Title: Carbon Taxes and the Constitution
1Carbon Taxes and the Constitution
- Nathalie Chalifour
- Faculty of Law, University of Ottawa
- October 18, 2008
2Carbon Taxes and theDivision of Powers
3Carbon Taxes and theDivision of Powers
- Which level of government has the authority to
legislate a carbon tax? - The short answer isboth
- Under which powers?
4Division of Powers 101
- Determined by sections 91 to 95 of the
Constitution Act, 1867 and the Constitution Act,
1982 - Sections 91 and 92 enumerate classes of subjects
for which the federal and provincial governments
can legislate - The key to determining whether something is
within a governments authority is the pith and
substance of the measure
5Carbon Taxes and theDivision of Powers
- Which level of government has the authority to
legislate a carbon tax? - The short answer isboth
- Under which powers?
- The respective taxation powers right?
6Carbon Taxes and theDivision of Powers
- Which level of government has the authority to
legislate a carbon tax? - The short answer isboth
- Under which powers?
- The respective taxation powers right?
- The short answer is. it depends
7Some relevant powers for a carbon tax
- Federal Powers
- National concern branch of the POGG power
- Trade and commerce power
- Criminal power
- Taxation power
- Provincial Powers
- Licensing power
- Property and civil rights power
- Natural resources power
- Taxation power
8Characterization
- What would be the pith and substance of a
carbon tax? - Is it environmental protection?
- Is it to address climate change?
- Is it to regulate energy?
- Is it to raise revenue?
- This will be determined based on design of the
actual measure
9Characterization
- Design factors that could be influential in the
characterization exercise include the following
(among others) - Is it a direct or indirect tax?
- Is it a stand-alone measure or part of a broader
regulatory scheme? - Is it a stand-alone measure or part of a broader
tax shift (eg. revenue-neutral)? - Is the measure incorporated into an existing tax
regime or apart from it? - Is it meant to be a corrective Pigouvian tax?
- Is it meant to make polluters pay?
10Québecs carbon levy
- An annual duty (redevance annuelle) applicable to
gasoline, diesel, heating oil, natural gas, coal
and thermal energy, payable by natural gas
distributors, fuel distributors and any person or
partnership bringing fuel to Québec for the
production of electricity - as of October 1, 2007, the levy works out to a
0.8 cent-a-litre charge on gasoline and 0.9
cent-a-litre charge on diesel - part of the provinces 2006-2012 climate change
plan
11BCs carbon tax
- a tax on the purchase of a broad range of fuels,
including gasoline, diesel, natural gas, and coal - the rate of the tax is established for five
years, starting at 2.4 cents per litre for
gasoline on July 1, 2008 and achieving 7.23 cents
per litre by July 1, 2012. - the Act creates an administrative system for the
collection of the taxes that mirrors that of the
provinces existing fuel taxes
12Characterizing the Québec levy
- enabling legislation is An Act respecting the
implementation of the Québec Energy Strategy - Québecs Energy Strategy identifies its purpose
as to empower the Québec society to maximize the
economic, social and environmental benefits
associated with the development of its energy
resources. - the Strategy identifies the further goal of
preparing the Québec of tomorrow a more
prosperous Québec that is more concerned about
the environment, and less burdened by debt. - the Strategy identifies six key objectives,
including - strengthening the provinces energy supply
security - making better use of energy as a lever for
economic development - using energy more efficiently and becoming a
leader in sustainable development.
13Characterizing the Québec levy
- the Strategy introduces the idea of a levy as a
means to finance an assistance plan for new
energy technologies (part of the broader Green
Fund Plan) - the Explanatory Notes state that the legislation
provides for the financing of measures aimed at
reducing greenhouse gas emissions and adapting to
climate change. - In Québec Premier Jean Charests speech opening
the provincial parliament in May 2007, he
committed to putting in place a climate change
plan, create prosperity with the provinces
renewable energy, hydroelectricity and gas, and
made one of eight concrete promises the
establishment of the carbon charge to protect
the environment
14Characterizing the BC tax
- From the Budget Speech
- to put a price on carbon emitting fuels in
British Columbia - Minister Taylor introducing the legislation
- Bill 37 introduces a groundbreaking
revenue-neutral carbon tax that will encourage
all British Columbia families and businesses to
lower their carbon footprint and will help meet
our goal of reducing emissions by 33 percent by
2020
15Possible justifications
- Taxation power
- must be a direct tax for raising revenues, within
the province, for provincial purposes - Licensing power
- allows provinces to institute charges that are
part of a regulatory scheme - Natural resources taxation
- is the C02 emitted from burning fossil fuels a
natural resource? - Property and civil rights
- regulation of polluting industries in the
province - Others
16Section 92(2) The provincial taxation power
- Is the measure a tax?
- The five Westbank Tax Criteria
- compulsory and enforceable by law
- imposed pursuant to the authority of the
legislature - levied by a public body
- intended for a public purpose and
- unconnected to a regulatory scheme
- Is it a direct tax?
17Section 92(9)The provincial licensing power
-
- To determine whether a charge is connected to a
regulatory scheme, we apply the Westbank Two-Part
Connection Test - (1) Is there a regulatory scheme?
- a complete, complex and detailed code of
regulation - a regulatory purpose which seeks to affect some
behaviour - the presence of actual or properly estimated
costs of the regulation - a relationship between the person being regulated
and the regulation, where the person being
regulated either benefits from, or causes the
need for, the regulation.
18Section 92(9)The provincial licensing power
- Westbank Two-Part Connection Test
- (2) Is the charge tied to the regulatory scheme?
- The connection will exist when the revenues are
tied to the costs of the regulatory scheme, or
where the charges themselves have a regulatory
purpose, such as the regulation of certain
behaviour (Westbank)
19Taxation or licensing power?
- While many charges will have elements of
taxation and elements of regulation, the central
task for the court is to determine whether the
levys primary purpose is, in pith and substance
- (1) to tax, i.e. to raise revenue for general
purposes - (2) to finance or constitute a regulatory
scheme, i.e., to be a regulatory charge or to be
ancillary or adhesive to a regulatory scheme or - (3) to charge for services directly rendered,
i.e., to be a user fee. - (Westbank)
- How does one select the appropriate regulatory
scheme?
20A federal carbon tax?
- Taxation power
- direct or indirect
- revenue-raising as the dominant purpose
- section 125
- Trade and commerce power
- part of a general regulatory scheme
- monitored by the continuing oversight of a
regulatory agency - concerned with trade as a whole rather than with
a particular industry - the provinces jointly or severally would be
constitutionally incapable of enacting such
legislation - the failure to include one or more provinces or
localities in a legislative scheme would
jeopardize the successful operation of the scheme
in other parts of the country.
21A federal carbon tax?
- Criminal law power
- a valid criminal law purpose (now includes
environmental protection) - a prohibition associated with a penalty
- POGG (National concern branch)
- singleness, distinctiveness and indivisibility
- extraprovincial inability test
- a scale of impact on provincial jurisdiction that
is reconcilable with the fundamental distribution
of legislative power under the Constitution
22Conclusions
- Scope for provincial and federal carbon tax
measures - Jurisdictional validity depends on design of the
measure - Respective taxation powers not optimal
- licensing power (provincially) and POGG
(federally) more likely candidates for
justification - Opportunity for courts to modernize division of
powers analysis for environmental taxes
23Carbon Taxes and the Constitution
- Nathalie Chalifour
- Faculty of Law, University of Ottawa
- October 18, 2008