Chapter 1 THE CONSTITUTIONAL CONTEXT

Both the federal and the provincial governments have wide powers to enact economic instruments for environmental protection, but neither level of government has an unlimited power to enact any instrument for any purpose. Governments must make decisions about possible solutions to environmental problems in the context of the constitutional limits to their powers. These jurisdictional limits relate to geographic and subject matter. Provincial laws apply only within provincial boundaries, whereas federal laws have national application. The division of powers between the federal and provincial governments regarding subject matter is based on the Constitution Act, 1867 as interpreted by the courts. [(3) -- 3. Constitution Act, 1867 (U.K.), 30 & 31 Vict. c. 3.] If the federal government's legislation goes beyond the subjects over which the federal government has jurisdiction, the law can be challenged.

Also, all Canadian governments are bound by constitutional rules that govern relations between government and citizen. Laws cannot limit rights protected by the Canadian Charter of Rights and Freedoms (the "Charter") [(4) -- 4. Canadian Charter of Rights and Freedoms, Part 1 of the Constitution Act, 1982, being Schedule B of the Canada Act, 1982 (U.K.), 1982, c. 11.] unless the limitations are reasonable, prescribed by law and "demonstrably justified in a free and democratic society." [(5) -- 5. Section 1; Section 33 of the Charter permits provincial legislatures and the federal Parliament specifically to override a Charter right, but doing so is usually politically unacceptable. ] If Charter rights are infringed by laws that create systems of economic instruments the laws can be struck down by the Courts.

This chapter deals with the constitutional limitations to establishing economic instruments and reforming environmental protection legislation. The focus is on the law relating to the division of powers between the provinces and the federal government, because the issues relating to the division of powers tend to be similar for all economic instruments. The provisions in the Charter which may be used to challenge economic instruments or law reform aimed at environmental protection are discussed briefly. Since Charter issues tend to vary from instrument to instrument, the chapters on specific instruments each include a more complete analysis of how the Charter might be interpreted .

The discussion of the division of powers in this Chapter does not deal with which level of government should establish particular economic instruments.

The Division of Powers

The "environment" is not a subject specifically assigned in the constitution to either the federal or the provincial government. Both levels of government have limited powers to regulate the environment based on other subject matters, or "heads of power", [(6) -- 6. "Heads of power" is a term for the subjects listed in sections 91 and 92 of the Constitution Act, 1867. Provincial heads of power, listed in section 92, are the subjects over which the provinces have exclusive juridiction. Federal heads of power, listed in section 91, are the subjects over which the Federal government has exclusive juridiction. ] over which they have exclusive authority under the Constitution Act, 1867. [(7) -- 7. See Friends of the Oldman River Society v. Canada (Minister of Transport) (1992), 7 C.E.L.R.(N.S.) 1 (S.C.C.) at 46 to 49.] Jurisdiction will "depend not only on factual matters such as the source, nature and consequences of particular ... pollution, but also on the precise form and scope of any law aimed at it." [(8) -- 8. Alastair R. Lucas, "Harmonization of Federal and Provincial Environmental Policies: The Changing Legal and Policy Framework," in O. Saunders, ed., Managing Natural Resources in a Federal State (Calgary: Carswell, 1986) at 34.]

The federal power to protect the environment is based on a number of federal "heads of power": fisheries; [(9) -- 9. Section 91(12), Constitution Act, 1867. ] land reserved for Indians; [(10) -- 10. Ibid., s. 91(24).] peace, order and good government; [(11) -- 11. Ibid., s. 91.] criminal law; [(12) -- 12. Ibid., s. 91(27).] federal undertakings [(13) -- 13. Ibid., s. 91(29) and 92(10). ] and federal public land. [(14) -- 14. Ibid., s. 91(1).] The provinces' powers over the environment are based mainly on their authority over property and civil rights [(15) -- 15. Ibid., s. 92(13).] as well as local matters. [(16) -- 16. Ibid., s. 92(16).] The federal government has the power to levy both indirect and direct taxes [(17) -- 17. Ibid., s. 91(3).] while the provinces only have authority to levy direct taxes. [(18) -- 18. Ibid., s. 92(2).] Each of these subject matters is relevant to the use of economic instruments, but none of them gives an unlimited authority for either level of government to apply a particular economic instrument in any case.

Municipalities and other regional or local governments have no constitutional powers, as they are usually created by provincial and sometimes federal [(19) -- 19. Local boards can also be created by the federal government to deal with areas of federal jurisdiction.] legislation; but they can be delegated powers from either level of government.

To understand each level of government's authority, it is necessary to review some general concepts of constitutional law as well as each level of government's specific powers. This chapter discusses provincial powers first, because the provinces generally have the clearest authority in relation to environmental protection and economic instruments. Moreover, an understanding of the provincial powers in this field is essential to an understanding of the federal government's powers.

Double Aspect Doctrine and Paramountcy

It is important to understand a few basic aspects of Canadian constitutional law before examining the powers of each level of government. First, merely because the federal government has the power to regulate a particular subject does not mean that the provinces do not have this power and vice versa. Overlapping jurisdiction is a phenomenon of Canadian federalism. Under the double aspect doctrine a provincial law regarding a matter of provincial jurisdiction may validly affect a matter that comes within federal jurisdiction. [(20) -- 20. Alberta Government Telephones v. Canada (Canadian Radio-Television & Telecommunications Commission), [1989] 2 S.C.R. 225 at 275.] However, the "dominant and most important characteristic" [(21) -- 21. See Friends of Oldman, above at footnote 7 at 45.] or "pith and substance" of a government's law must be in relation to one of its heads of power. These same rules apply to federal laws which affect a provincial area of jurisdiction.

Where there is an overlap, both provincial and federal laws apply unless there a conflict in operation, "as where one enactment says 'yes' and the other 'no', or compliance with one is defiance with the other," or unless there is a clash of purposes. [(22) -- 22. Multiple Access Ltd. v. McCucheon, [1982] 2 S.C.R. 161 at 163; Bank of Montreal v. Hall, [1990] 1 S.C.R. 121. ] Where there is such a conflict the federal law will be paramount. [(23) -- 23. "Paramount" is a legal term meaning the federal law will prevail over the provincial law.]

Due to the double aspect doctrine and the need for express conflict in regulations the instances of application of the paramountcy doctrine are rare. Courts have generally allowed federal and provincial laws to operate concurrently if at all possible. For instance, a federal tradeable permit system for sulphur dioxide emissions would not necessarily conflict with provincial laws requiring permits for such emissions. The clash of purposes test or operational conflict test suggests that if both federal laws and provincial laws apply to a firm, the firm could not rely on its federal permit alone. As discussed in Chapter 5 on tradeable permits, the application of provincial regulations should be clearly dealt with in federal legislation. This would avoid uncertainty about the application of the paramountcy doctrine and ensure that regulations necessary for protection of the local and workplace environments remain in effect. Overlapping federal and provincial jurisdiction in which the citizen must obey the highest legislative standard may be most effective means of protecting the environment at both the local and national level.

