Carbon Taxes & Rebates Explained (Province by Province)

September 24, 2020

While 2020 is all about the dreaded COVID pandemic, last year’s hot topic, the federal government’s carbon tax, has recently popped back up in the news. The Supreme Court of Canada is hearing an argument from several provinces – Ontario, Saskatchewan, and Alberta – that the tax is unconstitutional and oversteps Ottawa’s jurisdiction.

So where does that leave us – the folks driving cars, filling up at the pumps and heating our homes with gas? What can we expect to pay and do we still qualify for a rebate? It all depends on where you live in Canada. As the recent Supreme Court case has clearly demonstrated, the tax – established by the federal government to reduce carbon pollution nationally – has polarized the provinces and their approaches to the tax.

Some claim the tax will damage economies, hit average Canadians in the pocketbook, and not do enough to make an impact on climate change. Others insist that putting a price on pollution is the only meaningful response to climate change and our reliance on fossil fuels. 

Let’s clear the smokescreen of misinformation and better understand why the carbon tax was implemented, a breakdown of the province’s adoption of the tax, and what kind of rebate you might be entitled to.

Canada’s carbon tax has two parts: a carbon levy on fuel purchases and a big emitters program for industrial facilities. To explain how the carbon levy affects the average Canadian's pocket, this article will focus less on the big industrial emitters and more on the carbon levy.

How does carbon tax work In Canada?

Source: Carbon pricing is now in effect across Canada. What is it anyway? (Globe & Mail)

In the summer of 2018, Prime Minister Justin Trudeau’s government passed the Greenhouse Gas Pollution Pricing Act, dubbed the carbon tax, as part of a 2015 campaign pledge to put a price on pollution. The bill gave his government the authority to implement a carbon pricing system for provinces which do not have an adequate carbon pricing model of their own. The tax started at $20 per ton in 2019 and will rise $10 per ton each year until reaching $50 per ton in 2022. 

The goal, in part, is for Canada to meet its obligation to the Paris Agreement. That means cutting Canada’s carbon pollution by 30% below 2005 levels by 2030. 

The government of Canada calls the tax “revenue neutral” because all direct proceeds of the program go directly back to residents in the provinces where the federal system was forcefully adopted. This rebate is called the Climate Action Incentive, and the amount will range depending on which province you reside in, plus the size of your household.

What is the Climate Action Incentive rebate?

For the provinces which refused to adopt the carbon tax, Trudeau wasn’t about to reward them with billions in new tax revenue. That’s why the feds created the Climate Action Incentive (CAI) – to make sure taxpayers are on the receiving end of the carbon tax revenue – not uncooperative premiers. It also softens the blow for those cringing at increased power bills and pump prices.

Who gets the CAI carbon tax rebate?

Residents of Saskatchewan, Manitoba, Ontario, and Alberta are currently eligible for the rebate. The rebate payments will increase over time and vary between provinces and household size. It can be as low as $439 this year in Ontario to as high as $1,419 for a family of four living in Saskatchewan in 2022. There will also be an allocation of the tax revenue directed to universities, schools, municipalities, nonprofits and Indigenous communities, as well as small and medium-sized businesses.

The CAI rebate (Line 45110) can be claimed on your income tax return and it will automatically be applied to your balance owing for the year or added to any refund you are entitled to. That means if you're wondering about carbon tax rebate cheque dates, it depends how soon you're able to file your tax return. The sooner you file your return, the sooner you'll get your rebate. You can usually start filing your taxes once you get your T4 on the last week of February.

How much is the carbon tax?

We hear a lot about how the carbon tax is designed to go after the big polluters in various industries, but if you’re driving a conventional fuel-burning car, or heat your home using natural gas, for example, you will be paying extra too. 

Under the carbon tax levy, filling up your gas tank cost 6.6 cents more per litre until April 2021. As the tax increases each year, the levy will plateau at 11 cents per litre in 2022; something to consider if you’re weighing up the costs of switching to an energy-efficient electric vehicle

Those who heat large homes and drive frequently will be paying more under the plan. The government estimates an average yearly cost of $357 for a household in Ontario, for example. However, with an average rebate of $439 you will end the year in the green. 

