Chapter 3 DISCHARGE FEES, ADMINISTRATIVE PENALTIES AND TICKETING

This chapter examines three environmental policy initiatives. The first initiative, discharge fees, is aimed at encouraging polluters to lower their discharges below levels set by regulation or permits. The last two initiatives, ticketing and administrative penalties, are aimed at increasing the economic incentives for polluters to comply with regulations and the terms of their discharge permits.

Discharge Fees

Under a discharge fee system, the government sets a price on each unit of pollutant discharged and the polluter pays to the government an amount equal to the quantity of pollutant times the unit price. The unit price for different pollutants varies according to their toxicity or environmental effect. The basic rule is that the more harmful the pollutant discharged is, the more the polluter pays. The less discharged, the less the polluter pays. Companies are still prohibited from exceeding discharge levels allowed under the waste discharge permits. [(150) -- 150. Some economists have suggested that limits on discharges could be eliminated if discharges fees equal to the environmental damage caused by a unit of a pollutant were established; they argue this would lead to a societally optimal level of pollution: see D.G. McFetridge, "The Economic Approach to Environmental Issues" in Bruce G. Doern, ed., The Environmental Imperative: Market Approaches to the Greening of Canada (Ottawa: C.D. Howe Institute, 1990) at 83. This approach incorrectly assumes a political and scientific ability to measure the environmental costs of pollution or to determine what levels of fees are necessary to reduce discharges to desired levels. There is ample evidence that scientific studies attempting to measure the negative impacts of discharges unavoidably and consistently underestimate these impacts: see Randall Peterman & Michael M'Gonigle, "Statistical Power Analysis and the Precautionary Principle," (1992) 24 Marine Pollution Bulletin 231. Basing fees on the estimated costs of abatement is problematic because of unknowns relating to these costs: see United States General Accounting Office, Report to the Chairman, Subcommittee on Deficits, Debt Management and International Debt, Committee on Finance, U.S. Senate, Environmental Protection: Implications of Using Pollution Taxes to Supplement Regulation, (Washington, D.C.: U.S. General Accounting Office, 1993) at 28. A number of jurisdictions which have considered charging discharges fees equal to estimated social costs of pollution have rejected this approach because of uncertainty: see for instance, Hans Bressers, "Use of Economic Instruments for Environmental Management: The Role of Effluent Charges in Dutch Water Quality Policy" in H. von Gunter Schneider & R. Sprenger, eds., Mehr Umweltschultz fhur weniger Geld (Munich: Ifo-Institut fur Wirtschaftsforschung, 1984) at 324 to 325 and Gjalt Huppes & Robert Kagan, "Market-Oriented Regulation of Environmental Problems in the Netherlands" (1989) 11 Law and Policy 215 at 217-218. Dependence on discharge fees is unacceptable given these uncertainties and biases. Discharge fees are also unable, by themselves, to protect local ecosystems or communities.]

Discharge fees combine the benefits of command and control regulations with economic incentives: encouraging both economic efficiency and an improved environment. [(151) -- 151. British Columbia, Ministry of Environment, Lands and Parks, Revising British Columbia's Waste Discharge Permit Fee System: A Discussion Paper (Victoria: Ministry of Environment, Lands and Parks, 1992).] One study suggested that, where sufficiently high, the discharge fees component of a combined permit and fee system may have been more effective than the permit component of the system in encouraging abatement of emissions. [(152) -- 152. Bressers, above at footnote 150, at 335 to 336 suggests that this may be true without reaching any firm conclusions.] The main criticism of discharge fees has been that charges are generally too low to reflect the full social cost of emissions or to be an effective incentive. [(153) -- 153. J. Opschoor & H. Vos, Economic Instruments for Environmental Protection (Paris: Organization for Economic Cooperation and Development, 1989) at 113; Remiand Barre & Blaire Bower, "Water Management in France, with special emphasis on Water Quality Management and Effluent Charges," in Incentives in Water Quality Management in France and the Ruhr Area (Washington, D.C.: Resources for the Future, 1981) at 205; Gardener M. Brown & Ralph W. Johnson, "Pollution Control by Effluent Charges: It Works in the Federal Republic of Germany, Why not in the U.S." (1984) 24 Natural Resources Journal 929, at 943; but see also Bressers, Ibid., at 334 to 336. ]

While discharge fees have the potential to improve the efficiency of the tax system, by discouraging undesirable side effects of economic activity, [(154) -- 154. United States General Accounting Office, above at footnote 150, at 22. ] discharge fees may have undesirable effects on distribution of income. [(155) -- 155. An analysis of anticipated distributional effects of a carbon tax in the United States found that the tax, while it cannot be called progressive, may have less effects on lower income earners if revenues are used to replace revenue from very regressive taxes: Repetto, Robert et al. Green Fees: How a Tax Shift Can Work for the Environment and the Economy (Washington, D.C.: World Resources Institute, 1992).] If discharge fees are used adverse distributional effects must be addressed.

As noted above, the object of this report is to look at selected legal issues related to the implementation of discharge fees, rather than their effectiveness or their distributional effects. Thus, Chapter 3 looks at necessary components of enabling legislation and examines potential Charter, administrative law and trade law challenges to discharge fees.

Ticketing and Administrative Penalties

Chapter 3 also examines these same issues -- components of enabling legislation, Charter, administrative law and trade law challenges -- in relation to administrative penalties and ticketing. While these two initiatives are often not classified as economic instruments, they are examined in this report because they are a means of effectively implementing the polluter pays principle -- of ensuring that there is a cost associated with discharges. Like discharge fees, administrative penalties and ticketing are intended to provide a more powerful incentive to reduce discharges. While discharge fees are a means of encouraging the reduction in emissions below permitted levels, administrative penalties and ticketing are a means of increasing the economic incentives to comply with permitted discharges.

The need for better incentives is based on poor levels of compliance with environmental regulations. Low levels of compliance frequently are due to inadequate enforcement. However, even if expenditures on enforcement were increased the criminal court system is often not an adequate deterrent for many offences because of low levels of prosecution and fines. [(156) -- 156. See T.M. Rankin & R.M. Brown, Persuasion, Penalties and Prosecution: The Treatment of Repeat Offenders Under British Columbia's Occupational Health and Safety and Pollution Control Legislation, September 1988 [unpublished] at 38-41. See also John Swaigen, Regulatory Offences in Canada: Liability and Offences (Scarborough: Carswell, 1992) at 213-235.] The cost of using the criminal process; the need to prove guilt beyond a reasonable doubt; and the rules of criminal evidence all tend to inhibit laying of charges under the criminal system. [(157) -- 157. Ibid.] Existing administrative penalties, such as cancellation of discharge permits, are often equally unwieldy. Permit cancellation for minor violations will seldom be a viable option. Expanding administrative penalties to include monetary penalties and reforming the criminal process have both been suggested as ways to overcome the barriers to enforcement associated with the criminal process. [(158) -- 158. Swaigen, above at footnote 156, at 213-235, suggests that reforms to the criminal process, such as ticketing, reduced burdens of proof, specialized environmental prosecution units and changed rules of evidence may be as effective as administrative penalties in providing a cost effective credible deterrent to non-compliance with environmental laws. ]

Monetary administrative penalties could be levied on permit violations or other minor environmental offences. This report focuses on expanding the range of administrative penalties, rather than on the existing administrative penalties. In some circumstances, penalties can be set by regulation and made automatically payable. [(159) -- 159. See 42 U.S.C.S. §7651j (a) (Clean Air Act).] In other circumstances, both the amount of the penalty and its imposition are at the discretion of regulators or, alternatively, either the amount or the imposition is discretionary. [(160) -- 160. 33 U.S.C.S. §1319(g) (Clean Water Act) requires the administrator to levy a penalty when they become aware of a violation, but the amount of the penalty is up to the discretion of the administrator. ]

Incentives for compliance with environmental regulations also can be increased by reforming criminal procedure so that prosecutions are a viable alternative for minor offences. Ticketing is one of a number of potential reforms [(161) -- 161. See Swaigen, above at footnote 156, at 213-235, for a discussion of other potential reforms. ] that facilitates increased numbers of charges being laid. Under a ticketing system a conservation officer can issue a ticket. The party charged can plead guilty and pay a pre-set fine without appearing in court. Alternatively, the accused can request a trial or do nothing. If nothing is done, the court has the power to convict without hearing evidence. This system allows large numbers of charges to be processed through the courts at minimal cost, while preserving the safeguards of the criminal process for those who wish to raise a defence.

