Carbon Pricing in Canada

Canadian Carbon Prices & Rebates (Updated 2021)

Published by Rylan Urban and Chloe McElhone on June 1, 2021.

Carbon Pricing in Canada

Every province and territory in Canada is subject to a carbon pricing mechanism. Some jurisdictions have developed their own programs, while others use one or both of the federal programs.

In total, there are 14 different carbon pricing mechanisms in Canada. This includes 6 carbon tax programs, 6 baseline and credit systems, and 2 cap and trade systems.

This page describes the three main categories of carbon pricing mechanisms and gives a short summary of the programs that apply for each province and territory.

You can read from top to bottom, or start by clicking on your jurisdiction below:

Carbon Pricing Overview

All carbon pricing mechanisms in Canada fall into one of three main categories:

1. Carbon Tax

A carbon tax, often implemented as a ‘fuel charge’, is the most common carbon pricing mechanism in Canada. It works by applying an additional charge to the price of fossil fuels, based on the fuel’s carbon content.

For example, a lower carbon fuel (such as propane) might have a fuel charge of $0.05 per litre, while a higher carbon fuel (such as diesel) might have a fuel charge of $0.08 per litre.

Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, the Northwest Territories, Nunavut, Ontario, Prince Edward Island, Saskatchewan, and the Yukon all have a carbon tax.

2. Baseline and Credit System

Baseline and credit systems, including performance standards and output-based pricing systems, are the second most common type of carbon pricing mechanism in Canada. They only apply to industrial emissions.

The specifics vary across provinces, but baseline and credit systems generally work by allocating a ‘baseline’ amount of emissions that each industrial facility is allowed to release.

If a facility emits less emissions than their baseline, they earn ‘credits’ that can used to offset emissions in future years. If a facility emits more emissions than their baseline, they must buy credits.

Alberta, Manitoba, New Brunswick, Newfoundland and Labrador, Nunavut, Ontario, PEI, Saskatchewan, and the Yukon Territory all have a baseline and credit system for industrial emissions.

3. Cap and Trade System

The least common type of carbon pricing mechanism in Canada is the cap and trade system. Similar to baseline and credit systems, cap and trade systems only applies to industrial emissions.

In general, cap and trade systems work by setting a ‘cap’ on the total amount of emissions that can be released within a given jurisdiction. Emissions within this cap are then distributed freely to industrial facilities, or sold to them in an auction.

If a facility releases less emissions than their allocated or purchased amount, they earn credits that they can ‘trade’ to other facilities. Facilities that release more emissions than their allocated or purchased amount must buy credits.

Quebec and Nova Scotia are the only two Canadian jurisdictions with cap and trade systems.

Carbon Tax Rebate Overview

Each province and territory uses carbon tax proceeds in different ways. Often times, funds are returned to individuals in the form of climate action incentive payments. Provinces also use the funds to reduce other forms of taxes (i.e. income tax) or fund clean energy projects (either directly, or through rebate programs).

Continue below to see how your province uses the money it raises from the carbon tax (where applicable).


Federal Carbon Pricing Programs

Government of Canada

The federal government has developed two carbon pricing mechanisms – the federal fuel charge (often called the ‘pollution price’ or ‘carbon tax’) and federal baseline and credit system for industrial facilities.

These two programs are referred to as the ‘federal backstop‘, and only apply in provinces and territories that haven’t developed their own carbon pricing programs.

Federal Fuel Charge (Carbon Tax)

The federal fuel charge works by applying a tax on the sale of fossil fuels, based on their carbon content.

As of April 1, 2021, the Federal carbon tax is $40 per tonne of CO2e. It will increase $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.

For example, here are the 2021 fuel charges rates for some common fossil fuels:

  • Gasoline: $0.0884 per litre
  • Natural Gas: $0.0783 per cubic metre
  • Propane: $0.0619 per litre

You can see the full list of current fuel charge rates here.

The federal fuel charge currently applies in Alberta, Manitoba, Ontario, Saskatchewan, and partially in Nunavut and the Yukon Territory.