In Saskatchewan, where the temperatures are cold and the roads long, the yearly estimated cost would be higher at $588 per family. But rebates can be as high as $883. The average cost impact per household of the federal system can be found here.

Carbon tax by province/territory

Jump to your province.

British Columbia

Alberta

Saskatchewan

Manitoba

Ontario

Quebec

New Brunswick

Prince Edward Island

Newfoundland & Labrador

Nova Scotia

Territories

    British Columbia

    The carbon tax has not been controversial in BC because the province instituted its own tax way back in 2008. BC, a leader in fighting pollution using taxation, charges $40 per tonne on fossil fuels, including gasoline, natural gas and diesel. At the gas pump, this translates to around 9 cents extra a litre.

    This tax is returned to residents through an income-based tax credit that equates to about $154 per adult and $45 per child. However, this rebate only qualifies if your family’s net income is below $62,964. BC intends to raise its carbon tax in the spring of 2021.

    Alberta

    Alberta has made it abundantly clear it is no fan of the federal carbon tax. The prairie province was added to the federal carbon tax list in January 2020, but it has so far been unsuccessful in its battle to repeal it. The Alberta Court of Appeal declared the federal carbon tax unconstitutional, with the matter going to the Supreme Court of Canada in September 2020. This hearing ended without judgement, delaying a decision until 2021.

    Nevertheless, Albertans are entitled to a federal rebate. With the province charging $20 per tonne on emissions from facilities that emit more than 100,000 tonnes a year, from January to March 2020, and $30 until March 2021, rebates for a family of four average around $888 for the year. That’s $444 for a single adult, $222 for the second adult, and $111 per child.

    Saskatchewan

    Alberta’s neighbours have been a strong ally in opposition to the carbon tax. Both provinces feature strong oil & gas industries that see the carbon tax as a threat to the industry. Saskatchewan, like Alberta, is fighting the carbon tax all the way to the supreme court.

    In the meantime, the federal carbon tax is applied to all emitters that do not meet federal standards. The carbon tax started at $20 per tonne of emissions over the federal thresholds in 2019 and rises by $10 a year to $50 per tonne in 2022. Residential natural gas customers can expect a charge of $0.0587/cubic metre this year and $0.0783 starting April 2021. The extra tax on gasoline is the same as Alberta. 

    The rebate in Saskatchewan is also similar to Alberta. Families of four received $609 in the climate rebate in 2019, and it will be $809 this year.

    Manitoba

    Like Saskatchewan and Alberta, Manitoba strongly opposed the federal carbon tax and had it forced on them by Ottawa. That didn’t sit well with Manitoba, which recently supported the fight to repeal the tax.

    The province says it has created its own tax on polluters called a Made-in-Manitoba Climate and Green Plan, which would charge half of Ottawa’s cap of $50/tonne and only 5 cents per litre of gas versus Ottawa’s 11 cents. The federal government has made it clear it is not impressed with Manitoba’s plan. 

    Gas prices rose around 4 cents per litre and will rise to 11 cents by 2022. Natural gas increased 391 cents per cubic metre and propane 31 cents a litre. As for rebates, Manitoba families of four receive an average of $486 in carbon tax rebates this year. That’s $170 per adult, or $85 for the second adult and $42 per child.

    Ontario 

    Not to sound like a broken record, but here is yet another province firmly in opposition of the federal carbon tax, and like Manitoba, insists it can do better with a provincial structure. Ottawa reluctantly approved Ontario’s carbon tax plan recently despite higher pollution thresholds for emitters under the federal system.

    Similar to Manitoba’s plan, Ontario’s plan sees drivers paying an extra 4.4 cents per litre of gas this year, with an increase of 11 cents by 2022-23. Natural gas increases 3.9 cents per cubic metre this year and goes up to 9.8 cents.

    The rebates in Ontario average around $448 for a family of four. That works out to $224 for a single adult or first adult in a couple, with the second adult getting $112. Each child is entitled to $56.

