Canadian Carbon Prices and Rebates
Carbon pricing is a method designed to help reduce global warming by putting a price on carbon pollution. Canada has taken a flexible approach, allowing each province or territory to either choose the federal pricing system or design their own pricing system according to their needs.
This approach has resulted in more than a dozen pricing mechanisms being adopted across Canada. In total there are 6 carbon tax programs, 6 baseline and credit systems, and 2 cap and trade systems. What follows is a review of the programs that apply in each province or territory.
Carbon Pricing Overview
There are three main categories of carbon pricing:
Carbon Tax
This is the most common carbon pricing mechanism and is familiar to most as a fuel charge. This method imposes charges based on the carbon content of fossil fuels. The carbon tax is in effect in Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Northwest Territories, Nunavut, Ontario, Prince Edward Island, Saskatchewan, and Yukon.
Baseline and Credit System
This is the second-most common system, applying to industrial emissions. This system typically allows for a certain amount of emissions—the baseline—that each facility is permitted to release. Should the facility’s emissions fall below this baseline, they will earn credits. If they happen to go over, they must buy credits and may use any that they have previously earned. This system is in use in Alberta, Manitoba, New Brunswick, Newfoundland and Labrador, Nunavut, Ontario, PEI, Saskatchewan, and the Yukon.
Cap and Trade System
Cap and Trade applies to industrial emissions and is only in effect in Quebec and Nova Scotia, making it the least common of the three. This system sets a cap on the total level of emissions that may be emitted in a jurisdiction. Emissions within the cap are either auctioned off to facilities or distributed freely. Like the Baseline and Credit system, those facilities that release fewer emissions than they are permitted can earn credits, while they must buy them if they go over their limit.
Carbon Tax Rebate
The proceeds from the carbon tax are used in different ways in each province and will often find their way back to individuals in the form of climate action incentives. They may also be put toward various clean energy projects or used to reduce other forms of taxes, such as income tax.
Federal Carbon Pricing Programs
In those provinces that have not developed their own carbon pricing programs, there are two federal carbon pricing mechanisms, collectively known as the federal backstop, in place. These are the federal fuel charge (or carbon tax) and the federal baseline and credit system.
Federal Fuel Charge (Carbon Tax)
As discussed above, the carbon tax is applied according to the amount of carbon in fossil fuels. As of April 1, 2021, this tax is $40/tonne of CO2e (carbon dioxide equivalent). This amount will increase by $10 in April 2022, by $15/year until 2030, at which time it will be $170/tonne.
This charge works out to $0.0884/litre for gasoline and $0.0619/litre for propane. For the full list of current rates, click here.
The federal fuel charge applies in Alberta, Manitoba, Ontario, Saskatchewan, and partially in Nunavut and the Yukon Territory.
Of the funds collected, roughly 90% find their way back to the residents of the provinces in which they are collected, with the amount per person dependent on the number of individuals in the household. More information can be found here.
Federal Baseline and Credit System
The federal version of this program is known as the Federal Output-Based Pricing System (OBPS) and is applied to facilities that produce in excess of 50,000 tonnes of CO2e per year. Following national performance standards, each industrial polluter is permitted a baseline of emissions.
A list of standards can be found here, but some examples include 650 tonnes of CO2e per GWh of electricity produced from solid fuels and 0.0728 tonnes of CO2e per tonnes of potatoes processed for human or animal consumption.
This system applies in Manitoba, Nunavut, PEI, the Yukon, and partially in Saskatchewan.
The Federal Greenhouse Gas Offset System will soon allow industrial facilities to purchase emission offsets.
Systems By Province
Alberta
Alberta uses a mix of federal and provincial carbon pricing mechanisms. Fuel emissions are covered by the Federal Fuel Charge, while industrial emissions are governed by the provincial baseline and credit system.
As of April 1, 2021, the carbon tax in Alberta is $40 per tonne of CO2e. It will increase by $10 per year in April until it reaches $50 per tonne in 2022, and then $15 per year until it reaches $170 per tonne in 2030.
In 2021, the baseline climate action incentive payment for a family of four in Alberta is $981. While for a single adult, the climate action incentive payment is $490.
British Columbia
In British Columbia, all emissions are covered by the province’s carbon tax. This includes industrial emissions. The CleanBC Industry Fund and the CleanBC Industrial Incentive Program are available to BC’s industrial facilities.
The BC’s GHG Emissions Offset Program is also available to some industrial and public sector polluters.
As of April 1, 2021, the carbon tax in British Columbia is $45 per tonne of CO2e and is scheduled to rise to $50 on April 1, 2022.
As of July 2021, the maximum annual climate action tax credit payment for a family of four in British Columbia is $450. While for a single adult, the maximum payment is $174.
While most of the proceeds from the BC carbon tax are used to reduce income tax (personal and corporate), BC Climate Action Tax Credit payments are available to some low-income BC residents.
Manitoba
Although Manitoba has developed two programs of its own (the Manitoba Green Levy and the Manitoba Output-Based Pricing System) they have been deferred indefinitely. The province is therefore currently implementing the Federal Fuel Charge for fuel emissions and the Federal Output-Based Emissions Pricing System for industrial emissions.
As of April 1, 2021, the carbon tax in Manitoba is $40 per tonne of CO2e. It will increase by $10 per year in April until it reaches $50 per tonne in 2022, and then $15 per year until it reaches $170 per tonne in 2030.