Provincial Heads of Power

The provinces have a wide power to regulate the environment, based on their power over "property and civil rights." [(24) -- 24. R. v. Lake Ontario Cement Ltd. (1973), 11 C.C.C. (2d) 1 (Ont. H.C.).]

This section first discusses the breadth of environmental legislation which can be based on the "property and civil rights" head of power and some of the other provincial heads of power that may be relevant in the context of economic instruments. Second, it discusses the exceptions to the general rule that the provinces have the power to enact economic instruments for environmental protection. These exceptions include the inability of the provinces to establish economic instruments which are "in pith and substance" within an area of exclusive federal jurisdiction, and the inability of the provinces to pass laws which apply outside of their territory. Third, this section discusses the limitation of provincial taxation powers to raising revenue through direct taxes in the province.

Breadth of Provincial Powers

The property and civil rights head of power is the constitutional basis for almost all provincial environmental initiatives. Provincial environmental assessment legislation, regulations restricting the production and use of ozone depleting substances, legislation requiring permits to introduce discharges into the environment and permits requiring certain monitoring devices and imposing reporting requirements are all based on the property and civil rights head of power.

There are several other provincial heads of power which are relevant to the authority to use economic instruments for environmental purposes. For instance, the provincial power to impose direct taxes is the basis for green levies charged under the B.C. Social Service Act. [(25) -- 25. See discussion in at footnote 274.] Also the provincial powers over municipal institutions and matters of a merely local or private nature in the province, [(26) -- 26. S. 92(16), Constitution Act, 1867.] combined with the "property and civil rights" head, form the constitutional basis for most municipal regulation of environmental matters. Municipalities, regional districts, and improvement districts such as the Greater Vancouver Sewerage & Drainage District are all created by the Province. The Province can by statute delegate any of its environmental regulation powers to regional districts and municipalities. [(27) -- 27. The federal government can also delegate functions to provincially created boards or municipalities; however, it is doubtful if such delegation could be forced unwillingly on a municipality or regional district. ]

Provincial Powers and Federal Jurisdiction

Despite these wide ranging powers, there are some limits on provincial regulation of the environment. First, provinces cannot regulate any subject area which is a matter of exclusive federal jurisdiction. For instance, the province could not pass regulations aimed specifically at controlling discharges from federal lands, an area of federal responsibility. However, a provincial law will be valid so long as its "dominant and most important characteristic" comes within the very wide ambit of property and civil rights or some other head of provincial power.

This interplay between the provincial property and civil rights head of power and the federal heads of power is the most important limit on provincial powers over the environment. Most of the remainder of this part focuses on the federal powers, which may have an impact on the provincial power to regulate for environmental purposes where there is a direct conflict between the two levels of government.

The Provinces and local governments have been reluctant to regulate in the areas of federally owned land and federal undertakings to avoid interfering with federal jurisdiction. While the federal government has jurisdiction to regulate federally owned land, a number of Supreme Court of Canada cases have clearly stated that Indian Reserves and other federal lands are not enclaves from provincial regulation. [(28) -- 28. In both Montcalm Construction Inc. v. Minimum Wage Comm'n (1978), 93 D.L.R. (3d) 641 (S.C.C.) at 660, and Cardinal v. A.G. Alta. (1973), 40 D.L.R.(3d) 553 (S.C.C.) at 560 the court rejected the enclave theory. ] Valid provincial legislation of general application will apply to federal land located within the province so long as it does not conflict with federal regulation and so long as it is regulation of activities on the land rather than regulation of the land itself. For instance, a provincial order requiring the preparation of a report on contamination of federal land was valid because it did not purport to regulate the use or ownership of the federal land. [(29) -- 29. Canadian National Railway Co. v. Ontario (Director appointed under the Environmental Protection Act) (1992), 8 C.E.L.R. (N.S.) 1 (Ont. C.A.). But see also: Canadian Occidental Petroleum v. North Vancouver (1986), 13 B.C.L.R. (2d) 34 (B.C.C.A.); Delta v. Aztec Aviation Group (1985), 28 M.P.L.R. 215 (B.C.S.C.); International Aviation Terminal Inc. v. Richmond (Township) (March 16, 1992) Van. Reg. CA01384, (B.C.C.A.); Surrey v. Peace Arch Enterprises Ltd.(1970), 74 W.W.R. 380 (B.C.C.A.) all of which involved provincial or municipal attempts to actually regulate use of federal land through zoning and building by-laws. ] Similarly, provincial game laws have been held to apply to federal land. [(30) -- 30. R. v. Harrt and Stewart (1979), 94 D.L.R. (3d) 461 (N.B.S.C., App. Div.).]

It is expected that Courts would hold that provincial or local government pollution regulations and bylaws validly apply to federal lands such as ports and Indian reserves so long as the regulations do not conflict with federal regulation of the land. A conflict may exist where federal regulations or local port corporation bylaws regulate pollution and specifically allow emissions which are not allowed by provincial regulation. [(31) -- 31. See Jack Woodward, Native Law (Vancouver: Carswell, 1989) at 120 to 129 for discussion of application of provincial and municipal laws to Indian Reserves. Bands do not currently have an express power to regulate emissions although general regulations are in effect: s. 81, Indian Act, R.S.C. 1985, c. I-5; the federal government's current waste disposal regulations for reserves are unlikely to conflict in operation with economic instruments for environmental protection: see Indian Reserve Waste Disposal Regulation, C.R.C. 1980, c. 960. Although the Canadian Environmental Protection Act, R.S.C. 1985, 4th Supp., Part IV allows the federal government to pass regulations for federal lands no such regulations have in fact been passed.]

Further, the federal power to regulate federal undertakings, such as interprovincial and international transportation and communications businesses, [(32) -- 32. Note that a firm or individual who uses a vehicle to cross provincial or international boundaries from time to time does not become a federal undertaking: Agence Maritime v. Canada Labour Relations Board, [1969] S.C.R. 851.] does not mean that such undertakings are immune from provincial laws. [(33) -- 33. See s. 92(10) and 91(29) of the Constitution Act, 1867, and Hogg, Constitutional Law of Canada, 2d. ed. (Toronto: Carswell, 1977) at 321 to 329. ] The only limit on the provincial power is that it must not "affect a vital part of the management and operation of the undertaking". [(34) -- 34. Commission du Salaire Minimum v. Bell Telephone Co., [1966] S.C.R. 767. See also Alberta Government Telephones, above at footnote 22 at 275 and Irwin Toy v. Quebec, [1989] 1 S.C.R. 927. ] Provincial environmental laws have consistently been held to apply to federal undertakings. [(35) -- 35. See R. v. Canadian Pacific Ltd. (1993), 10 C.E.L.R. (N.S.) 169 (Ont. C.A.); R. v. Norris (1992), 17 W.C.B. (2d) 160 (Ont. Ct. J. Prov. Div.); and R. v. Nitrochem Inc. (1992), 8 C.E.L.R. 283 (Ont. Ct. J. Prov. Div.).] Economic instruments are unlikely to infringe the "vital part" rule since discharges are unlikely to be viewed as a vital part of an undertaking.

