Carbon Taxes & Rebates Explained (Province by Province)
The federal government has been making headlines recently at the UN's COP26 climate talks in the United Kingdom, promoting Canada's vision for climate action. Those climate change pledges, plus a recent election, have put Canada's carbon tax back on the minds of Canadians.
There’s been much hot-button chatter about carbon taxes in recent years. Some Canadians believe that the tax is unconstitutional, it doesn't have a meaningful environmental impact, and it gouges regular Canadians in the pocketbook. Nevertheless, many will continue getting a carbon tax rebate whether they want the federal levy or not.
Getting that carbon tax rebate, officially called Climate Action Incentive (CAI) payments, will all depend on where you live in Canada, plus the size of your household. Let’s clear the smokescreen of misinformation and better understand why the carbon tax was implemented and what kind of rebate you might be entitled to. Scroll down for a quick breakdown of each province and territory’s adoption of the tax.
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 more on the carbon levy and less on the big industrial emitters.
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 that 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 40% below 2005 levels by 2030.
In December 2020, Trudeau announced a gradual hike in the federal carbon tax on fuels to $170 a tonne by 2030. He also announced a $15 billion investment over the next decade that will go towards building up Canada's electric vehicle charging infrastructure, buying incentives for zero-emissions vehicles, and home retrofits.
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.
What is the Climate Action Incentive rebate?
For the provincial governments that 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 Ontario, Manitoba, Saskatchewan and Alberta are currently eligible for the federal rebate. The rebate payments will increase over time and vary between provinces and household size. The baseline amount for a family of four living in Ontario, for example, was $307 in 2019 (claimed through 2018 income tax returns). That rebate will rise annually until 2022, with a family of four in Ontario expected to receive around $588 from 2021 claimed taxes.
There will also be an allocation of the federal 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 be automatically applied to your balance owing for the year or added to any refund you are entitled to. These rebate payments will move to quarterly payments starting in mid-2022. That means if you're wondering about carbon tax rebate cheque dates, it depends on 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 costs 8.8 cents more per litre until April 2022, when it will rise to 11 cents per litre; 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 $463 (in 2021) for a household in Ontario, for example. However, with an average rebate of $571 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 $1,161 per family. But rebates can be as high as $1,189. The average cost impact per household of the federal system can be found here.
Carbon tax by province or territory
Jump to your province.
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 through taxation, charges $45 per tonne on fossil fuels, including gasoline, natural gas, and diesel. At the gas pump, this translates to around 10 cents extra per litre.
A BC climate action tax credit (BCCATC) is available to residents through an income-based system that equates to about $154 per adult and $45 per child. It will go up to $193.50 and $56.50 respectively in 2022. However, this rebate only qualifies if your family’s current net income is below $62,115.
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 despite its attempt to challenge the federal law. The Alberta Court of Appeal declared the federal carbon tax unconstitutional, with the matter going to the Supreme Court of Canada in September 2020. To the government’s disappointment, the Supreme Court ruled in 2021 that the federal carbon tax is entirely constitutional.
The province currently charges $40 per tonne on emissions, which equals an annual rebate of $992 for a family of four. That’s $496 for a single adult, $248 for the second adult, and $124 per child. In 2022, the emissions charge will rise to $50 per tonne and rebates will go up to $1,200 for a family of four.
Saskatchewan
Alberta’s neighbours have been a strong ally in opposition to the carbon tax. Both provinces feature strong oil and gas industries that see the carbon tax as a threat. Saskatchewan, like Alberta, fought 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. The rebate in Saskatchewan is also similar to Alberta – families of four can expect a rebate of $1,189 in 2021, and $1,459 in 2022.
Manitoba
Like Saskatchewan and Alberta, Manitoba strongly opposed the federal carbon tax but had it forced on them by Ottawa. That didn’t sit well with Manitoba, which recently lost a two-year court battle against the federal plan.
The province attempted a Made-in-Manitoba Climate and Green Plan at $25 per tonne on emissions, but it did not meet Ottawa’s standard, so the federal system was implemented.
For rebates, Manitoba families of four should receive $654 in carbon tax rebates this year. That’s $328 for the first adult, $164 for the spouse and $81 per child. In 2022, the rebate will rise to $801 for a family of four.
Ontario
Not to sound like a broken record, but Ontario is 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 2022/2023. Natural gas increases 3.9 cents per cubic metre this year and goes up to 9.8 cents.
The rebates in Ontario should average around $451 for a family of four. That works out to $226 for a single adult or first adult in a couple, with the second adult getting $113. Each child is entitled to $56.
Quebec
The only other province besides BC to have its own provincial carbon tax in place, before the federal government initiated theirs in 2018, is Quebec.
Quebec has 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 three cents per litre on gas.
The minimum price per tonne for credits varies in the province, but it averages around $17 per tonne. All revenues go towards various measures to reduce carbon emissions 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
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 that taking advantage of these “loopholes” in the federal plan is meant to protect industries and jobs.
New Brunswickers can expect CAI payments at $495 for a family of four, with $247 going to the first adult, $124 to the spouse and $62 per child in 2021. It will surge to $607 the following year.
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 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 government initiatives such as free driver’s licenses. The province says it intends to create its own rebate program.
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 $40 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 $40 per tonne which works out to around 9.4 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 $260 per adult and $300 per child.
Yukon and Nunavut signed on to the federal carbon tax plan, with Yukon collecting revenue and distributing the rebates. Rebates are in the range of $176 per family of four while charging $40 per tonne on emissions. Nunavut covers half the carbon levy, reducing its gas price increase by half. It does not offer rebates.
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