Our support for the use of administrative penalties and ticketing is qualified by our strong support for the continued application of criminal sanctions applied through the normal criminal procedure. Appearing before the criminal courts has a strong stigma effect and is an expression of society's disapproval of an act. [(162) -- 162. Dianne Saxe, Environmental Offences: Corporate Responsibility and Executive Liability (Aurora, Ontario: Canada Law Book, 1990) at 40 to 41.] Economic incentives and penalties do not have the aura of moral culpability associated with the normal criminal process. While economic incentives are strong modifiers of behavior, there is a danger that penalties and ticket fines may be seen as a cost of doing business and reliance solely on administrative fees may weaken the stigma associated with being a law breaker. Much of the discussion of potential challenges to administrative penalties is focused on ensuring that criminal sanctions continue to be available if penalties are imposed.

Discharge Fees

The essence of a discharge fee system is a fee charged for each unit of a specified pollutant that is released. A charge can be placed on permitted discharges, actual charges or a mix of the two. Per unit charges can be lowered where polluters have installed best available technology or undertaken other pollution prevention steps. Also, charges can be placed on products whose use will eventually lead to an emission. For instance, a charge placed on carbon in fossil fuels is an effective proxy for a charge on carbon dioxide in emissions and could be an efficient and effective way of dealing with global warming. [(163) -- 163. Roger Dower & Mary Beth Zimmerman, The Right Climate for Carbon Taxes: Creating Economic Instruments to Protect the Atmosphere (Washington, D.C: World Resources Institute, 1992).]

Implementing Legislation

Discharge fees have been applied in British Columbia, [(164) -- 164. Waste Management Permit Fees Regulation, B.C. Reg. 299/92.] the United States, [(165) -- 165. M. Stone, Pricing Pollution: Revising British Columbia's Waste Discharge Permit Fees (Victoria: B.C. Ministry of Environment, 1990) at 23.] Ontario, [(166) -- 166. M. Fortin & B. Mitchell, Water and Wastewater Charges for Ontario: The User Pay Principle (Mississauga: Ontario Sewer and Water Main Contractors' Association, 1990) at 14.] Quebec [(167) -- 167. Regulation Respecting Industrial Depollution Attestions, Quebec Gazette, March 4, 1992; In force for pulp and paper mills only as of September 13, 1993: personal communication with Cecile Geadrealt, Quebec Ministry of Environment.] and extensively in the European community. [(168) -- 168. J. Opschoor & H. Vos, above at footnote 153, at 58.] In British Columbia the Waste Management Act allows the Lieutenant Governor in Council to make regulations:

requiring persons to whom a permit ... is issued under this Act ... to pay to the government charges in respect of the permit ... , establishing the amount of those charges or the method of their determination and requiring that they be paid yearly or otherwise, .... [(169) -- 169. Section 35(2)(d).]

This minimal statutory provision is sufficient to establish a system of discharge fees such as the system authorized by the Waste Management Permit Fees Regulation, [(170) -- 170. Above at footnote 165.] but it may not be sufficient for a more comprehensive system of discharge fees. For instance, the language in the Waste Management Act referring to "charges in respect of the permit" could be interpreted as not allowing discharge fees which do more than recoup the costs of administering permits. [(171) -- 171. A number of cases in other contexts have distinguished between permits fees aimed at recouping administration costs and fees which raise revenue: see for instance Attorney General of Canada v. Registrar of Titles, [1934] 4 D.L.R. 764 (B.C.C.A.); See also section 35(4) of the Waste Management Act.]

We recommend that any federal or provincial law under which discharge fees are imposed include the following provisions:

]

] Specific provision for surcharges would avoid arguments that legislation is not intended to allow fees which discriminate between different regions or different emitters. [(174) -- 174. See , text accompanying footnote 112-113. ] In addition to allowing surcharges we strongly recommend the use of a standard minimum fee structure rather than a fee structure that varies from region to region or is individualized according to assimilative capacity. Reasons supporting a standardized minimum fee structure include:

- administratively and politically it is more difficult to establish effluent emissions which are a realistic incentive to pollution reduction where the fee schedule is being negotiated on a site by site or regional basis; [(175) -- 175. See Brown & Johnson, above at footnote 154, at 960.]

- a consistent provincial fee schedule avoids the danger of luring dischargers to pristine areas; [(176) -- 176. Ibid., at 959.]

- the concept of assimilative capacity is problematic, given scientific uncertainty and the fact that assimilative capacity can ignore both local and global effects; and

- wherever they locate, dischargers are utilizing a portion of the local assimilative capacity of the environment.

] Taxes on ozone depleting substances have been used in the United States and proposals have been made for excise taxes on import or production of virgin chlorinated solvents. [(178) -- 178. Molly Macauley, et al., Using Economic Incentives to Regulate Toxic Substances (Washington, D.C.: Resources for the Future, 1992) at 31-40 and 61-64. ]

]

] While this may not provide a full internalization of environmental costs and may not fully accord with the polluter pays principle, there are circumstances where it could be a useful regulatory tool. [(181) -- 181. Sweden implemented the refundable charge because it was not practical to apply charges based on continuous emissions monitoring to small units, and it did not want to give small, less environmentally friendly plants an economic advantage.]

Legal Challenges to Discharge Fees

Government may be reluctant to adopt high discharge fees that these fees for fear of challenges in the courts by firms who argue that a charge is unfairly high or results in an adverse economic effect. While the potential for challenges always exists, the potential for successful challenges to discharge fee systems is very limited so long as enabling legislation gives a wide authority for appropriate regulations and, where necessary, administrative discretion.

Administrative Law Challenges

As discussed in Chapter 2, the abuse of any discretionary power can be challenged. Therefore, regulations which implement a system of discharge fees could be challenged if implemented for some ulterior motive unrelated to the purposes of the enabling legislation. There is no right to procedural fairness in the context of regulation setting, although thorough consultation will help ensure both the legitimacy and quality of regulations. Regulations adopted under clear statutory authority are difficult to attack on administrative law grounds. On the other hand, a right to procedural fairness arises in the context of decisions by individual regulators. If the enabling statute does not establish a process for making such decisions, the content of the right to procedural fairness will vary according to the decision and its implications.

Regulations can be challenged as not being authorized by legislation. The components of enabling legislation discussed above are aimed at avoiding any successful challenges. In particular legislation should give ample authority for setting high fees to avoid arguments that regulations are not authorized because the statute only contemplates recouping administrative costs. The law should state clearly that fees can be set at any level deemed advisable by the regulator.

The potential for challenges to administrative actions will depend on the structure of the discharge fee system. The British Columbia Waste Management Permit Fee Regulation, which bases fees on the amount of discharge allowed under regulations or permits, provides virtually no potential for challenge. There is no individual discretion in relation to the fees charged per unit or the measurement of units emitted; therefor, no rights to procedural fairness arise. Since the fees are charged on permitted emissions rather than actual emissions, permittees have acquiesced to the permitted amounts. The only situation where a permittee could challenge the fees would be if regulators insisted on the permit having a higher permitted discharge than the permittee thought necessary -- an unlikely scenario.

