal powers. The Court found that climate change is an existential threat to human life and that the issue must be approached as a matter of national concern through coordinated national and international efforts. 

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