The Administrative State after the Carbon Tax References

“The Administrative State after the Carbon Tax References” (2022) 26 Review of Constitutional Studies 33-60

This is a case comment on the aspects of the Supreme Court of Canada’s 2021 decision in the References re Greenhouse Gas Pollution Pricing Act which are relevant to the administrative state.

Three aspects of the References are of importance to Canada’s administrative state: the constitutional limits on delegation in Canada; judicial review of regulations made under POGG; and the distinction between a regulatory charge and a tax for the purposes of Canadian public law. Through its analysis of these aspects, the decision in the References sets out high-level principles about the delegation of authority to Canada’s administrative state. On two of these aspects – constitutional limits on delegation and judicial review of regulations – there was disagreement between the majority and dissenting judges. These disagreements highlight the importance of the decision to the administrative state and careful consideration of the dissenting judges’ observations helps to supplement the majority’s analysis of these aspects of the decision. Ultimately, therefore, inasmuch as this case comment contains an argument, it is that the majority got the References right on the aspects relating to the administrative state, but that the dissenting judges’ cogent concerns deserve to be taken seriously.

First, the status quo in relation to delegations of authority was maintained. Even though much of the who, why, what, where, when and how of carbon pricing in Canada was left by Parliament to the federal cabinet, the majority strongly rejected the proposition that there was any constitutional deficiency with the breadth of the delegation of authority. By adding another chain to an unbroken line of authority for the proposition that Canadian legislatures may delegate plenary powers to administrative officials, the decision in the References confirms that there is ample scope for delegation in Canada. Even the GGPPA’s Henry VIII clauses, which permit the federal cabinet to modify the GGPPA, were constitutionally valid. However, there was a strong partial dissent by Côté J on the constitutionality of Henry VIII clauses – whilst consideration of Côté J’s analysis demonstrates the strength of the premises of the majority’s decision, her analysis may be influential going forward.

Second, the majority established a framework for reviewing regulations made under the GGPPA. Even though the delegation of authority under the GGPPA is broad, the federal cabinet does not enjoy unfettered discretion, as every exercise of the authority is constrained by the purposes and language of the GGPPA here. Some difficulties arise here, however, because the GGPPA contains broad delegations of authority to the federal cabinet, but the GGPPA itself rests on the narrow constitutional basis of the POGG power. Accordingly, the federal cabinet could conceivably make regulations which are within the scope of the GGPPA, but outside the scope of the POGG power. If so, the regulations would almost certainly lack a chain of constitutional validity. As the dissenters observed, moreover, reviewing cabinet decisions is quite difficult, as these are often shrouded in secrecy. I argue that despite the concerns of the dissenters, courts will be able to ensure that these regulations are legally valid; judicial oversight is capable of being robust, especially in view of recent Federal Court of Appeal jurisprudence on judicial review of cabinet decisions. When supplemented by critical analysis of the dissenter’s concerns, the majority’s decision promises meaningful judicial review of regulations made under the GGPPA.

Third, the Court clarified the test for categorizing an obligation to pay monies as being a regulatory charge rather than a tax, in such a way as to facilitate the creation of regulatory schemes by Parliament and the provincial and territorial legislatures. Taxes cannot be imposed by discretion, as this would be contrary to the principle (enshrined in the Constitution Act, 1867) that taxes can only be imposed by elected representatives, not by executive fiat. Regulatory charges can be so imposed, however. Accordingly, distinguishing between taxes and regulatory charges becomes significant, with legislatures and officials having much more latitude in respect of the latter than the former. In the References, the Court clarified the distinction in a pro-administrative state fashion. A regulatory charge will be valid even if the revenues it raises exceed the costs of the scheme put in place and the revenues are put to some other purpose entirely, as long as the scheme aims to modify behaviour. However, it is hard to imagine a revenue-raising scheme which does not aim to modify behaviour – as such, the References have increased the scope for creative regulatory design by minimizing the risk that administrative schemes will be held to be unconstitutional because they impose taxes by discretion rather than by statute.

In both its administrative law and constitutional law aspects, the decision in the References is a significant contribution to Canadian public law. And when the decision is read alongside recent developments in American public law, its significance becomes even clearer. For some years now America’s administrative state has been under attack, on the basis that it is an unlawful deviation from the constitutional standards created by the founders. This attack has resonated with the federal and state judiciary. It is not fanciful to expect that in the years to come, the Supreme Court of the United States will rein in America’s administrative state. Such changes are singularly unlikely in Canada, as the References demonstrate, even though the course of American administrative law has often influenced developments in the Great White North.

This content has been updated on May 2, 2023 at 15:17.