However, as more discretion is involved in the application of discharge fees there will be a greater potential for challenges based on administrative law. If discharge fees are based on actual emissions measured by individually approved monitoring systems, permittees can challenge administrative decisions relating to the approval of systems. For instance, in appropriate circumstances a permit holder might argue that regulators did not grant it a hearing before insisting on a particular monitoring system or that they fettered their discretion in insisting on following past practices relating to required systems. These types of challenges currently can be made to conditions in waste management permits. However, there is no basis for challenging administrative actions merely because they lead to particularly high costs for an industry.

Establishing a system for appeals of administrative decisions to an impartial and independent tribunal, with provision for fair hearings, either written or oral, would help protect against court challenges to administrative decisions. The right to appeal decisions on monitoring systems or estimates of emissions to an independent tribunal will reduce the potential for appeals to the courts.

Charter Challenges

As discussed in Chapter 1, there is little basis for arguing that a system of discharge fees is contrary to section 7 of the Charter merely because it limits the liberty of a firm by making it economically impossible to carry on operations. Nor can discharge fees infringe the equality provisions of the Charter because they only apply in one area of the province or Canada, or set higher fees in one area of a province than another.

Section 7

Section 7 of the Charter provides that a person's liberty will not be taken away except "in accordance with the principles of fundamental justice". Economic rights, except to a very limited extent, are not protected by this provision and a corporation's economic rights find no protection under the section.

For example, a court rejected, without hearing evidence, arguments that excessive taxation of tobacco products breached section 7 because it unreasonably deprived or restricted tobacco farmers of their right and ability to carry on their livelihood. [(185) -- 185. Cosyns v. Canada (Attorney General) (1992), 88 D.L.R.(4th) 507 (Ont. Div'l Ct.).] Similarly, a regulation which temporarily outlawed the use of non-refillable aluminum cans was not contrary to section 7 merely because it denied aluminum manufacturers the right to market aluminum cans. [(186) -- 186. Aluminum Co. of Can. v. Ontario (Ministry of Environment) (1986), 1 C.E.L.R.(N.S.) 1 (Ont. Div'l Ct.).] Other cases have held that conditions on liquor licenses, or the revocation of such licenses, cannot be challenged under section 7 because the right to hold such licenses is an entirely economic interest. [(187) -- 187. R.V.P. Enterprises Ltd. v. British Columbia (Minister of Consumer and Corporate Affairs) (1988), 50 D.L.R.(4th) 394 (B.C.C.A.).] The same reasoning would apply to discharge fees.

There has been one case in which the right to carry on a profession, which is arguably an economic right, was found to be protected under section 7. However, it is extremely unlikely that this case would be followed by the courts if a polluter challenged a system of discharge fees. [(188) -- 188. In Wilson v. British Columbia (Medical Services Commission), (1988), 53 D.L.R.(4th) 171 (B.C.C.A.) the B.C. Court of Appeal held that regulations denying doctors the right to practice where they chose were contrary to section 7. The Court held that the right to choose a profession and where to practice, subject to reasonable restrictions imposed by the state, came within the meaning of liberty. This case has been criticized by members of the Supreme Court of Canada (see Ref. Re: ss. 193 and 195.1(1)(c) of the Criminal Code, at 99 to 101) and has not been followed by Ontario Courts (see: Cosyns, above at footnote 186). ]

Section 15

The equality rights guaranteed by section 15 are equally unlikely to provide fruitful grounds for challenging discharge fee systems. The Supreme Court of Canada has held that section 15 only applies if there is discrimination based on grounds relating to the personal characteristics of an individual or group. This discrimination must have the effect of imposing burdens, obligations or disadvantages on the individual or group not imposed on others. [(189) -- 189. Andrews v. Law Society of British Columbia, [1989] 1 S.C.R. 143; 56 D.L.R. (4th) 1.] The purpose of section 15 is to protect groups who suffer social, political and legal disadvantage in society. In applying this the courts will consider whether the person complaining of discrimination belongs to a classification which has been treated differently on the basis of personal characteristics listed in section 15 or analogous to those listed. In particular, the court will consider if a person comes from a minority which has suffered from stereotyping and vulnerability to prejudice.

The courts have held that neither tobacco farmers nor the tobacco industry were groups of the sort protected by section 15, [(190) -- 190. Cosyns, above at footnote 186, at 522 to 524.] and upheld distinctions in taxation between tobacco products and other products without even considering if the higher tobacco taxes were justified on the basis of health or other effects. [(191) -- 191. Ibid.] Other cases have held that occupational class is not the sort of classification to which section 15 applies. [(192) -- 192. Lister v. Ontario (A.G.) (1990), 67 D.L.R. 4th 732 (Ont. H.C.J.).] Therefore, it seems clear that there is no basis for arguing that section 15 would protect against discharge fees which target a particular industry or business.

Similarly, courts have held that inequality in the application of the law in different geographic areas is not contrary to section 15. [(193) -- 193. See R v. Turpin (1989), 48 C.C.C.(3d) 8 (S.C.C.); R. v. C.L.P. Canmarket Lifestyle Products Corp., [1988] 2 W.W.R. 170 (Man. C.A.).] Thus, section 15 will not protect against differential application of discharge fees in different provinces or in different parts of a province.

Trade Law Challenges

It is difficult to imagine a situation where discharge fees would be contrary to Canadian international trade obligations. Except for a few rare instances, discharge fees will not pose a barrier to trade. For instance, a fee charged on import or production of solvents as a proxy for emissions of VOCs from solvents might have different effects on imported solvents. Likewise, a fee charged on mobile sources might have the effect of increasing the price of imports because transportation might be a larger component of costs for imports. [(194) -- 194. A global road user charge was found by the European Court of Justice to be contrary to European Community law because it was considered discriminatory. However, this decision was based on provisions peculiar to the E.C. and the case has been criticized: see Eckard Rehbinder, "Environmental Regulation Through Fiscal and Economic Incentives in a Federalist System" (1993) 20 Ecology Law Quarterly 57. ] However, these trade effects would be permissible so long as the environmental measures are genuine and do not exclude goods which meet Canadian environmental goals. [(195) -- 195. See NAFTA Article 904.4; GATT Article XX(b) and discussion in .]

The only exception would be if Canada attempted to charge taxes on imports based on the emission of a pollutant during foreign production. For instance, the United States applies its ozone depleting chemical fee to products which use ozone depleting substances in their manufacture. [(196) -- 196. See Canada, Economic Instruments for Environmental Protection: Discussion Paper (Ottawa: Supply and Services Canada: 1992) at 60.] According to the reasoning of a recent GATT dispute panel this would be contrary to GATT; however, that panel ruling has yet to be adopted by GATT as a whole. [(197) -- 197. See United States -- Restrictions on Imports of Tuna, GATT Doc. DS21R/R (September 3, 1991) as cited in Eric Christensen & Samantha Griffen, "GATT sets its net on Environmental Regulation: the GATT Panel Ruling on Mexican Yellowfin Tuna Imports and the Need for Reform of the International Trading System" (1992) 23 The University of Miami Inter-American Law Review 569 at 570.]

Administrative Penalties

While regulators in Canada are familiar with the use of discharge fees for environmental purposes, they are less familiar with the use of administrative penalties for environmental purposes. Nonetheless, this approach is well established in other regulatory areas in Canada and is an important part of American and some European nations' environmental law. [(198) -- 198. For examples of Canadian use of administrative penalties see B.C. Workers Compensation Act, Canada Income Tax Act; the Canadian Aeronautics Act and the Canadian Employment Insurance Act. For examples of administrative penalties for environmental offences in the United States see footnote 160 and 161 above. Environmental offenders in Sweden are subject to both criminal sanctions and administrative penalties: see Lidgren, Karl, "Use of Economic Instruments in the Environmental Policy in Sweden" in H. von Gunter Schneider & R. Sprenger, eds., Mehr Umweltschultz fhur weniger Geld (Munich: Ifo-Institut fur Wirtschaftsforschung, 1984). ] As with discharge fees, many potential legal challenges to the use of administrative penalties can be avoided by drafting enabling legislation that sets a clear framework for the application of administrative penalties.