Federal Climate Action Incentive

Approximately 90% of funds collected through the federal fuel charge are distributed back directly to residents in the provinces where the funds were collected.

The amount that individuals receive depends on the number of people within their household. For example:

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.

You can see the full details about the federal climate action incentive payments here.

Federal Baseline and Credit System

The federal baseline and credit system is called the Federal Output-Based Pricing System (OBPS). This system applies to industrial facilities that emit more than 50,000 tonnes of CO2e per year.

Under the Federal OBPS, each industrial polluter is allowed to release a baseline amount of emissions per unit of product produced, based on a national performance standard.

For example, here are the baseline emission amounts for three common products:

  • 650 tonnes of CO2e per GWh of electricity produced from solid fuels
  • 0.216 tonnes of CO2e per vehicle produced
  • 0.0728 tonnes of CO2e per tonnes of potatoes processes for animal or human consumption

Click here to see a full list of the federal output-based standards.

If a polluter beats the standard, they earn credits that they may be able to save or sell. If they don’t beat the standard, they must buy credits to offset their excess emissions.

Industrial facilities will also soon be able to buy emissions offsets through the Federal Greenhouse Gas Offset System.

The federal baseline and credit system currently applies in Manitoba, Nunavut, Prince Edward Island, the Yukon Territory, and partially in Saskatchewan.


Alberta

Government of Alberta

Emissions in Alberta are covered by a combination of provincial and federal carbon pricing mechanisms:

  • Federal Fuel Charge (for fuel emissions)
  • Provincial baseline and credit system (for industrial emissions)

Fuel Charge (Carbon Tax)

Because Alberta is subject to the Federal Fuel Charge, the federal carbon tax also applies:

As of April 1, 2021, the carbon tax in Alberta is $40 per tonne of CO2e. It will increase $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.

Federal Climate Action Incentive

Because Alberta is subject to the Federal Fuel Charge, all Alberta residents receive Federal Climate Action Incentive payments to help offset personal carbon tax costs.

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.

You can see the full details about the federal climate action incentive payments here.

Baseline and Credit System

Alberta’s baseline and credit system is called the Alberta Technology Innovation and Emissions Reduction (TIER) Regulation. TIER applies to industrial facilities that emit more than 100,000 tonnes of CO2e per year.

Under Alberta’s TIER, each emitter is required to reduce its emissions by 10% compared to a 2013-2015 baseline. If an emitter releases more than their allocated baseline amount, they pay $30 per tonne. If they release less, then they earn credits that they can carry forward for future years.

Industrial polluters can also participate in the Alberta Emission Offset System. Starting in 2021, industrial emitters have to reduce their emissions by 1% annually.


British Columbia

Government of British Columbia

All emissions in British Columbia, including industrial emissions, are covered by the province’s carbon tax.

Industrial facilities may also participate in the CleanBC Industry Fund and the CleanBC Industrial Incentive Program. Some industrial and public sector polluters can also participate in the BC’s GHG Emissions Offset Program.

Fuel Charge (Carbon Tax)

British Columbia’s Carbon Tax works by applying an additional charge to the sale of fossil fuels, based on their carbon content.

Here are the 2021 fuel charges rates for some common fossil fuels:

  • Gasoline: $0.0996 per litre
  • Natural Gas: $0.0882 per cubic metre
  • Diesel: $0.1171 per litre

As of April 1, 2021, the carbon tax in British Columbia is $45 per tonne of CO2e, and is scheduled to rise to $50 April 1, 2022.

Climate Action Tax Credit

While most proceeds raised by the BC carbon tax are used to reduce corporate and personal income tax, certain low-income BC resident are also eligible to receive BC Climate Action Tax Credit payments.

The amount received depends on the number of people within your household and your adjusted family net income. For example:

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.

If your adjusted family net income is above a certain threshold, the climate action payments are reduced. It is also possible to not receive any payments if your personal or family income is high.

You can see the full details about the BC climate action tax credit here.