    Quebec

    The only other province beside BC to have its own provincial carbon tax in place, before the federal government initiated theirs in 2018, is Quebec.

    Quebec has had a cap-and-trade system, setting caps on emissions by industry. Companies that cannot reduce their emissions below that cap must buy credits from a carbon market shared with California. While Quebec mostly targets energy producers with its system, drivers in the Montreal area cough up a tax of 3 cents per litre on gas. 

    The minimum price per tonne for credits varies in the province, but it averages around $20.82 per tonne. All revenues go towards various measures to reduce carbon emission and fight climate change. Unfortunately for those looking for a federal rebate- no luck since Quebec does not participate in the federal plan.

    What is the cap-and-trade program?

    The everyday user of greenhouse gas-emitting vehicles shouldn’t be too concerned about a cap-and-trade system because it mostly targets big polluters in industries like oil & gas. Under cap-and-trade, a regulatory body like the provincial or federal government sets a “cap” on emissions output, setting a limit to how much industry sectors are allowed to pollute each year. The government body will issue permits, allowances if you will, for industries to pollute and these can be “traded” or sold to other companies who need to emit more. 

    For example, a company that emits 10 tons below its cap can trade its extra 10 allowances in the market or bank them for future use. As part of the carbon tax, the federal government is calling this an output-based pricing system where compliance obligations can be met by paying carbon pollutions price ($20/t currently) or purchasing credits from industrial facilities that beat their standard.

    New Brunswick

    New Brunswick had the federal carbon tax imposed on it until April 2020 when it introduced its own provincial tax; only recently getting it approved by the feds.

    Like Ontario, New Brunswick has designed a system to allow for higher pollution thresholds while maintaining Ottawa’s mandatory price per tonne standards. Provinces like Ontario and New Brunswick argue taking advantage of these “loopholes” in the federal plan is meant to protect industries and jobs.

    Since New Brunswick now has its own plan, residents of the Maritime province should not expect the federal rebates they enjoyed in 2019. All funds will be directed to a climate change fund, say officials.

    P.E.I.

    After backing out of the supreme court challenge of the carbon tax, Prince Edward Island decided to administer its own carbon levy at $20 per tonne on most liquid and gaseous fuels. It does not, however, tax furnace oil and propane. 

    Drivers probably haven’t noticed much change in the price of gas because the province has reduced their provincial gas tax to offset the federal carbon levy. There is no rebate in the province, as all funds are directed to environmental initiatives. 

    Newfoundland & Labrador 

    Newfoundland adopted a similar approach to P.E.I., reducing its gas tax to offset any pain at the pumps. The province has a standard $20 per tonne as set by the federal government.

    Nova Scotia

    Nova Scotia has a similar cap and trade system as Quebec. This system, implemented in January 2019, meets the federal standards in limiting greenhouse gas emissions. It, therefore, does not participate in the federal carbon tax rebate program.

    Northwest Territories, Yukon and Nunavut 

    Having implemented its territorial carbon tax in 2019, Northwest Territories charges $20 per tonne which works out to around 7 cents per litre of gas this year for drivers. The offsets and rebates, however, are quite generous with a 100% rebate on home heating fuel, and a cost-of-living offset of up to $156 per adult and $180 per child.

    The Yukon and Nunavut signed on to the federal carbon tax plan, with the Yukon collecting revenue and distributing the rebates. Rebates are in the range of $172 per family of four while charging $20 per tonne on emissions. Nunavut covers half the carbon levy, reducing its gas price increase by half. It does not offer rebates. 

Upgrade for better fuel economy with Canada Drives

If the sound of paying more at pumps due to the carbon tax has you fumed, Canada Drives can connect you with fuel-efficient vehicles across the nation. For your consideration, we also did a recent roundup of electric and hybrid vehicles that are currently on the market.

Canada Drives has been helping Canadians find vehicles with great auto finance rates since 2010. We’re partnered with dealerships all across the nation that offer incentives and promotions for people facing all types of credit situations. 

Apply with Canada Drives to learn more and see what you're eligible for.

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