Enabling Legislation

Legislation authorizing the use of administrative penalties will need to clearly specify the differences between penalties and criminal sanctions. The exact contents of legislation will depend to a large degree on the government's intentions as to the relationship between penalties and criminal sanctions. Alberta, for instance, simply provides:

    (1) Where the Director is of the opinion that a person has contravened a provision of this Act or the regulations that is specified in the regulations, the Director may, subject to the regulations, by notice in writing given to that person require that person to pay to the Government an administrative penalty in the amount set out in the notice for each day the contravention continues.

    (2) A person who pays an administrative penalty in respect of a contravention may not be charged under this Act with an offence in respect of that contravention. [(199) -- 199. S. 223, Environmental Protection and Enhancement Act, C.C.R.S.A., c. E-133.]

Regulations can prescribe offences subject to administration penalties and can prescribe penalties of up to $5,000. Further provisions allow appeal of penalties to the Alberta Environmental Appeal Board. [(200) -- 200. Ibid. ] These provisions have a limited ability to provide a strong deterrent to potential law breakers. Legislation containing the following provisions would allow regulations which provide a stronger deterrent to polluters while maintaining fairness for all members of society. The legislation should:

] The courts have distinguished between punitive function of criminal sanctions and the deterrent function of administrative penalties. It is essential that criminal sanctions remain an option for punishing significant environmental offences. Environmental legislation in a number of other jurisdictions provides for combination of administrative penalties and criminal sanctions. [(202) -- 202. See Lidgren, footnote 198 above.]

In contrast, fault need not be proved for an absolute liability offence. The imposition of absolute liability for minimum penalties is justified because it may cause some business people to institute more safeguards than if they knew they could avoid conviction by setting up a "reasonably good system". Absolute liability also will allow for an increased application of penalties. If polluters can avoid penalties by introducing evidence of due diligence, investigators will need to contradict this evidence. This constrains taking legal action in many cases where administrators are aware that an offence has occurred.

Although absolute liability is undesirable in the criminal context where there is a potential for imprisonment, courts will be more open to it in the context of administrative penalties. [(204) -- 204. See L.S. Fairbairn, "Administratively-Imposed Civil Monitoring Penalties: Feature, Opportunities and Constraints" prepared for the Canadian Bar Association Continuing Legal Education Committee, May 15, 1992.] The traditional objection to absolute liability -- that it is inappropriate to penalize a morally innocent person -- is less applicable to administrative penalties for permit exceedences.

Courts have long recognized that where people engage in activities that may cause harm to others, they should sometimes be liable even if they neither intended the harm nor were at fault in allowing it to happen. [(205) -- 205. For instance under the common law, a person may be liable for the escape of hazardous substances from their land: Fletcher v. Rylands (1865), 159 E.R. 737 and John Fleming, The Law of Torts, 7th ed. (Sidney: Law Book Company, 1987). Similarly, employers will be liable for the negligence of their employees done in the course of the employees' duties, even though the employer is not at fault. See Fleming at 339-342.] Permit violations will often involve environmental degradation. Because of the difficulty in quantifying these costs in monetary terms, [(206) -- 206. See Randall & M'Gonigle above at footnote 150, for a discussion regarding the near impossibility of quantifying environmental harm.] civil liability for degradation is not practical in many cases. Absolute liability represents a means of ensuring that the costs of degradation, or an estimate of such costs or potential costs, is borne to some degree by the polluter. Even if the polluter was not at fault in allowing an emission to occur it has an obvious moral responsibility for degradation, and it, rather than society at large, should be responsible for these costs.

Challenges to Administrative Penalties.

Administrative Law Challenges

Regulators will need to establish a system that provides a fair process in levying fines because, the duty of procedural fairness applies to decisions to levy penalties against an individual or corporation except when the application and amount of the fine is automatic. [(209) -- 209. See Sara Blake, Administrative Law in Canada (Toronto: Butterworths, 1992) at 10 -12. ]

The British Columbia Workers' Compensation Board uses a process that avoids administrative law challenges to administrative fines by building procedural fairness into the system [(210) -- 210. This process is described in Rankin & Brown, above at footnote 156, at 62 to 63.] The penalty process begins with a letter sent to an employer who has breached WCB regulations, describing the violation and possibly the employers' compliance history. The letter proposes a penalty and invites the employer to state why there should not be a penalty. Some employers pay the fine at this stage and the matter is concluded. If the employer objects, the objection is forwarded to inspectors and regional officials for their comment. Oral hearings are granted if requested. Final decisions by the Board can be appealed to the Commissioners of the Board.

If defined by legislation, a penalty assessment process is unlikely to be successfully challenged in court. Legislation also can limit the potential for appeal of decisions to the courts. "Privative clauses" [(211) -- 211. See . ] in legislation or other limits on review of administrative decisions by the Courts could help to ensure that decisions are made by a body familiar with environmental regulatory issues. They also could help reduce the potential for parties seeking judicial review of penalties on the basis of factual issues or questionable legal interpretations.

Charter Challenges

The two largest potential challenges to administrative penalties relate to the ability to impose a penalty with no trial under section 11(d) of the Charter and the imposition of both administrative fines and criminal sanctions under section 11(h) of the Charter. Another potential argument is that absolute liability for administrative offences violates section 7 of the Charter. While these challenges are realistic concerns they will likely be unsuccessful if enabling legislation is properly drafted.

Section 11

As discussed in Chapter 1, section 11 of the Charter protects against being charged twice with the same offence. It also guarantees the right of someone charged with an offence to be presumed innocent until proven guilty in a fair public hearing before an independent tribunal. If a polluter receives an administrative penalty, prosecutors will be prohibited from proceeding with criminal charges if the administrative penalty process is viewed as being charged with an offence. Similarly, a polluter could argue that the administrative penalty process -- which does not necessarily involve a public hearing -- is contrary to s. 11(d).

What constitutes an offence in this context has been narrowly defined. Courts have held that an offence is only an offence for the purposes of section 11 if it is a matter that is prosecuted in a process which is "by its very nature a criminal proceeding" or because it may lead "to a true penal consequence". [(212) -- 212. Wigglesworth v. the Queen (1987), 37 C.C.C. (3rd) 385. ] Normal provincial or federal regulatory offences, including environmental offences, are invariably subject to section 11. On the other hand, an administrative penalty system can probably be designed and administered so that it is not criminal in nature and does not involve "true penal consequences".

Proceedings which are Criminal in Nature

The Courts have distinguished between matters which are intended to promote welfare within a public sphere of activity and matters which are intended to regulate conduct within a limited private sphere of activity, stating that "proceedings of an administrative nature" instituted for the protection of the public in accordance with the policy of a statute are not the sort of "offence proceedings to which section 11 is applicable". [(213) -- 213. Ibid. at 401.] Although administrative penalties are intended to protect the public, they are private in the sense that they are aimed at maintaining adherence to the set of environmental protection rules which industries accept when they enter a business. [(214) -- 214. See R. v. Wholesale Travel Group Inc. (1991), 67 C.C.C. (3d) 193 (S.C.C.) which distinguishes between regulations applying to the general public and those regulating a specific industry or sphere of activity.]