Manitoba

Government of Manitoba

Manitoba has developed two of its own programs: the Manitoba Green Levy and the Manitoba Output-Based Pricing System (OBPS). However, these programs have been deferred until further notice. Therefore, emissions released within the province are covered by the federal programs:

  1. Federal Fuel Charge (for fuel emissions)
  2. Federal Output-Based Emissions Pricing System (for industrial emissions)

Fuel Charge (Carbon Tax)

Because Manitoba is subject to the Federal Fuel Charge, the federal carbon tax also applies:

As of April 1, 2021, the carbon tax in Manitoba is $40 per tonne of CO2e. It will increase $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.

Federal Climate Action Incentive

Because Manitoba is subject to the Federal Fuel Charge, all Manitoba residents receive Federal Climate Action Incentive payments to help offset personal carbon tax costs.

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.

You can see the full details about the federal climate action incentive payments here.

Baseline and Credit System

Manitoba is subject to the Federal Output-Based Pricing System.


New Brunswick

Government of New Brunswick

Emissions in New Brunswick are covered under one of two provincial programs:

  1. Provincial Fuel Charge (for fuel emissions)
  2. Provincial Baseline and Credit System (for industrial emissions)

Fuel Charge (Carbon Tax)

New Brunswick has recently implemented the New Brunswick Carbon Tax. However, there is curiously few details on their provincial website, apart from the linked press release.

Here are the 2021 fuel charges rates for some common fossil fuels:

  • Gasoline: $0.0884 per litre
  • Diesel: $0.1073 per litre

As of April 1, 2021, the carbon tax in Manitoba is $40 per tonne of CO2e. It will increase $10 per year in April until it reaches $50 per tonne in 2022.

Carbon Tax Rebate

In the past, New Brunswick has reduced existing provincial fuel taxes by the same amount that the carbon tax increases fuel prices. Therefore, the carbon tax does not generate any additional revenue for the province.

However, the government has decided to not reduce fuel taxes further – thus the most recent carbon price increase from $30/tonne to $40/tonne will generate extra revenue for the province.

There is discussion about returning these funds to New Brunswick residents or towards green project funds, but no formal plans have been made.

Baseline and Credit System

New Brunswick’s baseline and credit system is called the New Brunswick Output-Based Pricing System (OBPS). The OBPS applies to industrial facilities that emit more than 50,000 tonnes of CO2e per year.

Under New Brunswick’s OBPS, each emitter is required to reduce its emissions annually compared to a historical baseline. If an emitter releases more than their allocated baseline amount, they pay $30 per tonne. If they release less, they earn credits that they can carry forward for future years.


Newfoundland and Labrador

Government of Newfoundland and Labrador

Emissions in Newfoundland and Labrador are covered under one of two provincial programs:

  1. Provincial Fuel Charge (for fuel emissions)
  2. Provincial Baseline and Credit System (for industrial emissions)

Fuel Charge (carbon tax)

Newfoundland and Labrador’s Carbon Tax works by applying an additional charge on the sale of fossil fuels, based on their carbon content.

Here are the 2021 fuel charges rates for some common fossil fuels:

  • Gasoline: $0.0663 per litre
  • Diesel: $0.0805 per litre
  • Propane: $0.0464 per cubic metre

As of November 7, 2020, the carbon tax in Newfoundland and Labrador is $40 per tonne of CO2e. It will increase $10 per year in November until it reaches $50 per tonne in 2022.

You can see the full list of NL fuel charge rates here.

Carbon Tax Rebate

Newfoundland and Labrador does not currently have a provincial carbon tax rebate program as most carbon tax proceeds are used to reduce the province’s existing fuel tax.

Baseline and Credit System

Newfoundland and Labrador’s baseline and credit system is called the Newfoundland and Labrador Emissions Performance Standard System (EPS). The performance standard system applies to industrial facilities that emit more than 25,000 tonnes of CO2e per year.

Under the Newfoundland and Labrador’s EPS, each emitter is required to reduce its emissions annually, starting with a baseline amount determined by the facility’s historical emissions or by a sector benchmark.

If an emitter releases more than their allocated baseline amount, they must purchase emissions credits. If they release less, then they earn credits that they can carry forward for future years.