The only exception is if a provincial law has a disproportionate effect on a federal undertaking, so that the federal undertaking is hampered in comparison to intraprovincial undertakings. Thus, a discharge fee system or tradeable permit system that charges interprovincial trucking firms for discharges outside the province might be invalid because it would hamper interprovincial trade, especially if enacted by more than one province. [(36) -- 36. See below at footnote 38.]

Extraprovincial Effect

Provincial law cannot have any extraterritorial effect. Thus, discharges charges could not be imposed on polluters in the Yukon or Washington discharging into a river flowing through B.C. [(37) -- 37. In Interprovincial Cooperatives v. The Queen (1975), [1976] S.C.R. 477 the Supreme Court of Canada held that a Manitoba law could not impose liability on an Ontario company who, with legal authority from Ontario, was polluting a river draining into Manitoba. The minority in Interprovincial Cooperatives characterized this extra provincial aspect of the Manitoba legislation as a valid incident of intraprovincial regulation. The majority decision is difficult to reconcile with The Queen v. Thomas Equipment, [1979] 2 S.C.R. 529; see Peter Hogg, Constitutional Law of Canada, 3d. ed. (Toronto: Carswell, 1992) at 13-11. ]

Extraprovincial effects and mobile sources

The inability of the province to pass laws which apply extraprovincially raises the question of whether the province could establish an effective economic instrument system for mobile sources of air pollution. A provincial law requiring British Columbia drivers to pay a fee or purchase a permit based on miles driven during the year and Air Care readings or car specifications might be challenged on this basis. It could be argued that where a motorist's driving was not limited to British Columbia a fee was in effect being charged for emissions occurring in another province. Despite this potential challenge, it is likely that the province can successfully and effectively apply economic instruments to vehicles.

First, it would be possible to prevent this sort of challenge by allowing motorists to avoid paying charges for out of province driving. [(38) -- 38. Cases dealing with application of provincial sales tax are instructive in this regard. The Constitution Act, 1867, in S. 92(2), only allows provinces to levy direct taxes "within the province" (Constitution Act, 1867, S. 92(2).). The Courts have rejected provincial taxation of aircraft and of alcohol served in aircraft where the aircraft's only presence in the province is transitory -- for instance, where the aircraft is only flying over or landing in the province (Manitoba v. Air Canada, [1980] 2 S.C.R. 303, 111 D.L.R. (3d) 513; Canadian Pacific Airlines Ltd. v. British Columbia, [1989] 1 S.C.R. 1133; 59 D.L.R. (4th) 218.). Courts have, however, allowed the application of provincial taxes to aircraft or railway cars used partly in the province so long as the tax is applied in proportion to the amount of their use within the province and the provincial taxation does not place a "undue burden" on inter-provincial transportation firms or inter-provincial movement of goods (Canadian Pacific Airlines Ltd. v. British Columbia, leaves this issue open in the context of aircraft (at S.C.R. 1154); Dow Chemical Canada Inc. v. British Columbia (1992), 67 B.C.L.R. (2d) 145 (B.C.C.A.) decides this point in regard to railway rolling stock.).] For instance, if a fee or permit system were established for the Lower Mainland of British Columbia, and cars insured for use in the Lower Mainland were given an opportunity to claim exemptions for miles traveled outside that area there would be only an incidental and, probably, unchallengeable extraprovincial effect. [(39) -- 39. This system would require some infrastructure to police but may be workable. For instance, offices at all arteries leading into and out of the permit trading area would have to be established to take odometer readings for vehicles claiming the exemption. Some sort of identification would be necessary to indicate when such exemptions are being claimed (for instance, different coloured license plate renewal stickers) so that cars claiming exemptions could not use exemptions while in the permit area. Claims for minor exemptions for short periods outside the province could be avoided by having an administration fee to cover the costs of exemption requests.]

Courts might uphold a provincial tradeable permit or discharge fee system for provincially licensed vehicle emissions even if there is no means to claim exemptions for out-of -province travel. The charges could be characterized as an aspect of "property and civil rights", payable solely due to a vehicle owner's decision to license the vehicle in the Lower Mainland. Liability for fees only occurs where a person has submitted to licensing in B.C. In this regard, the Courts have upheld the power of provinces to tax residents of the province taking into consideration "extraprovincial facts" such as the amount of property held outside the province. [(40) -- 40. Hogg, above at footnote 37, at 30-11; Bank of Toronto v. Lambe (1887), 12 App. Cas. 575.] It follows that they also should be able to take into account other "extraprovincial facts" such as miles driven outside the province.

Also, the Supreme Court of Canada has held that a New Brunswick wholesaler selling machinery to an Alberta retailer is bound to purchase back stock from the Albertan retailer pursuant to a generally applicable Alberta law requiring wholesalers to buy back unsold stock. [(41) -- 41. The Queen v. Thomas Equipment, above at footnote 37.] The Court stated, "If a manufacturer wants to have his farm implements sold here he must comply with the rules of the game, as it were, established by the Legislature in Alberta." [(42) -- 42. Ibid.] An analogous argument could be made for drivers licensing themselves in B.C.

However, cases on the application of provincial sales taxes [(43) -- 43. See footnote 38 above.] have expressed concern that provincial laws not be a barrier to interprovincial trade or federal undertakings. Thus Courts might be more likely to uphold application of provincially imposed economic instruments to mobile sources if some sort of proportionality is applied at least to federal undertakings, such as interprovincial or international trucking and shipping firms.

Indirect Taxation

The provincial government cannot raise revenue through indirect taxation. [(44) -- 44. Constitution Act, 1867, s. 91(3) and 92(2).] Many economists would argue that discharge fees are indirect taxation. However, since discharge fees are not charged on the basis of products produced or imported and will not be passed on to consumers where a product can be manufactured without causing pollution, they would likely be classified as direct taxation by the Courts. [(45) -- 45. See Canadian Industrial Oil & Gas Ltd. v. Government of Saskatchewan (1977), 80 D.L.R.(3d) 449 (S.C.C.) for a discussion of how courts distinguish between direct and indirect taxes. ] Discharges resulting from the manufacture of a good are analogous to products purchased and incorporated into another product which is sold. Courts have held that taxes on such products are direct. [(46) -- 46. Cairns Construction Ltd. v. Saskatchewan, [1960] S.C.R. 619, 24 D.L.R.(2d) 1. ] The tax

"... is not related or relateable to any unit of the commodities which the company advertises and sells and cannot be regarded as a tax which clings as a burden to a unit of the commodity or its price.... The mere fact that the company may be able to shift the burden of the tax to the purchasers of it merchandise is not ... sufficient to make the tax an indirect one... [(47) -- 47. This quote is from the New Brunswick Court of Appeal unanimous decision on a case dealing with a tax on catalogues: Simpsons-Sears Ltd. v. Provincial Secretary of New Brunswick (1976), 71 D.L.R. (3d) 717 at 724, rev'd (1978), 82 D.L.R.(3d) 321 (S.C.C.). Although the Supreme Court of Canada was equally divided on this point, the decision of the New Brunswick Court of Appeal has been supported by G.V. La Forest prior to his appointment to the Supreme Court of Canada: G.V. La Forest, The Allocation of Taxing Power Under the Canadian Constitution, 2d ed. (Toronto: Canadian Tax Foundation, 1981) at 83.]

