Canada’s Supreme Court ruled 6-3 to uphold the country’s carbon tax policy on Thursday, according to CBC.
Now provinces have to set their own carbon taxes on consumers at the gas pump and on companies that release carbon dioxide, or minimum prices by the federal government will be set. Chief Justice Richard Wagner wrote that because greenhouse gas (GHG) emissions are “extraprovincial,” meaning they aren’t confined by borders, the federal government can create rules to control them.
"The evidence clearly shows that establishing minimum national standards of GHG price stringency to reduce GHG emissions is of concern for Canada as a whole. This matter is critical to our response to an existential threat to human life," Wagner wrote in the decision.
"As a result, it readily passes the threshold test and warrants consideration as a possible matter of national concern,” he added.
Canada’s carbon tax faced resistance after it began to be implemented in 2019. Multiple provinces claimed that the tax was punitive and they alone had jurisdiction over their emissions. In response, the federal government imposed minimum carbon taxes and then returned the raised revenue to taxpayers.
The policy eventually made it to the Supreme Court, and Thursday's decision establishes that a carbon tax is constitutional under the “peace, order and good government" clause of the constitution, which allows the government to take action on issues of national concern.
The ruling sets the foundation for broader climate action in the future, CBC previously reported.
Canada’s carbon tax is currently $40 a tonne, but is set to rise over several years, reaching $170 per tonne in 2030. The country ultimately aims to cut emissions by 30% by 2030 compared to 2005 levels and achieve net zero emissions by 2050.
The carbon tax is seen as crucial to these goals. Canada’s other climate pillars include improving energy efficiency in homes and buildings, investing in transportation systems, decarbonizing industries, and making communities more resilient to climate impacts.
An Economic Lever
Climate and economic analysts have long agreed that carbon taxes are an effective means of reducing emissions and mitigating climate change.
By making it more expensive to release CO2, these taxes cause polluters to reduce their emissions by investing in clean energy and energy efficiency.
Environmental advocates argue that carbon taxes clarify the cost of CO2 by accounting for the “external costs” that traditionally get passed onto people and governments. For example, climate change is leading to extreme storms that cause billions in economic damages each year. A carbon tax could potentially raise money to pay for these costs.
As of 2020, 25 countries around the world had a carbon tax on the books. Each carbon tax is structured differently depending on a range of factors, including climate impacts, socioeconomic conditions, and market forces.
In Canada, money raised from the carbon tax is returned to citizens. Now that the Supreme Court has affirmed the policy, the government can focus on taking broader climate action.
"Climate change is real,” Wagner wrote in the decision. “It is caused by greenhouse gas emissions resulting from human activities, and it poses a grave threat to humanity's future.”