Recent decisions of the Supreme Court of Canada have stated that the question of whether proceedings are criminal in nature is dependent not on the nature of the act giving rise to the proceedings, but on the "nature of the proceedings themselves". [(215) -- 215. R. v. Shubley (1990), 52 C.C.C. (3rd) 481 (S.C.C.) at 493. ] The exact same facts can lead to both a criminal offence and a non penal based penalty. [(216) -- 216. For instance, making fraudulent income tax returns can be the basis both for a fine from Revenue Canada and criminal proceedings: R. v. Yes Holdings (1987), 40 C.C.C. (3rd) 30 (Alta. C.A.).]

In considering the nature of the proceedings the court will look at whether an offender has been asked to account to society in general and face punishment or whether the proceedings are intended merely to be a deterrent to breach of a regulatory code. Informal and private proceedings will generally not be criminal in nature. [(217) -- 217. R. v. Shubley, above at footnote 215, at 494.] Proceedings which have been held to not be criminal in nature include Revenue Canada penalties for false statements in income tax returns, [(218) -- 218. Lavers v. B.C. (Minister of Finance) (1989), 41 B.C.L.R. (2d) 307 (C.A.); R. v. George's Contracting Ltd. (1987), 15 B.C.L.R. (2nd) 240.] prison disciplinary hearings, [(219) -- 219. R. v. Shubley, above at footnote 215.] police disciplinary hearings, [(220) -- 220. Wigglesworth v. the Queen above at footnote 212.] and environmental clean-up orders. [(221) -- 221. Eagle Disposal Systems Ltd. v. Minister of Environment (1987), 9 C.C.C. (3rd) 501 (Ont. H.C.J.).]

In contrast, a person charged with a traffic ticket violation has been deemed to be charged with an offence [(222) -- 222. Randall v. The Queen (1989), 49 C.R.R. 368 (B.C. Co. Ct..)] and military court martial proceedings have been considered to constitute being charged with an offence. [(223) -- 223. R. v. Genereux (1992), 133 N.R. 241; 8 C.R.R.(2d) 89 (S.C.C.)] However, traffic ticket processes and court martials are significantly different from administrative penalties. The court martial process is an extremely formalized criminal court like process and can be used in relation to any offence under the Criminal Code. [(224) -- 224. R. v. Genereux, Ibid., at 103 to 104.] The ticket process is closely related to the normal criminal process, involving a hearing before a judge and related court procedures if the person pleads not guilty. Although administrative penalties would likely involve a right to appeal to an open tribunal, the penalty initially would be levied in a private proceeding whether or not it was contested by the accused. [(225) -- 225. We note that one provincial court case decided shortly after the introduction of the Charter suggests that levying administrative penalties under the Aeronautics Act amounts to being charged with an offence. This case clearly gives a much wider meaning than was later given to it by the Supreme Court of Canada: see R. v. B & W Agricultural Services (1982), 3 C.R.R. 354 (B.C. Prov. Ct.)]

These cases indicate that so long as an administrative penalty process is carried out in a largely private manner as opposed to involving a court hearing where a finding or fine is disputed it will not be considered criminal in nature.

True Penal Consequences

Whether or not an administrative penalty would constitute a "true penal consequence" will depend on the circumstances. The Supreme Court of Canada has stated that penalties to which section 11 applies include imprisonment or fines which by their magnitude would appear to be imposed for the purpose of redressing a wrong done to society at large. [(226) -- 226. R. v. Wigglesworth, above at footnote 212, 1t 402. ] This is distinct from fines which are merely intended to deter people from breaching a regulatory code. [(227) -- 227. Ibid.] The Courts have clearly stated that fines will not necessarily be considered true penal consequences. [(228) -- 228. Ibid.] It should be noted that very significant penalties have been considered non-punitive. For instance, the courts have said that confining inmates to solitary cells and losing parole rights are not penal consequences. [(229) -- 229. R. v. Shubley, above at footnote 215. ] Forfeiture of pay, loss of a liquor licence, paying an extra levy on income tax, and deportation have also been held to not be "true penal consequences". [(230) -- 230. Rio Hotel Ltd. v. New Brunswick (Liquor Licence Board) (1987), 44 D.L.R. (4th) 663 (S.C.C.); Trimm v. Durham Regional Police Force, [1987] 2 S.C.R. 582; Burnham v. Metropolitan Toronto Police, [1987] 2 S.C.R. 572; Hurd v. Canada (Minister of Employment and Immigration), [1988] F.C.J. 945.]

One issue that arises from the Courts' definition of what constitutes a true penal consequence is whether an administrative penalty aimed at compensation for potential or actual damage done to the environment would be a fine "intended to redress a wrong done to society at large". Although the Courts' decisions are ambiguous, it appears that compensation for damages or potential damages is distinct from "fines intended to redress a wrong done to society at large". First, in other contexts the law has always distinguished between punitive and compensatory damages. For instance, in contract law parties are permitted to provide for fines which are intended to compensate one party for breach of a contract but cannot establish contractual fines intended to punish a party. [(231) -- 231. Dunlop Pneumatic Tyre Co. Ltd. v. New Garage and Motor Co. Ltd., [1915] A.C. 79 (H.L.)] Thus, there is well established distinction between penal and compensatory fines.

Second, while the word 'redress' can mean both compensation and punitive retribution, the reference of the Court to redressing a wrong done to society at large appears to be in reference to punitive retribution. The "redress a wrong done to society as a whole" test was formulated in the context of a case involving an assault by a police officer on a prisoner. In this context "redress to society at large" appears to mean punishment for a morally unacceptable act rather than compensation to the specific individual for his pain and suffering. Thus, in the context of administrative penalties for illegal discharges, administrative penalties do not become "true penal consequences" merely because they attempt to approximate actual or potential harm to the environment.

A fine directed toward a special purpose is less likely to be seen as a "a true penal consequence" than a fine directed towards consolidated revenue. If fines collected by administrative penalties are directed towards a particular fund, such as the Sustainable Environment Fund in British Columbia, they will more likely be seen as non-punitive.

Application of Section 11 to Administrative Penalties

We expect that automatic administrative penalties imposed on an absolute liability basis will not be contrary to section 11 nor will they block prosecutions if the penalties involved are based on multiplying applicable discharge fees by a specified factor. The combination of a private process for penalty assessment and the tying of penalties to otherwise applicable civil liabilities should ensure that the penalties are not considered to be offences.

Administrative penalties levied in a discretionary manner likely will not be considered offences for the purposes of section 11 if the process involved for imposing such fines is relatively informal and private and the purposes of the penalties are clearly distinct from the purposes of criminal law. Because there is some uncertainty as to the exact distinction between criminal sanctions and administrative penalties which are neither "criminal in nature" nor "true penal consequences", it is recommended that legislation should clearly distinguish between the nature and purpose of administrative penalties and the nature and purpose of criminal sanctions. Specifically, legislation should provide that the purpose of fines is to encourage compliance with environmental regulations and permits, to compensate for actual or potential damage to the environment and to recover administrative costs related to imposition and investigation of regulatory breaches. Legislation could specifically provide that the purpose of fines is non-punitive. Given the limited purposes of such fines and the need to continue to treat some environmental offences with the full weight of the criminal law, environmental enforcement officials should continue prosecuting offences in the courts in appropriate circumstances.

Section 7

As discussed in Chapter 1, section 7 protects citizens from being deprived of their liberty except in accordance with the principles of fundamental justice. A polluter [(232) -- 232. We note that the ability of a corporate polluter to raise a section 7 argument may be limited. The courts have held that since corporations cannot be deprived of "life, liberty or security of the person" they cannot raise section 7 in legal proceedings unless they are charged in "penal proceedings" with an offence that contravenes section 7: see R. v. Wholesale Travel, above at footnote 214; Irwin Toy Ltd. v. Quebec (Attorney General) (1989), 58 D.L.R. (4th) 577; R. v. Big M Drug Mart Ltd. (1985), 18 D.L.R. (4th) 321 (S.C.C.). It is likely that so long as administrative penalties are not considered to be penal for the purposes of section 11, a corporation may not have standing to raise section 7 issues.] could argue that administrative penalties have the potential to deprive the polluter of its liberty contrary to section 7.