Similarly, discharge fees are analogous to business taxes based on the number of places of business a firm operates or the capital it employs. Courts have upheld these as direct taxes. [(48) -- 48. Bank of Toronto v. Lambe, above at footnote 40.]

A problem arises if "proxy discharge fees" are applied to a product that is likely to be resold. Use of charges based on carbon content of fuels or volatile organic content of solvents has been identified as a more efficient means of discouraging carbon dioxide production or VOC releases from consumer sources than applying discharge fees to measured releases. [(49) -- 49. Canada, Economic Instruments for Environmental Protection: Discussion Paper (Ottawa: Supply and Services Canada, 1992) at 34 to 35.] However, a tax on fossil fuels or solvents applied when they are first sold is clearly an indirect tax. [(50) -- 50. British Columbia (Attorney General) v. Canadian Pacific Railway, [1927] A.C. 934, [1927] 4 D.L.R. 113 (P.C.).]

A carbon tax or fee that is part of a larger regulatory scheme aimed at environmental protection may be valid since provincial charges will generally be valid as long as they are ancillary to a valid provincial regulatory scheme. [(51) -- 51. See Re LaFarge Concrete Ltd and District of Coquitlam (1972), 32 D.L.R.(3d) 459 (B.C.C.A.). ] If carbon taxes or taxes on solvents were imposed on the import or production of these products as part of a larger provincial discharge fee system this might change the character of invalid indirect taxation into valid provincial regulation. This characterization would be supported by dedicating revenues to a purpose such as environmental protection, applying the charge under the same statute as other discharge fees, and allowing exemptions if the product is exported or if it can be proven that its use did not result in discharges.

Federal Heads of Power

The main federal heads of power that relate to environmental protection are:

• Peace, Order and Good Government. The so called "POGG" power may be the most important of the federal heads of power. It includes a power to regulate matters of national concern and transboundary pollution. Although the exact limits of this power are uncertain it is the basis for many federal environmental initiatives.
• Trade and Commerce. This head of power may influence how the "Peace, Order and Good Government" power is interpreted and could arguably be a basis for many far reaching economic instruments.
• Criminal Law. This power may be important in the sphere of establishing economic instruments for dealing with discharges that threaten human health.
• Any Mode or System of Taxation. Federal taxation powers may support some forms of discharge fees and could certainly support "proxy discharge fees" such as carbon taxes or taxes applied to other products that lead to discharges.
• Sea Coast and Inland Fisheries. This power allows use of tradeable permits and possibly other economic instruments which are clearly aimed at protecting fish habitat.

Peace, Order and Good Government

The Courts have generally interpreted the POGG power narrowly, stating that the federal government only can rely on the power in order to deal with "matters of national concern" and matters not dealt with in the Constitution Act, 1867 (the "residual power"). Nonetheless, this power is important in the environmental context.

Interprovincial Discharges

It is clear that pollution of interprovincial and international rivers and airsheds can be regulated under the federal POGG power. Some judges have justified this on the basis that it comes within the residual power of POGG; [(52) -- 52. R. v. Crown Zellerbach Canada Ltd. (1988), 3 C.E.L.R. (N.S.) 1 (S.C.C.). ] others have based their decision on the national concerns test discussed below. [(53) -- 53. Interprovincial Cooperatives, above at footnote 37.]

In one case, a minority of the Supreme Court of Canada upheld the federal power over pollution of interprovincial rivers through an analogy with the federal power over trade and commerce, [(54) -- 54. Ibid.] which allows regulation of intraprovincial trade and commerce incidental to the primary purpose of regulating interprovincial trade. This suggests the POGG power will allow regulation of discharges within a province if the regulation is part of an attempt to deal with an interprovincial or international problem. One case even suggests that any regulation of air pollution would be justified by the POGG power. [(55) -- 55. See Re: Canada Metal Company and The Queen, (1982), 144 D.L.R.(3d) 124 (Man. Q.B.)] It is likely that any regulation of discharges that pose significant cross boundary problems would be justified, especially where interjurisdictional agreements deal with the problem.

The fact that the federal government has the power to regulate pollution of international or interprovincial waterways and airsheds does not mean that the provinces do not have powers to impose higher standards in their regulation of these waterways and airsheds. [(56) -- 56. In R. v. Nitrochem Inc., above at footnote 35, the court held that provincial statutes which validly supplemented CEPA provisions for discharges into interprovincial waters valid. See also TNT Canada Inc. v. Ontario (1986), 1 C.E.L.R. (N.S.) 109 (Ont. C.A.). ]

National Concern Doctrine

As noted above, the POGG power also allows the federal government to legislate over "matters of national concern." These can be matters which, although originally matters "of a local or private nature in the province" and thus subject to provincial jurisdiction, have grown to be matters of national concern. [(57) -- 57. R. v. Crown Zellerbach Ltd. above at footnote at 52; Labatt Breweries of Canada Limited v. Canada (A.G.), [1980] 1 S.C.R. 914 at 944 to 945.]

The National Concern Test

A problem such as legislation of acid rain must fulfill several tests before the federal government can regulate it on the basis of the national concerns test. One aspect of the national concerns doctrine is that provinces are unable to effectively regulate a problem. The "provincial inability" test has been met where failure to deal with the intraprovincial aspects of a problem could have an adverse effect on extra-provincial interests. [(58) -- 58. R. v. Crown Zellerbach Ltd., above at footnote 52. Other cases have expressed the provincial inability test in more demanding terms stating: "the most important element of national concern is a need for one national law which cannot realistically be satisfied by cooperative provincial action because the failure of one province to cooperate would carry with it grave consequences for the residents of other provinces:" Labatt Breweries, Ibid. ]

One cannot assume that there must be an undivided jurisdiction in one or other level of government to deal with a subject. Also, in order to qualify as a matter of national concern a matter must have "a singleness, distinctiveness and indivisibility that clearly distinguishes it from matters of provincial concern and a scale of impact on provincial jurisdiction that is reconcilable with the fundamental distribution of legislative power under the Constitution." [(59) -- 59. R. v. Crown Zellerbach Canada Ltd., above at footnote 52, at 32.] Finally, the federal government must use measures which are the least intrusive to provincial interests.

National Concerns Doctrine and the Environment -- the Crown Zellerbach Case

The national concern doctrine is discussed at length in the case of R. v. Crown Zellerbach. [(60) -- 60. R. v. Crown Zellerbach Canada Ltd., above at footnote 52.] The defendant logging company had been charged, under the Ocean Dumping Control Act, with dumping waterlogged wood waste that it had dredged from provincial Crown property and disposed of in an adjoining area of provincial Crown property. The Supreme Court of Canada held, by a 5-4 majority, that the anti-dumping provision was constitutionally valid. Although both the decisions of the minority and the majority indicate that there are limits to the extent of the federal government's power under the national concern test, both found the federal government had a very substantial role in regulating pollution under this test.

