Toronto, Canada - According to the C.D. Howe Institute the federal government’s proposals to regulate greenhouse gas emissions as set out in its Regulatory Framework paper are likely to be upheld as constitutional exercises of the federal criminal-law power.

In a Backgrounder released on August 21st, the Institute poses the question that while the federal government is seeking to limit GHG emissions by large industrial emitters, does it have the legal authority to implement the regulations through its criminal-law power?

In "A Question of Parliamentary Power: Criminal Law and the Control of Greenhouse Gas Emissions," Peter Hogg, Professor Emeritus, Osgoode Hall Law School, and Scholar in Residence, Blake, Cassels & Graydon LLP, argues that Parliament’s criminal-law power provides the required legal grounds.

In its Regulatory Framework paper, the federal government proposed to impose limits on greenhouse gas emissions by large industrial emitters. Regulatory limits will vary from sector to sector. Each regulated firm may choose among different options to comply. They may reduce emission levels to prescribed levels; make contributions to a climate-change technology fund; or, comply through a cap-and-trade system. Under the cap-and-trade system, a regulated firm can comply by purchasing "emissions credits" from firms in the same sector, or by buying "offset credits" from firms in unregulated sectors.

Professor Hogg reviewed a string of court decisions that have a bearing on the matter with emphasis placed on Parliament’s criminal-law power, because that is the constitutional basis for the current Canadian Environmental Protection Act, 1999 (CEPA).

The government’s Regulatory Framework proposals will likely take the form of amendments to that Act, regulations made under that Act, or both. The author concludes that the proposals of the Government of Canada for the regulation of greenhouse gas emissions in the Regulatory Framework paper are likely to be upheld as constitutional exercises of the federal criminal-law power.

A Globe and Mail article published on August 24th notes oil and gas industry lobbyists have expressed concern about the federal government’s "Turning the Corner Plan" based on the fact that regulations limiting the emission of greenhouse gases will be enforced through the Canadian Environmental Protection Act under the federal government’s criminal-law power - a necessity because the environment and natural resources are under constitutional jurisdiction of the provinces.

In 2005, the six main greenhouse gases were assessed under the CEPA process and added to the list of toxic substances in the schedule to the Act. On that basis, the regulatory powers of CEPA apply. Of course, notes the author, standards still have to be set, sector by sector, for the limits on emissions that will be required of large industrial emitters under the regulations. Then, the prohibition and penalty provided by CEPA will apply to greenhouse gas emissions.

Professor Hogg admits that at first blush, it seems odd that carbon dioxide, which is the main greenhouse gas, would be classified as a toxin, since it occurs naturally in the air and is benign in its direct effect on life on earth. But "toxic" is a defined term in CEPA, Sec. 64 (a). Part of the definition states: "a substance is toxic if it is entering or may enter the environment in a quantity or a concentration or under conditions that … may have an immediate or long-term harmful effect on the environment."

He notes the Kyoto Accord is predicated on the belief that the discharge of greenhouse gases into the environment in current quantities is causing global warming with a long-term harmful effect on the environment. This is enough to satisfy the definition of toxic in the Act. And this definition does not raise a constitutional issue since Hydro-Québec establishes that Parliament’s criminal-law power is no longer limited to the protection of life or health, but also extends to measures for the protection of the environment.

Once emissions standards have been prescribed by regulation for industrial sectors, firms that fail to abate emissions as required will be subject to criminal penalties. In light of the decision in Hydro-Québec, this is all a perfectly safe exercise of Parliament’s criminal-law power.

Other key points set out in the Backgrounder are as follows:

• While in-house abatement will be the standard method of compliance with the regulations, the Regulatory Framework paper also proposes to introduce three additional means of compliance. One is the creation of emissions credits that can be earned by firms that have reduced emissions below the regulated standard.
  
  
• These credits can be purchased by those who have failed to reduce their own emissions to the required level. A second means of compliance is the creation of offset credits that can be earned for reductions in emissions by firms that are in unregulated areas like agriculture, forestry or landfill operations. These, too, can be purchased by regulated firms and used as credits towards the regulated standard.
  
  
• The third means of compliance is a contribution to a government-created but independently operated climate-change technology fund that would invest in projects likely to yield reductions in emissions.
  
  

For most kinds of criminal behaviour, the purchase of exemptions from the criminal prohibitions would be unthinkable. But the protection of the environment differs from other criminal purposes in that it is concerned with the overall reduction of emissions more than the individual behaviour of particular emitters.

Can these three additional means of compliance - emissions credits, offset credits and contributions to a technology fund - be upheld under the federal criminal-law power? According to Professor Hoag:

• Each enables a regulated firm to meet its obligations without actually reducing emissions to the regulated standard.
  
  
• Emissions trading allow a market to develop that provides some choices for private firms as to the most efficient allocation of the resources required for emissions reductions. Measures that are likely to speed up the overall reduction of emissions are squarely within the purpose of protecting the environment.
  
  
• This is so even if the alternative measures are not themselves prohibitions of the harmful conduct- like the prohibition of advertising that was upheld in the tobacco case. It is likely, therefore, that alternative means of compliance with the regulated limits on greenhouse gas emissions will be upheld as criminal law.
  
  
• In the case of the emissions credits and offset credits, their constitutionality seems clear. They provide incentives for and then recognize equivalent reductions in emissions to limits that the regulated firm is bound to achieve. Since the goal is to reduce overall emissions, a reduction anywhere is equally beneficial.
  
  
• The constitutionality of the proposed climate change technology fund is less clear. The reduction of emissions caused by technology funded projects will come long after the contributions to the fund. And when realized, the reduction may not be equivalent to the credits issued to the firms that contributed the money to the fund.
  
  
• However, this exemption is also directed to the ultimate reduction in emissions, and is likely to be upheld as a valid part of the scheme, especially since, according to the Regulatory Framework paper, it will be available only for a transitional period and will provide credit for only part of a regulated firm’s obligations (70 percent initially, declining annually to zero in eight years).

The C.D. Howe Backgrounder can he found here.

Click here for the federal government’s Turning the Corner: Regulatory Framework for Industrial Greenhouse Gas Emissions.

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For More Information: C.D. Howe Institute