In Re: British Columbia Motor Vehicle Act, [(233) -- 233. (1985), 23 C.C.C. (3d) 289 at 312.] the court concluded an absolute liability offence would be contrary to section 7 if it allowed for imprisonment. The court specifically left open the question of whether section 7 would be violated by an absolute liability offence which used fines as a penalty but left imprisonment for nonpayment of the fine as a possibility.

If penalties are a civil debt the possibility of imprisonment will be negligible and there will be no unjustifiable breach of section 7. Although there is still a potential for imprisonment in a collection of a civil debt, this will only apply where a debtor has, without any reasonable excuse, ignored a court order for payment. [(234) -- 234. See, for instance, Rule 42 (35) of the British Columbia Rules of Court.] This would distinguish the administrative penalties from the cases in which the combination of absolute liability and the potential for imprisonment were considered to infringe the Charter. [(235) -- 235. In R. v. Grey [1989] 1 W.W.R. 66 (Man. C.A.) the court considered whether an absolute liability offence was unconstitutional when combined with provisions for imprisonment in default of fine payment. The statute challenged stated that the court could set a period of imprisonment in default of payment and if no alternative imprisonment sentence was specified the jail term would be five days plus one day for every ten dollars of the fine not paid. The court held that because the prospect of imprisonment was highly remote the provision would be justified under section 1 of the Charter. A bench of the B.C. Court of Appeal has adopted this reasoning (R. v. Smith (1989), 14 M.V.R. (2d) 166 (Y.T.C.A.); see also Yellowknife City v. Boyd (February 19, 1993) (Terr. Ct. N.W.T.). Courts in a number of other provinces have held that almost identical provisions are contrary to sections 7 and cannot be justified under section 1: R. v. Burt, [1988] 1W.W.R. 385 (Sask. C.A.), R. v. Sutherland (1990), 55 C.C.C. (3d) 265 (N.S.S.C, App. Div.)] In these cases the probability for imprisonment was an important factor in deciding whether absolute liability and the potential for imprisonment were unconstitutional.

As discussed in Chapter 1, it will not be viewed as an infringement of the Charter to impose fines or restrict economic liberty on an absolute liability basis.

Use of Mandatory Reporting for Administrative Penalties

Despite at least one recent case restricting the use of self monitoring data, requiring polluters to submit monitoring data and spill reports and using such data to impose administrative penalties likely is not contrary to the Charter. [(236) -- 236. In R. v. Weill's Food Processing Ltd. (1991), 6 C.E.L.R.(N.S.) 249 (Ont. Ct. J.).Ontario Court of Justice held that using mandatory spill reports as evidence would be contrary to an accused's "right to silence".] The "right to silence" is considered to be a part of section 7 of the Charter and specific aspects of it are protected by sections 11(c), 11(d) and 13. [(237) -- 237. Thompson Newspapers Ltd. v. Canada (Director of Investigation and Research, Restrictive Trade Practice Commission) (1990), 67 D.L.R.(4th) 161 (S.C.C.)] None of these sections would apply to the use of mandatory reporting data so long as there is no potential for loss of liberty, life or security of the person, and so long as the administrative penalty process is not an offence for the purposes of section 11. As discussed above, there is unlikely to be an unconstitutional deprivation of life, liberty or security of the person where the only potential sanction is a fine levied as a civil debt. [(238) -- 238. Furthermore, at least one case has said that the use of mandatory reporting provisions is not contrary to the Charter: See R. v. Courtalds Fibres Canada, [1992] O.J. No. 1972 (Ont. Prov. Court). ] Moreover, administrative penalties can be designed in such a way that they do not constitute an offence.

Ticketing

While administrative penalties are an alternative to the criminal system, ticketing is a procedural reform to the criminal system intended to facilitate increased numbers of charges being laid. The normal criminal procedure [(239) -- 239. The criminal process in fact involves many more procedural possibilities than discussed here. The description is intended to give an idea of the typical process for minor offences. ] is cumbersome. Informations alleging an offence has been committed are sworn by police in front of a justice of the peace. An appearance notice or summons is issued requiring the accused to appear in court and charges are drafted by crown prosecutors on the basis of information provided by police or investigators. The first court appearance may involve the accused entering a guilty plea. In that case the Crown must be prepared to make submissions on appropriate sentencing. Alternatively, the matter can be held over for several weeks or a trial date can be set. Often trial dates are set and arrangements made for all witnesses and investigators to attend the trial only for a guilty plea to be entered at the time of trial.

This process involves substantial and expensive time on the part of the courts, prosecutors and investigators, as well as involving substantial inconvenience to the accused. Because of the costs and inconvenience involved, investigators aware of a minor offence may decide not to initiate a prosecution.

Ticketing is intended to streamline the process for minor offences so that more charges can be laid. In a ticketing system a conservation officer first issues a ticket. There is no need to swear an information or draft charges. The party charged can plead guilty and pay a pre-set fine without appearing in court. Alternatively the accused can request a trial or do nothing. If nothing is done, the court can convict without hearing evidence. This system allows large numbers of charges to be processed through the courts at minimal cost, while preserving the safeguards of the criminal process for those wish to raise a defence.

The ticket system is an important tool for enforcement officers since it allows them to take some action beyond a mere warning without invoking the whole process of the criminal court system. Even though fines for ticketed offences are generally quite small, [(240) -- 240. Currently the maximum ticket fine for Waste Management Act offences is $200: Violation Ticket Fines Regulation, B.C. Reg. 434/90: In our opinion ticketing could also be used for more substantial fines.] they may provide a substantial deterrence because large numbers of tickets can be issued and the registration of a conviction will leave a party more open to substantial penalties if there is a subsequent conviction. It would be useful to combine ticketing systems with other reforms of the criminal process. For instance, there is no reason why the legislature could not provide that persons charged with an environmental offence will be guilty on the basis of the "balance of probabilities" standard rather than the "beyond a reasonable doubt" standard; indeed courts already adopt a flexible standard of proof depending on the significance of a finding of guilt. [(241) -- 241. See Swaigen above at footnote 156, at 232. It is clear from a number of cases that the standard of proof varies according to the magnitude of an offence and the circumstances that flow from a conviction: See Bater v. Bater, [1950] 2 All E.R. 458 at 459 (C.A.) approved in R. v. Oakes (1986), 26 D.L.R. (4th) 200 (S.C.C.); Re Beckon (1992), 9 O.R.(3d) 256 (Ont. C.A.); Continental Insurance Co. v. Dalton Cartage Co., [1982] 1 S.C.R. 164; Coates v. Ontario (Registrar Motor Vehicle Dealers and Salesmen) (1988), 65 O.R. (2nd) 526, (Div'l Ct.) at 536. Some statutes have also reduced the burden of proof and reversed the onus of proof in relation to proof of negligence in regulatory offences. For example, see Canadian Environmental Protection Act, R.S.C. 1985, c. 16 (4th Supp.), s. 125. ]

Enabling Legislation for Ticketing

British Columbia, [(242) -- 242. Offence Act, R.S.B.C. 1979, c. 305.] Ontario, [(243) -- 243. Provincial Offences Act, R.S.O. 1990, c. P. 33.] Alberta [(244) -- 244. Provincial Offences Procedure Act, S.A. 1988, c. P-215. ] and the federal government [(245) -- 245. Contraventions Act, S.C. 1992, c. 47.] provide means for ticketing minor offences, including environmental offences. In British Columbia, provision is already made for using these general ticketing provisions in the context of Waste Management Act violations. [(246) -- 246. See Violation and Ticket Administration Regulation B.C. Reg. 423/90, schedule 2. ] No further statutory provisions are necessary for using ticketing as a means of prosecuting environmental offences.