The majority held that marine pollution, because of its predominantly extra-provincial and international character, could be distinguished from pollution of fresh waters or land and air. The majority's decision involved drawing an admittedly arbitrary line around discharges into marine water. Discharges into fresh water were excluded from federal jurisdiction under POGG. This made the subject of marine pollution sufficiently discreet to meet the requirements of singleness, indivisibility and reasonable impact on provincial jurisdiction. The Court justified this distinction on the basis of the uncertainty involved in determining which marine pollution will cross provincial boundaries and different characteristics of marine pollution.

The minority focused on the fact that the substances regulated by the Act were not necessarily deleterious and might not cause pollution outside of the province. The minority agreed with the majority that the federal government had the ability to regulate extra-provincial ocean pollution by dealing with sources of pollution, including air, fresh water and groundwater pollution, that originate within the province.

However, the minority opinion stated that the federal regulations must be linked in some way to the basis for the federal power -- the control of extra-provincial pollution. It suggests that the necessary link could have taken the form of evidence that monitoring of all dumped substances is necessary to avoid ocean pollution (no such evidence was adduced) or a link in the wording of the statute. [(61) -- 61. See discussion below at footnote 91 on R. v. Northwest Falling.] The latter could be accomplished by prescribing pollutants which are potential cross boundary pollutants.

The minority opinion in Crown Zellerbach is important because it is reconcilable with the majority opinion. Neither rejected the federal government's power to regulate air or fresh water discharges and ground deposits that are somehow linked to cross boundary pollution.

The scope of the national concern test has been fleshed out in several other cases. In a 1992 unanimous decision, the Supreme Court of Canada stated that environmental control, as a subject matter, does not have the requisite distinctiveness to meet the test under the national concern doctrine. [(62) -- 62. Friends of the Oldman River Society, above at footnote 7, at 46.] This should not be seen as ruling out wide use of federal economic instruments based on the POGG power. The Court was referring to the environment in its broadest sense, including the social and economic environment. Moreover, many environmental pollution issues have the same degree of distinctness as marine pollution and it can be shown in many situations that intraprovincial sources of pollution must be controlled to deal with transboundary pollution.

Limits to the National Concern Doctrine? -- The Hydro Quebec Case

In Attorney General of Canada v. Hydro Quebec, [(63) -- 63. Attorney General of Canada v. Hydro Quebec (August 6, 1992), Shawnigan Reg. 410-36-000024-914 (Que. S.C.).] the Quebec Supreme Court held that regulations governing the release of PCBs made under the Canadian Environmental Protection Act ("CEPA") were unconstitutional. The Court found that environmental protection was too broad a subject for the national concern doctrine, and noted that CEPA did not merely regulate release but actual use. The Court did not accept Hydro Quebec's proposition that CEPA can only apply to localized releases if it is proven that they will inevitably spread to another province. Instead, it quoted from a lower Court decision which suggested that the main concern is whether release might have interprovincial effects and questioned whether the cradle to grave regulation of CEPA was necessary for regulating interprovincial releases.

Unfortunately the decision in Hydro Quebec is vague in its reasoning. It is currently under appeal. [(64) -- 64. Appeal date October, 1993. [Personal communication, Janet Davies, Environment Canada, Conservation and Protection Branch.]] While it raises some concerns it may not ultimately affect the implications of the decision in R. v. Crown Zellerbach.

Interlocking Legislation and Equivalency Agreements

The national concerns test depends in part on the potential for dealing with a problem through provincial cooperation and in part on the impact federal regulation of a subject will have on provincial jurisdiction. Three models of cooperative regulation should be considered when determining the provincial inability test and when considering the impact of federal legislation on provincial jurisdiction:

• Federal and provincial or multi-provincial statutes and regulations which interlock in a comprehensive scheme ("Interlocking Legislation");
• Federal legislation and regulations combined with provincial legislation that incorporates federal regulations by reference ("Referential Incorporation"); and
• Federal Legislation which applies nationally in the absence of equivalent provincial legislation ("Equivalency Schemes").

The first two models can be designed to effectively avoid any constitutional questions as to the validity of federal legislation. Thus, in areas where there is doubt as to the constitutional authority of either level of government there is a strong incentive for using Interlocking Legislation or Referential Incorporation. The Supreme Court of Canada has shown a great deal of deference to such Interlocking Legislation. [(65) -- 65. See text accompanying footnote 75.]

Unfortunately, both Referential Incorporation and Interlocking Legislation require a great deal of cooperation and may be thwarted by failure of one province to cooperate. However, since failure to reach a common approach may support application of the national concerns doctrine, where its application is unclear, Interlocking Legislation should be considered.

Equivalency agreements may also help ensure the validity of federal legislation. [(66) -- 66. CEPA includes provisions for equivalency agreements between the federal government and a province where the federal government agrees that provincial regulation of toxic substances is equivalent to a CEPA regulation. ] First, equivalency provisions indicate that a statute is designed to minimize intrusion on provincial environmental jurisdiction, which may help support federal legislation based on the national concerns test. [(67) -- 67. This issue approach has yet to be considered by the Courts. ] Second, the lack of equivalency agreements can be an indication of provincial inability. Finally, to the degree equivalent provincial regulations are in place the chances of challenges to the constitutionality of CEPA are reduced. [(68) -- 68. Alastair Lucas, "Jurisdictional Disputes: Is Equivalency a Workable Solution?" in Into the Future, Environmental Law and Policy for the 1990s (Edmonton: Environmental Law Centre, 1990) raises the issue of whether equivalency agreements undercut POGG because they indicate a provincial ability to regulate a problem. While this concern may be important in other contexts, it is not a problem with regard to most economic instruments for environmental protection, where the basis of the provincial inability test is the undermining of effective regulation by non-cooperation of one or several provinces. In those circumstances federal legislation, whether or not it includes equivalency provisions, is aimed at overcoming provincial inability. ]

In areas where application of the national concerns test is unclear, the federal government is well advised to attempt establishing Interlocking Legislation through forums such as the Canadian Council of Ministers of the Environment. If these attempts are unsuccessful, federal legislation, especially federal legislation with equivalency provisions, is more likely to be upheld by the Courts on the basis of the national concern doctrine.

Potential Application of National Concerns Doctrine

There are a number of potential applications of the national concern test under POGG for justifying economic instruments established by the federal government.

• Tradeable permits for N0x and SO2 possibly could be established along the lines suggested in the federal discussion paper Economic Instruments for Environmental Protection [(69) -- 69. Canada, above at footnote 49, at 27 to 30.

], with trading regions consisting of Western, Central and Atlantic Canada. The existence of a Canada-U.S. agreement on acid rain and the interprovincial nature of the trading areas support this being a distinct environmental concern of national importance. Even though not all SO2 or NOx crosses provincial boundaries, evidence may be presented to show that transboundary pollution requires a comprehensive application of legislation. While industries that are generally under provincial jurisdiction could argue that the program has a scale of impact on provincial jurisdiction not reconcilable with Canada's division of powers, the Court support for federal regulation of interprovincial pollution suggests that a SO2 and NOx trading program would be supported, especially if interprovincial cooperation is ineffective in dealing with acid rain.