In 2021, the baseline climate action incentive payment for a family of four in Manitoba is $720. While for a single adult, the climate action incentive payment is $360.
New Brunswick
New Brunswick emissions are governed by the Provincial Fuel Charge (fuel emissions) and the Provincial Baseline and Credit System (industrial emissions).
In the past, New Brunswick did not receive any proceeds from the carbon tax, as they were balanced against the reduction of provincial fuel taxes. Going forward, the government will no longer reduce fuel taxes, meaning any increases in carbon price will result in revenue for the province.
As of April 1, 2021, the carbon tax in Manitoba is $40 per tonne of CO2e. It will increase by $10 per year in April until it reaches $50 per tonne in 2022.
Newfoundland and Labrador
Newfoundland and Labrador emissions are covered by provincial programs: Provincial Fuel Charge (fuel emissions) and Provincial Baseline and Credit System (industrial emissions).
As of November 7, 2020, the carbon tax in Newfoundland and Labrador is $40 per tonne of CO2e. It will increase by $10 per year in November until it reaches $50 per tonne in 2022.
Northwest Territories
Emissions of all types in the Northwest Territories are covered by the territories’ carbon tax, with special consideration given to large industrial emitters.
As of September 1, 2020, the carbon tax in the Northwest Territories is $30 per tonne of CO2e. It will then increase by $10 per tonne annually in July until reaching $50 per tonne in 2022.
Northwest Territory residents receive cost of living offset payments. In 2021, the baseline annual cost of living offset for a family of four in the Northwest Territories is $672. For a single adult, the cost-of-living offset payment is $180.
Nova Scotia
Emissions of all types are covered in Nova Scotia by the province’s Cap and Trade Program. This is applied to all emissions from industrial, heating, electricity, and transportation sectors, though only the largest facilities within each sector must participate.
Under this program, a limit is set on the total emissions that can be released annually. A portion of this limit is given to participating facilities for free, with the remainder being auctioned off.
As of December 2020, the current carbon price for allowances sold at auction in Nova Scotia is $24.70 per tonne of CO2e, with a minimum price in 2021 of $21.09 per tonne that will increase 5% annually plus inflation.
Nunavut
Emissions in Nunavut are covered by federal programs: Federal Fuel Charge (fuel emissions) and Federal Output-Based Emissions Pricing System (industrial emissions). The Government of Nunavut also offers the Nunavut Carbon Rebate, which reduces some fuel charges by 50% at the time of purchase.
As of April 1, 2021, the carbon tax in Nunavut is $40 per tonne of CO2e. It will increase by $10 per year in April until it reaches $50 per tonne in 2022, and then $15 per year until it reaches $170 per tonne in 2030.
Ontario
Ontario uses a combination of the Federal Fuel Charge (fuel emissions) and provincial baseline and credit system (industrial emissions).
As of April 1, 2021, the carbon tax in Ontario is $40 per tonne of CO2e. It will increase by $10 per year in April until it reaches $50 per tonne in 2022, and then $15 per year until it reaches $170 per tonne in 2030.
In 2021, the baseline climate action incentive payment for a family of four in Ontario is $600. The climate action incentive payment for a single adult is $300.
Prince Edward Island
PEI uses a combination of provincial and federal carbon pricing mechanisms: Provincial Carbon Levy (fuel emissions) and Federal Output-Based Emissions Pricing System (industrial emissions). Proceeds from the carbon tax go toward reducing the provincial gas tax, and driver’s license and registration fees. It also provides a 10% reduction in public transit fees.
As of April 1, 2021, the carbon tax in Prince Edward Island is $40 per tonne of CO2e. It will increase by $10 per tonne annually in July until reaching $50 per tonne in 2022.
Quebec
Quebec’s provincial cap and trade program covers all emissions, including industrial emissions. It is linked with California’s CaT through the Western Climate Initiative. This allows participants in California and Quebec to trade emission credits.
As of February 17, 2021, the current carbon price for allowances sold at auction in Quebec is $22.58 per tonne of CO2e, with a minimum price of $16.70 per tonne that will increase 5% annually plus inflation.
Saskatchewan
Saskatchewan handles emissions via a combination of federal and provincial carbon pricing mechanisms: Federal Fuel Charge (fuel emissions), Federal Output-Based Emissions Pricing System (industrial emissions from electricity generation and natural gas transmission), and provincial baseline and credit system (all other industrial emissions). Saskatchewan residents receive climate incentive payments.
As of April 1, 2021, the carbon tax in Saskatchewan is $40 per tonne of CO2e. It will increase by $10 per year in April until it reaches $50 per tonne in 2022, and then $15 per year until it reaches $170 per tonne in 2030.
In 2021, the baseline climate action incentive payment for a family of four in Saskatchewan is $1000. While for a single adult, the climate action incentive payment is $500.
Yukon
The Yukon Territory has implemented the Federal Fuel Charge (fuel emissions) and the Federal Output-Based Emissions Pricing System (industrial emissions). Yukon residents receive carbon tax rebates to offset personal carbon tax costs.
As of April 1, 2021, the carbon tax in the Yukon is $40 per tonne of CO2e. It will increase by $10 per year in April until it reaches $50 per tonne in 2022, and then $15 per year until it reaches $170 per tonne in 2030.
In 2021, the baseline carbon tax rebate for a family of four in the Yukon is $704. While for a single adult, the carbon tax rebate is $176. Remote residents outside of Whitehorse will receive a $774.4 rebate for a family of four and $193.6 for a single adult.