Although it is beyond the scope of this report, both the provincial and federal governments should consider further amendments to the criminal process which would facilitate environmental prosecutions: these could include changes to the standard of proof necessary to convict polluters and the use of absolute liability for offences where conviction does not involve a potential for imprisonment. Any such provisions should give prosecutors and enforcement officers a choice between prosecutions requiring lower levels of proof, absolute liability and relatively low fines, and prosecutions requiring high levels of proof, strict liability and more punitive penalties including imprisonment.

Challenges to ticketing

Several cases have challenged the legality of ticketing itself, as opposed to the legality of a particular, improperly completed ticket. These cases have challenged the use of ticketing on the basis that it contravenes the right to be presumed innocent until proven guilty. The argument advanced is that, since convictions can be entered without any proof of guilt, even though the accused can require a trial, ticketing is contrary to Section 11 (d) of the Charter.

In all of these cases, the courts have upheld the application of ticketing for minor traffic offences. The courts have stated that ticketing is justified because of its value in alleviating inconvenience, costs and hardship to those charged and because it provides procedural protections to those who wish to contest a charge [(247) -- 247. Grant v. British Columbia (1986), 40 M.V.R. 56 (B.C.S.C.); R. v. Greckol (1991), 79 Alta. L.R. (2nd) 272 (Alta. Q.B.); R. v. Carson (1983), 41 O.R. (2nd) 420 (C.A.); Kindersley v. Boisvert, [1986] 6 W.W.R. 636 (Sask. Q.B.); Yellowknife (City) v. Boyd [1993] N.W.T.J. No. 5 (Terr. Ct.); R. v. Randall (1989), 49 C.R.R. 368 (B.C. Co. Ct.).]. In at least one of these cases challenging ticketing the court specifically referred to the application of ticketing procedures to environmental concerns and upheld this application [(248) -- 248. R. v. Greckol, Ibid., at 282-283. ]. Given these cases, ticketing is very unlikely to be challenged under the Charter unless it is used for serious offences.

A criminal process which uses ticketing is subject to most of the defences available in criminal proceedings. [(249) -- 249. Some defences are not available because of changes in procedure. For instance, since no information is sworn, the information which serves as a basis for a charge cannot be attacked.] Tickets must enable the accused to know the offence with which it is charged and the circumstances to which the charge relates, except to the extent these rules have been changed by the laws establishing the ticketing system. [(250) -- 250. The rules relating to sufficiency of the description of an offence are often altered in a ticketing system: see for instance, Offence Act, R.S.B.C. 1979, c. 305, section 14(6).]. There is a large body of criminal procedure law which relates to these topics, but it is beyond the scope of this work. However, it is unlikely these defences will be raised in a ticketing regime because polluters are less likely to challenge technicalities when the penalties involved are relatively low. [(251) -- 251. See Swaigen, above at footnote 156, at 217.] Also, these technical defences are not something peculiar to ticketing and, so long as inspectors are given adequate instruction in completing tickets, there is no reason why improperly completed tickets should be a more frequent occurrence than improper informations in the normal criminal process. Indeed, if these rules have been specifically addressed in a ticketing system the likelihood of successful challenges on technical grounds may be reduced. [(252) -- 252. See footnote 156 and 100 above.]

Summary

Discharge fees, monetary administrative penalties and ticketing are all instruments intended to increase the economic incentive either to reducing emissions or to comply with environmental permits and regulations. In this sense all three instruments are economic instruments.

We strongly endorse the use of discharge fees in combination with regulatory controls as a means of applying the polluter pays principle and encouraging reductions in emissions below permitted levels. The weakness in discharge fees in British Columbia and other jurisdictions is that they have not been broadly applied and are set too low to reflect the full cost of environmental degradation caused by discharges or to be a effective incentive to reducing discharges.

A number of legislative reforms, such as clarification that fees are not merely intended to cover administration costs and authority to apply higher fees in environmentally sensitive areas, would enable discharge fees that are effective incentives to discharge reductions. Enabling legislation also could ensure broader application of discharge fees by providing for fees applied to classes of businesses with rebates available where environmental performance is demonstrated, and by providing for proxy discharge fees applied to products on their import or manufacture. Other reforms are necessary to ensure effective enforcement and administration.

The potential for challenges to discharge fees will vary according to the details of the system. Administrative law challenges are probable in any system involving substantial discretion, but the likelihood of success for such challenges can be limited by establishing an appeal process in legislation. Neither Charter challenges nor trade law challenges pose any significant threat to discharge fee systems.

Monetary administrative penalties are a useful tool for encouraging compliance with discharge permits and environmental regulations. Automatic absolute liability penalties payable in the event monitoring data indicates a polluter is out of compliance or in the event monitoring systems are not functioning would operate in a manner analogous to discharge fees, but should be high enough that they are never viewed as merely a cost of doing business.

If automatic or discretionary administrative penalties are used, they should not foreclose prosecution in the criminal court system. Continued availability of criminal sanctions is essential both to ensure that administrative penalties are not viewed as a cost of doing business and to stress the importance society places on compliance with environmental laws. If administrative penalty legislation is properly drafted, penalties should not foreclose the additional use of criminal sanctions. Similarly, so long as administrative penalties are only a civil debt the combination of absolute liability and the slim potential for imprisonment is not contrary to the Charter.

Ticketing also is a useful tool for encouraging compliance with discharge permits and environmental regulations. Ticketing facilitates prosecutions for minor offences, and so long as fines for ticketed offences are significant, the increased potential for prosecution and imposition of fines should be an economic incentive to increased compliance. Traditional criminal process and higher fines should still be available for more significant offences. Charter challenges to ticketing have been rejected throughout Canada on the basis of the significant utility to ticketing and the fact that ticketing retains all the procedural safeguards of the criminal process for those who wish to defend a charge or make submissions on the appropriate sentence.

In summary, we support the use of discharge fees and the availability of administrative penalties and ticketing so long as there is continued reliance on the normal criminal system for any significant offences. There are no major legal barriers to establishing any of these systems.

Discharge fees, Administrative Penalties and Ticketing

DISCHARGE FEES, ADMINISTRATIVE PENALTIES AND TICKETINGThis chapter examines three environmental policy initiatives. The first initiative, discharge fees, is aimed at encouraging polluters to lower their discharges below levels set by regulation or permits. The last two initiatives, ticketing and administrative penalties, are aimed at increasing the economic incentives for polluters to comply with regulations and the terms of their discharge permits.

Discharge Fees

Under a discharge fee system, the government sets a price on each unit of pollutant discharged and the polluter pays to the government an amount equal to the quantity of pollutant times the unit price. The unit price for different pollutants varies according to their toxicity or environmental effect. The basic rule is that the more harmful the pollutant discharged is, the more the polluter pays. The less discharged, the less the polluter pays. Companies are still prohibited from exceeding discharge levels allowed under the waste discharge permits. [(253) -- 253. Some economists have suggested that limits on discharges could be eliminated if discharges fees equal to the environmental damage caused by a unit of a pollutant were established; they argue this would lead to a societally optimal level of pollution: see D.G. McFetridge, "The Economic Approach to Environmental Issues" in Bruce G. Doern, ed., The Environmental Imperative: Market Approaches to the Greening of Canada (Ottawa: C.D. Howe Institute, 1990) at 83. This approach incorrectly assumes a political and scientific ability to measure the environmental costs of pollution or to determine what levels of fees are necessary to reduce discharges to desired levels. There is ample evidence that scientific studies attempting to measure the negative impacts of discharges unavoidably and consistently underestimate these impacts: see Randall Peterman & Michael M'Gonigle, "Statistical Power Analysis and the Precautionary Principle," (1992) 24 Marine Pollution Bulletin 231. Basing fees on the estimated costs of abatement is problematic because of unknowns relating to these costs: see United States General Accounting Office, Report to the Chairman, Subcommittee on Deficits, Debt Management and International Debt, Committee on Finance, U.S. Senate, Environmental Protection: Implications of Using Pollution Taxes to Supplement Regulation, (Washington, D.C.: U.S. General Accounting Office, 1993) at 28. A number of jurisdictions which have considered charging discharges fees equal to estimated social costs of pollution have rejected this approach because of uncertainty: see for instance, Hans Bressers, "Use of Economic Instruments for Environmental Management: The Role of Effluent Charges in Dutch Water Quality Policy" in H. von Gunter Schneider & R. Sprenger, eds., Mehr Umweltschultz fhur weniger Geld (Munich: Ifo-Institut fur Wirtschaftsforschung, 1984) at 324 to 325 and Gjalt Huppes & Robert Kagan, "Market-Oriented Regulation of Environmental Problems in the Netherlands" (1989) 11 Law and Policy 215 at 217-218. Dependence on discharge fees is unacceptable given these uncertainties and biases. Discharge fees are also unable, by themselves, to protect local ecosystems or communities.]