• Tradeable permits for the production and import of fossil fuels, and carbon taxes could be established both on the basis of the global nature of climate change and on the basis that the federal government could effectively implement these schemes.
• Tradeable permits for solvent production and import as suggested in the discussion paper Economic Instruments for Environmental Protection, [(70) -- 70. Canada, above at footnote 49, at 35 to 36.

] or product charges for solvents, could potentially be justified on the basis that ozone pollution is a relatively discreet topic and that cooperative provincial regulation may not be a realistic alternative since failure of one province to cooperate would limit the effectiveness of the system. [(71) -- 71. Not only would it lead to problems associated with controlling inter-provincial transportation of solvents but also non-cooperative provinces could become pollution havens contributing to transboundary pollution. ] Arguments in favour of the federal jurisdiction to impose such a system would likely be buttressed by the trade and commerce power.

• Deposit refund systems on toxic substances such as cadmium or pollution precursors such as sulphur likely would be justified both on the basis that there are transboundary problems with acid rain and that toxic substance contamination is a distinct subject with a transboundary dimension. The difficulties inherent in provinces levying charges on imports into the province would help support the provincial inability test.
• Phasing out of toxic substances which pose a recognized human health hazard likely would be justified by the national concern test. For example, phase-out by tradeable permits analogous to that used for lead in gasoline and ozone depleting substances in the United States [(72) -- 72. See, Canada, above at footnote 49, at 23.

] could probably be justified by the national concerns test combined with the Criminal Power to prohibit releases that pose a significant and recognized threat to human health.

• Tradeable permit systems for ground level ozone precursors may be upheld on the basis of their transboundary effects and their health effect. While the federal government could try to justify regulation of N0x/VOC in the lower Fraser Valley on the basis that some ozone may cross into Washington State, the Courts may see this as a "colourable" means of dealing with what is actually a local problem. On the other hand, a federal NOx/VOC tradeable permit system might be valid for the Windsor/Quebec corridor where there is a larger transboundary dimension to ozone pollution. This would be especially true if Ontario and Quebec were unable to cooperate effectively in dealing with the problem.

Trade and Commerce

The federal power of trade and commerce and its relation to provincial powers over "property and civil rights" may be important in terms of the federal power to establish tradeable discharge permit systems.

Tradeable permit systems to control some discharges may be applied most efficiently to production and import of a particular substance such as VOC from solvents. [(73) -- 73. See Canada, above at footnote 49, at 27 to 30.] The issue is whether the federal government can regulate such manufacture and import under the trade and commerce power. Cases dealing with agricultural marketing boards indicate that federal legislation primarily aimed at interprovincial or international trade in a particular product will be valid, even if some regulated goods are manufactured, sold and consumed solely within a province. [(74) -- 74. R. v. Klassen (1959), 20 D.L.R. (2d) 406 (Man. C.A.) upheld application of the Canadian Wheat Board Act to intra-provincial grain works and trades and was approved by the Supreme Court of Canada in Caloil v. A.G. Canada, [1971] S.C.R. 543; A.G. Manitoba v. Manitoba Egg and Poultry Assoc. (1971), 19 D.L.R. (3d) 169.]

The trade and commerce cases have not held that where the market for a product is national in size, effective regulation can only occur at the federal level. However, federal action may be justified to impose a tradeable permit system for the manufacture or import of solvents on the basis of trade and commerce power in combination with the national concerns test. Since the federal government has some role in regulating import and manufacture of products, federal action under the national concerns doctrine is less problematic as it involves less of an intrusion on provincial jurisdiction.

One case, which upheld a federal marketing statute that applied to primarily intraprovincial markets involved an interlocking scheme of provincial and federal statutes. [(75) -- 75. Agricultural Products Marketing Act, Re:, [1978] 2 S.C.R. 1198.] Since the system encompassed interlocking legislation in the ten provinces, the Court's support of federal jurisdiction was probably out of deference to the unanimity among the jurisdictions. This sort cooperation is ideal for ensuring the constitutional inviolability of any tradeable permit scheme. However, the practical difficulty of achieving this level of cooperation may require one or the other level of government to legislate on its own.

The federal trade and commerce power does not prevent provinces from exercising control over import and production of a particular product within the province. Cases generally support the notion that the provinces could establish a tradeable permit system for import or production of fossil fuels or solvents, as the Courts have upheld compulsory provincial marketing plans that apply to products imported into a province. [(76) -- 76. See Carnation Co. v. Quebec Agricultural Marketing Board, [1968] S.C.R. 238; followed in Can. Indemnity Co. v. A.G.B.C., [1976] 5 W.W.R. 748 (S.C.C.); Shannon v. Lower Mainland Dairy Products Board, [1938] A.C. 708 (P.C.); and Home Oil Distributors v. A.G. B.C., [1940] S.C.R. 444. Provincial schemes must not, however, be aimed at restricting inter-provincial trade disadvantaging out of province producers: see A.G. Manitoba v. Manitoba Egg & Poultry Association, [1971] S.C.R. 689 and Hogg, above at footnote 37 at 21-19.]

Finally, the federal government's power over interprovincial trade does not preclude a province's ability to adopt economic instruments which have the potential to impact on interprovincial trade. As long as the impact on interprovincial trade is not the intent of the legislation or regulation it should be immune from attack. [(77) -- 77. American cases which challenge deposit refund systems on the basis of their effect on inter-state trade have failed. American Courts have held that the commerce clause in the United States Constitution, which gives the federal government power to regulate interstate commerce, is not violated by deposit refund systems because the local benefits of these systems clearly outweigh any burden which might be imposed on interstate commerce: Bowie Inn, Inc. v. Bowie, 335 A. 2d. 679 (Md. 1975), American Can Co. v. Oregon Liquor Control Commission, 517 P. 2d. 691 (Ore. 1973). Courts have held that these laws are reasonably related to achieving the objective of environmental regulation and, even though the laws affect interstate commerce, the state is "under no obligation to maintain equal levels of competitive advantage for all producers regardless of their distance from the market.": Midstate Distributing Co. v. Columbia, (1981) 617 SW 2d. 419. Canadian Courts would almost surely come to a similar conclusion if a bona fide deposit refund system were challenged in Canada. ]

Criminal Power

The federal government has exclusive authority to make criminal laws. While not every prohibition coupled with a potential jail sentence or fine can be justified as criminal law, the criminal power has been interpreted as allowing prohibitions aimed at protecting human health. [(78) -- 78. Labatt Breweries, above at footnote 57, at 934; Section 5(a) of the Dairy Industry Act, Ref. Re:, [1949] S.C.R. 1, aff'd [1951] A.C. 179.] Regulation of air pollution causing significant health effects has been upheld under the criminal law. [(79) -- 79. Canada Metal Co. and the Queen, Re: (1982), 144 D.L.R. (3d) 124 (Man. Q.B.). There is some support for this decision in Crown Zellerbach above at footnote 52, at 44.]

This power could be used to justify enacting some types of economic instruments. For instance, it is possible to envisage a general prohibition against release of contaminants which pose health hazards, with an exception made for releases which are allowed by tradeable permits. Such a system should only be considered where it can lead to a faster phase out of a substance than command and control legislation.

