Federal Emissions Target: Setting the Stage for the Next Constitutional Battle
On December 7, 2023, the federal government published the draft Regulatory Framework for an Oil and Gas Sector Greenhouse Gas Emissions Cap. This “Emissions Cap” proposes, among other things, that a cap-and-trade system be implemented across Canada in a way that sets a regulated limit on emissions from within the oil and gas sector. Currently, the federal government plans to implement the Emissions Cap at some point in 2025.
Following the release of this draft framework, Rebecca Schulz, the Minister of Environment and Protected Areas for Alberta, wrote federal Minister Steven Guilbeault a letter with an attached report outlining Alberta’s opposition to the Emissions Cap and related technical concerns. In her letter, Minister Shulz makes it clear that Alberta is already “efficiently and effectively regulating and driving emissions from all industrial sectors” and that Canada’s “proposed oil and gas emissions cap will undercut this work… [and] would have a devastating impact on the economies of Alberta and all of Canada.”
Provincial and federal jurisdiction over the regulation of the environment has been one of the most contentious legal battle grounds in recent Canadian history. In fact, it has been less than a year since the Supreme Court of Canada (the “SCC”) released their decision on the Reference re Impact Assessment Act, which declared current federal legislative schemes respecting the environment unconstitutional, as they intrude into areas which are firmly under provincial jurisdiction.
In light of the recent constitutional conflicts between the federal government, Alberta, and many other provinces, and the rhetoric being levied with respect to the Emissions Cap, it is almost a certainty the Alberta and Canada will be in front of the SCC again in the relatively near future.
The Federal Plan
The government of Canada has made no secret of how seriously they are taking environmental initiatives and how far they are willing to go to reach net-zero carbon emissions targets by 2050. As a result, the Emissions Cap is based on implementing regulations which would cap green house gas emissions at levels roughly 35-38% less than similar levels in 2019.
To do this, the federal government would prohibit oil and gas facilities from emitting any green house gasses unless the are participating in the cap-and-trade system. The system would however allow some flexibility in meeting reduction targets by allowing carbon emitters to remit carbon offset credits to contribute to a certain portion of emissions reductions for a particular facility.
The Emissions Cap would also require carbon emitters in the oil and gas industry to submit annual reports to the regulator. It is likely that these reporting requirements would start at some point in 2026.
Alberta’s Opposition
Simply put, the government of Alberta is fiercely against the implementation of the Emissions Cap. The concern is two-fold insofar as Alberta believes that first, the cap is not realistic, nor effective; and second, the cap, even if it was realistic and effective, is not constitutional.
With respect to concerns about the feasibility of the Emissions Cap, Alberta projects that such a cap could cost the Canadian economy up to $1 trillion dollars between 2030 and 2040 and 151,000 jobs by 2030. One reason for this is that given the Emissions Cap uses 2019 as a baseline for emissions targets, the oil industry has already scaled well past those figures in the last five years, and it would be that much harder to reduce current emissions. Further, the government of Alberta claims that the technology needed to “massively abate” emissions in the oil and gas industry does not yet exists or is not yet being developed at the scale which would be required to do so.
Constitutional Challenge
Section 92 of the Constitution Act, 1867, sets out matters of provincial jurisdiction, with which, the federal government cannot interfere. Section 92A states that in each province, the provincial legislatures may exclusively make laws in relation to the exploration, development, conservation, and management, of non-renewable natural resources, among other things.
Although the above may seem straightforward, the law becomes more complex when the spectre of “environmental regulation” is raised. Considering several landmark SCC decisions, the most recent of which is the previously noted Reference re the Impact Assessment Act, the regulation of the environment is considered to be shared jurisdiction between the provinces and the federal government. As a result, Canada does have jurisdiction to legislate respecting the environment, however such jurisdiction should not extend areas of provincial competency.
At this point, given that the draft regulations for the Emissions Cap have yet to be released, it is uncertain if Canada has learned its lesson from its failure with the Impact Assessment Act. If Canada releases regulations that clearly set boundaries between provincial and federal jurisdiction, Alberta will have a much tougher fight ahead in this continuation of the constitutional legal saga. That being said, if Canada again tries to overstep its authority, the federal government may have to swallow another bitter defeat at the SCC served by Premiere Danielle Smith and the government of Alberta.