Discharge fees combine the benefits of command and control regulations with economic incentives: encouraging both economic efficiency and an improved environment. [(254) -- 254. British Columbia, Ministry of Environment, Lands and Parks, Revising British Columbia's Waste Discharge Permit Fee System: A Discussion Paper (Victoria: Ministry of Environment, Lands and Parks, 1992).] One study suggested that, where sufficiently high, the discharge fees component of a combined permit and fee system may have been more effective than the permit component of the system in encouraging abatement of emissions. [(255) -- 255. Bressers, above at footnote 151, at 335 to 336 suggests that this may be true without reaching any firm conclusions.] The main criticism of discharge fees has been that charges are generally too low to reflect the full social cost of emissions or to be an effective incentive. [(256) -- 256. J. Opschoor & H. Vos, Economic Instruments for Environmental Protection (Paris: Organization for Economic Cooperation and Development, 1989) at 113; Remiand Barre & Blaire Bower, "Water Management in France, with special emphasis on Water Quality Management and Effluent Charges," in Incentives in Water Quality Management in France and the Ruhr Area (Washington, D.C.: Resources for the Future, 1981) at 205; Gardener M. Brown & Ralph W. Johnson, "Pollution Control by Effluent Charges: It Works in the Federal Republic of Germany, Why not in the U.S." (1984) 24 Natural Resources Journal 929, at 943; but see also Bressers, Ibid., at 334 to 336. ]

While discharge fees have the potential to improve the efficiency of the tax system, by discouraging undesirable side effects of economic activity, [(257) -- 257. United States General Accounting Office, above at footnote 151, at 22. ] discharge fees may have undesirable effects on distribution of income. [(258) -- 258. An analysis of anticipated distributional effects of a carbon tax in the United States found that the tax, while it cannot be called progressive, may have less effects on lower income earners if revenues are used to replace revenue from very regressive taxes: Repetto, Robert et al. Green Fees: How a Tax Shift Can Work for the Environment and the Economy (Washington, D.C.: World Resources Institute, 1992).] If discharge fees are used adverse distributional effects must be addressed.

As noted above, the object of this report is to look at selected legal issues related to the implementation of discharge fees, rather than their effectiveness or their distributional effects. Thus, Chapter 3 looks at necessary components of enabling legislation and examines potential Charter, administrative law and trade law challenges to discharge fees.

Ticketing and Administrative Penalties

Chapter 3 also examines these same issues -- components of enabling legislation, Charter, administrative law and trade law challenges -- in relation to administrative penalties and ticketing. While these two initiatives are often not classified as economic instruments, they are examined in this report because they are a means of effectively implementing the polluter pays principle -- of ensuring that there is a cost associated with discharges. Like discharge fees, administrative penalties and ticketing are intended to provide a more powerful incentive to reduce discharges. While discharge fees are a means of encouraging the reduction in emissions below permitted levels, administrative penalties and ticketing are a means of increasing the economic incentives to comply with permitted discharges.

The need for better incentives is based on poor levels of compliance with environmental regulations. Low levels of compliance frequently are due to inadequate enforcement. However, even if expenditures on enforcement were increased the criminal court system is often not an adequate deterrent for many offences because of low levels of prosecution and fines. [(259) -- 259. See T.M. Rankin & R.M. Brown, Persuasion, Penalties and Prosecution: The Treatment of Repeat Offenders Under British Columbia's Occupational Health and Safety and Pollution Control Legislation, September 1988 [unpublished] at 38-41. See also John Swaigen, Regulatory Offences in Canada: Liability and Offences (Scarborough: Carswell, 1992) at 213-235.] The cost of using the criminal process; the need to prove guilt beyond a reasonable doubt; and the rules of criminal evidence all tend to inhibit laying of charges under the criminal system. [(260) -- 260. Ibid.] Existing administrative penalties, such as cancellation of discharge permits, are often equally unwieldy. Permit cancellation for minor violations will seldom be a viable option. Expanding administrative penalties to include monetary penalties and reforming the criminal process have both been suggested as ways to overcome the barriers to enforcement associated with the criminal process. [(261) -- 261. Swaigen, above at footnote 156, at 213-235, suggests that reforms to the criminal process, such as ticketing, reduced burdens of proof, specialized environmental prosecution units and changed rules of evidence may be as effective as administrative penalties in providing a cost effective credible deterrent to non-compliance with environmental laws. ]

Monetary administrative penalties could be levied on permit violations or other minor environmental offences. This report focuses on expanding the range of administrative penalties, rather than on the existing administrative penalties. In some circumstances, penalties can be set by regulation and made automatically payable. [(262) -- 262. See 42 U.S.C.S. §7651j (a) (Clean Air Act).] In other circumstances, both the amount of the penalty and its imposition are at the discretion of regulators or, alternatively, either the amount or the imposition is discretionary. [(263) -- 263. 33 U.S.C.S. §1319(g) (Clean Water Act) requires the administrator to levy a penalty when they become aware of a violation, but the amount of the penalty is up to the discretion of the administrator. ]

Incentives for compliance with environmental regulations also can be increased by reforming criminal procedure so that prosecutions are a viable alternative for minor offences. Ticketing is one of a number of potential reforms [(264) -- 264. See Swaigen, above at footnote 156, at 213-235, for a discussion of other potential reforms. ] that facilitates increased numbers of charges being laid. Under a ticketing system a conservation officer can issue a ticket. The party charged can plead guilty and pay a pre-set fine without appearing in court. Alternatively, the accused can request a trial or do nothing. If nothing is done, the court has the power to convict without hearing evidence. This system allows large numbers of charges to be processed through the courts at minimal cost, while preserving the safeguards of the criminal process for those who wish to raise a defence.

Our support for the use of administrative penalties and ticketing is qualified by our strong support for the continued application of criminal sanctions applied through the normal criminal procedure. Appearing before the criminal courts has a strong stigma effect and is an expression of society's disapproval of an act. [(265) -- 265. Dianne Saxe, Environmental Offences: Corporate Responsibility and Executive Liability (Aurora, Ontario: Canada Law Book, 1990) at 40 to 41.] Economic incentives and penalties do not have the aura of moral culpability associated with the normal criminal process. While economic incentives are strong modifiers of behavior, there is a danger that penalties and ticket fines may be seen as a cost of doing business and reliance solely on administrative fees may weaken the stigma associated with being a law breaker. Much of the discussion of potential challenges to administrative penalties is focused on ensuring that criminal sanctions continue to be available if penalties are imposed.

[ Chp.1 ] [ Chp.2 ] . . . * . . . [ Chp.4 ] [ Chp.5 ] [ References ]