The criminal law power can support a prohibition combined with exemptions so long as regulatory processes are used only to establish exceptions and not to define the offence. [(80) -- 80. For instance, in Nova Scotia Board of Censors v. McNeil, [1978] 2 S.C.R. 662 the Supreme Court of Canada held that film censorship was not criminal because it did not involve a prohibition and penalty. In film censorship the administrative process of the censorship board is necessary to determine when a film is banned. On the the other hand, in R. v. Morgentaler, [1976] 1 S.C.R. 616 and R. v. Furtney, [1991] 3 S.C.R. 89 a general prohibition was ascertainable without recourse to administrative processes, but exceptions from the prohibition could be made by administrative process. ] While the federal government cannot justify a regulatory scheme as criminal law merely because it uses a penalty to enforce compliance, [(81) -- 81. In Attorney General of Ontario v. Reciprocal Insurers, [1924] A.C. 328, [1924] 1 D.L.R. 789 (P.C.). See also R. v. Morgentaler, [1976] 1 S.C.R. 616; and Hogg, above at footnote 36, at 18-24 to 18-26.] the use of a tradeable permit system for the phasing out of environmental contaminants that threaten human health could distinguish the system from other cases. However, any authority the federal government has to use tradeable permits based on its criminal law power is limited by several very important factors.

First, not all statutory prohibitions are based in the criminal law. The Courts have distinguished between "mens rea" [(82) -- 82. Latin for "guilty mind".] or criminal offences and regulatory or strict liability offences. The essence of criminal responsibility is that the accused must have intended the offence to occur. On the other hand, for regulatory offences a finding of guilt may be made even if the accused did not intend the offence to occur. To avoid conviction, the accused must not only prove lack of intent but also must show it exercised due diligence in trying to avoid the offence's occurrence.

Although the Supreme Court of Canada case [(83) -- 83. R. v. Sault Ste. Marie, [1978] 2 S.C.R. 1299.] which made the distinction between regulatory and criminal cases was not trying to determine the constitutionality of the offence, there is some authority that offences based on the criminal law power must be mens rea offences. [(84) -- 84. See Hydro Quebec, above at footnote 61, at 15-6; In R. v. OMI International (Canada) Inc. (1989), 4 C.E.L.R. (N.S.) 190 (Ont. Prov. Ct.) the Court rejected basing the Transportation of Dangerous Goods Act on criminal law power because it was a strict liability offence. ] This is a problem in relation to economic instruments aimed at unintended discharges because the mens rea test cannot be met. However, the criminal law power might provide authority for regulation of discharges where the nature of discharges are known and emitters have clear control over the amounts emitted.

Second, there is some authority that the more elaborate the regulatory scheme the more likely it will be viewed as not being based on the criminal law power. [(85) -- 85. See Hogg, above at footnote 37, at 18-27. In our opinion the case referred to by Professor Hogg does not support this view point, although the proposition is probably true.] The air pollution regulations which have been upheld on the basis of the criminal law power have been quite simple prohibitions. [(86) -- 86. Secondary Lead Smelter National Emission Standards Regulations, C.R.C. 1978, c. 412.]

Finally, despite these limitations the criminal law power may be useful in buttressing federal use of economic instruments under the national concerns doctrine. The Courts often consider the criminal law power in applying the national concerns doctrine. Presumably this is because the existence of some federal involvement in an area based on the criminal law power makes an extension of federal involvement in that area more reconcilable with the division of powers. This logic appears to be true even if the criminal law power alone would not justify the expanded role..

Taxation

Under the Constitution Act, 1867, the federal government has the power to raise revenue through both direct and indirect taxation. [(87) -- 87. Taxation is a very broad subject matter with much greater potential for use in relation to environmental protection than is dealt with in this report.] This potentially could justify federal imposition of some types of discharge fees. However, federal charges that are part of a system of regulation will not necessarily be valid merely because they generate revenue. [(88) -- 88. For instance, levies charged as part of an overall marketing scheme or unemployment insurance premiums to finance unemployment benefits cannot be supported under the tax power because they are tied with the regulatory scheme: see Agricultural Products Marketing Act, Re (1978), 83 D.L.R.(3d) 257 (S.C.C.) at 283; Employment and Social Insurance Act, Re: [1936] S.C.R. 427. A discussion of federal taxing power is found in G.V. La Forest "The Allocation of Taxing Power Under the Canadian Constitution" Toronto: 1981. The Canadian approach to the limits of the taxing power is much more restrictive than in the United States where a tax is valid even if aimed purely at regulation with negligible revenue generating potential: see for instance United States v. Sanchez (1950), 340 U.S. 42. ] The taxing power cannot be used to indirectly control an area of provincial jurisdiction, but taxes of uniform application throughout Canada can be used to discourage activities. such as smoking and drinking. Extremely high taxes for foreign publishers of Canadian magazine editions aimed at protecting Canadian publishers have been upheld by the Courts. [(89) -- 89. Reader's Digest Association (Canada) Ltd. v. Attorney General of Canada (1967), 59 D.L.R. (2d) 54.]

Courts clearly would uphold some taxes aimed at discouraging pollution. For instance:

• An energy tax or a carbon tax applied either on the retail sale or production and import of fossil fuels almost undoubtedly would be valid federal legislation;
• A federal substance charge, such as a charge on chlorine or heavy metals, with potential exemptions where export or proper disposal can be proven, would also likely be valid if it is revenue generating; and
• Fees on discharges also might be justifiable if they are not seen as an attempt to usurp the role of provincial regulation. There is little guidance as to what factors the Courts would consider in this regard although the federal government could consider measures such as a nationally applied tax on a common and relatively easily measured type of discharge, for instance SO2, NOx or AOX. Revenue from such taxes should not be dedicated to particular programs if the tax is being justified as an exercise of federal taxation power. [(90) -- 90. See Re: Agricultural Products Marketing Act above at footnote 73 and Re: Employment and Social Insurance Act, above at footnote 88.

]

Fisheries

The federal "Sea Coast and Inland Fisheries" head of power provides the constitutional authority for federal laws protecting fish from degradation of their environment. However, the fisheries power is not a general power to prohibit or regulate water pollution. [(91) -- 91. In R. v. Fowler, [1980] 2 S.C.R. 213, 113 D.L.R. (3d) 513 the Supreme Court of Canada ruled that a prohibition against putting logging debris in water frequented by fish was beyond the scope of the federal fisheries power, because the offence was not tied to harm to fisheries and there was no evidence that all the prohibited deposits of logging debris would cause harm to fisheries. On the other hand, another section of the Fisheries Act prohibiting deposit of "deleterious substances" into fish bearing water, was held to be valid legislation in Northwest Falling Contractors Ltd. v. The Queen, ((1980), 113 D.L.R (3d) 1 (S.C.R.)) because it was restricted to deposits that threaten fisheries. ]

Any use of economic instruments based on the fisheries power must be clearly linked to regulating deposits which alone or cumulatively threaten fish. In the same manner that regulations or legislation can prescribe substances as deleterious, [(92) -- 92. The Fisheries Act, ss. 34(1)(c) allows deleterious substances to be designated by regulation, thus avoiding problems relating to actually proving that a substance is deleterious to fish. We are not aware of any court consideration of this provision; however, we expect that it will be valid as long there is some justification for prescribing a substance as deleterious for purposes of fisheries protection. This ability to prescribe substances as deleterious is important for setting up any workable economic instrument system. ] regulations or legislation can be used to establish a link between an economic instrument and fisheries protection. For instance, a tradeable permit system could be established whereby regulations would set limits on contaminants that can enter a fish bearing river system. So long as there is some justification for identifying a contaminant as a potential threat to fisheries, the system should be constitutionally valid. Similarly, a discharge fee system could be set up where the goal is to set fees for the discharge of deleterious substances.

Canadian Charter Of Rights And Freedoms

Just as the Constitution Act, 1867 establishes the fundamental rules governing the relations between provincial powers and federal powers, the Canadian Charter of Rights and Freedoms [(93) -- 93. Above, at footnote 4. ] establishes the fundamental rules governing relations between governments and individuals. Any system of economic instruments that breaches these rules will be invalid. [(94) -- 94. Charter arguments may be raised as a defence by polluters charged with an environmental offence.]

This part gives a brief overview of the main sections of the Charter which will be of concern in structuring economic instruments. Unlike the application of the division of powers to economic instruments -- where a very similar analysis applies to each instrument -- the application of the Charter tends to be quite different for each instrument. Therefore, the analysis of whether a specific instrument breaches the Charter is contained in the chapters discussing those instruments, and issues which are relevant to all instruments are discussed in this part.

Section 7

Section 7 of the Charter provides:

Everyone has the right to life, liberty and security of the person and the right not to be deprived thereof except in accordance with the principles of fundamental justice.

When applying section 7 to economic instruments legislation it is necessary to consider whether the legislation endangers someone's life, liberty or security of the person, and, if so, whether it has done so contrary to the principles of fundamental justice.

Because imprisonment is a clear loss of liberty, offence provisions which can be penalized by imprisonment must accord with the principles of fundamental justice. However, "liberty", has been interpreted as not including "economic liberties" such as a business' freedom to conduct business as it likes or to do what it likes with its property. [(95) -- 95. In Irwin Toy Ltd. v. Quebec (A.G.) (1989), 58 D.L.R. (4th) 577 (S.C.C.) the Supreme Court of Canada stated that generally economic rights do not come within the protection of section 7 and that a corporation's economic rights find no protection under section 7. Corporations can, however, raise a Charter defence in the context of a criminal prosecution. While the Court in Irwin Toy left open the issue of whether economic rights fundamental to human life -- such as rights to social security -- were included in section 7, it is clear that the Courts are extremely reluctant to extend section 7 to economic matters: see Edwards Books and Art Ltd. v. The Queen (1986), 30 C.C.C. (3d) 385 (S.C.C.) and Sections 193 and 195.1(1)(c) of the Criminal Code, Reference Re: (Man.) (1990), 56 C.C.C.(3d) 65 at 77.] This limitation on the meaning of liberty is important in designing economic instruments because it protects instruments from Charter attacks that the instruments are restrictions on business which have been imposed contrary to fundamental principles of justice. [(96) -- 96. This is discussed further in .]

If legislation creating economic instruments may deprive a person of liberty it will only be contrary to the Charter if the deprivation of liberty is contrary to the principles of fundamental justice. The principles of fundamental justice are the basic tenets of the legal system, including many procedural protections such as the right to silence and the right to a fair trial. Many but not all of these procedural guarantees are specifically referred to in other sections of the Charter. Section 7 also protects Canadians from infringements of their liberty that are fundamentally unfair. For instance, it disallows enactments which could lead to a person being jailed after the Court has found they are not in any moral sense at fault for an offence having occurred. [(97) -- 97. Section 94(2) of the Motor Vehicle Act, Reference Re: (1985), 23 C.C.C.(3d) 289 (S.C.C.) The application of this rule is discussed further in .]

Section 11

Section 11 is important in the context of administrative penalties and ticketing, both of which are discussed in Chapter 3. Section 11 provides:

Any person charged with an offence has the right

(d) to be presumed innocent until proved guilty according to law in a fair and public hearing by independent and impartial tribunal;

(h) if finally acquitted of the offence, not to be tried for it again, and, if finally found guilty and punished for the offence, not to be tried or punished for it again;

Section 11 only applies to circumstances where a person has been "charged with an offence" or in the case of subsection 11(h) to someone who is being charged with an offence a second time. For instance, a polluter will only be able to argue that processes for ticketing or for levying administrative penalties deny the right in subsection 11(d) to a public hearing if these processes are considered to be proceedings in relation to an offence.

Offence proceedings in this context have been narrowly defined. Courts have held that something is only an offence for the purposes of section 11 if it is prosecuted in a process which is "by its very nature a criminal proceeding" or if it may lead "to a true penal consequence". [(98) -- 98. Wigglesworth v. the Queen (1987), 37 CCC (3rd) 385 (S.C.C.). ] Normal provincial or federal regulatory offences, including environmental offences, are offences. [(99) -- 99. Ibid.] How section 11 applies to administrative penalties and ticketing systems, and how these systems can be designed to avoid challenge, is discussed further in Chapter 3.

Section 15

Section 15, the equality section of the Charter, is considered because of the concern that economic instruments might be challenged if they apply unequally to different sectors or in different geographic areas. This potential argument has little, if any, weight. Subsection15(1) provides

Every individual is equal before and under the law and has the right to the equal protection and equal benefit of the law without discrimination and, in particular, without discrimination based on race, national or ethnic origin, colour, religion, sex, age or mental or physical disability.

Not every distinction or differentiation in treatment at law will violate the equality guarantee. Discrimination exists where a distinction based on grounds relating to personal characteristics of the individual group whether intentional or not, has the effect of imposing burdens or disadvantages not imposed on other members of society. [(100) -- 100. Andrews v. Law Society of British Columbia (1989), 56 D.L.R.(4th) 1.] Discrimination has been interpreted as discrimination on the grounds listed in section 15 or analogous grounds. [(101) -- 101. Ibid. See also . ] Given these limits it will be difficult to argue that an initiative to implement economic instruments is contrary to section 15 merely because it only applies to a certain industry or treats different industries differently. [(102) -- 102. Application of section 15 is discussed further in . ]

Section 1

Section 1 is relevant to any analysis of the application of the Charter and economic instruments because enabling legislation which infringes any Charter right will still be valid if it can be justified under section 1. Section 1 states

The Canadian Charter of Rights and Freedoms guarantees the rights and freedoms set out in it subject only to such reasonable limits prescribed by law as can be demonstrably justified in a free and democratic society.

To justify a limitation on a protected right under section 1, the objective of the measure must be of sufficiently important to warrant overriding a constitutionally protected right. Also, the means chosen to reach that objective must be reasonable, based on a balancing of societal and individual interests. Thus, even if an economic instrument for environmental protection is found to breach one of the protected rights, it may be justified on the grounds that it is necessary given the importance of environmental protection or that the infringement is a necessary means of meeting an important objective.

Summary

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