Northwest Territories

All emissions in the Northwest Territories, including industrial emissions, are covered by the territories’ carbon tax. Special considerations apply to Large Industrial Emitters.

Fuel Charge (Carbon Tax)

The Northwest Territories Carbon Tax works by applying an additional charge to the sale of fossil fuels, based on their carbon content.

Here are the 2021 fuel charges rates for some common fossil fuels:

  • Gasoline: $0.071 per litre
  • Diesel: $0.109 per litre
  • Propane: $0.062 per cubic metre
  • Aviation fuels are exempt.

As of September 1, 2020, the carbon tax in the Northwest Territories is $30 per tonne of CO2e. It will then increase $10 per tonne annually in July until reaching $50 per tonne in 2022.

You can see the full list of NT fuel charge rates here.

Cost of Living Offset Payment

All Northwest Territory residents receive Cost of Living Offset Payments to help offset personal carbon tax costs.

In 2021, the baseline annual cost of living offset for a family of four in the Northwest Territories is $672. While for a single adult, the cost of living offset payment is $180.

You can see the full details about the NWT cost of living offset payment program here. Federal climate action incentive payments here.

Proceeds raised from the carbon tax are also used to fund the territory’s heating fuel rebate, electric power producers rebate, and larger emitters offsets programs. You can see full details here.


Nova Scotia

Government of Nova Scotia

All emissions in Nova Scotia, including industrial emissions, are covered by the province’s cap and trade program.

Cap and Trade System

The Nova Scotia Cap and Trade Program (CaT) applies to all emissions from the industrial, heating, electricity, and transportation sectors. Only the largest facilities from each sector need to participate, and the full list of all 27 participants can be found here.

Under Nova Scotia’s CaT, the government sets a limit on the total emissions can be released annually, and then gives a portion of this limit to participating facilities for free. The remaining portion is sold to facilities in an auction.

If an emitter releases more than their allocated amount, they must buy a credits in the auction or from another participant. If they release less, they earn credits that they can sell in the auction or directly to another participant.

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. (auction history)


Nunavut

Government of Nunavut

Nunavut has decided not to develop its own carbon pricing mechanism. Therefore, emissions released within the province are covered by the federal programs:

  1. Federal Fuel Charge (for fuel emissions)
  2. Federal Output-Based Emissions Pricing System (for industrial emissions)

Fuel Charge (Carbon Tax)

Because Nunavut is subject to the Federal Fuel Charge (with one adjustment), the federal carbon tax also applies.

Here are the 2021 fuel charges rates for some common fossil fuels in Nunavut:

  • Gasoline: $0.0884 per litre
  • Diesel: $0.1073 per litre
  • Propane: $0.0619 per litre

As of April 1, 2021, the carbon tax in Nunavut is $40 per tonne of CO2e. It will increase $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.

You can see the full list of NU fuel charge rates here.

Nunavut Carbon Rebate

The Government of Nunavut has implemented the Nunavut Carbon Rebate which reduces some fuel charges by 50% at the point of purchase.

The Government of Nunavut has also worked with the federal government to get a fuel charge exemption for the aviation, electricity generation, and fishing sectors.

Baseline and Credit System

Nunavut is subject to the Federal Output-Based Pricing System.


Ontario

Government of Ontario

Emissions in Ontario are covered by a combination of provincial and federal carbon pricing mechanisms:

  • Federal Fuel Charge (for fuel emissions)
  • Provincial baseline and credit system (for industrial emissions)

Fuel Charge (Carbon Tax)

Because Ontario is subject to the Federal Fuel Charge, the federal carbon tax also applies:

As of April 1, 2021, the carbon tax in Ontario is $40 per tonne of CO2e. It will increase $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.

Federal Climate Action Incentive

Because Ontario is subject to the Federal Fuel Charge, all Ontario residents receive Federal Climate Action Incentive payments to help offset personal carbon tax costs.

In 2021, the baseline climate action incentive payment for a family of four in Ontario is $600. While for a single adult, the climate action incentive payment is $300.

You can see the full details about the federal climate action incentive payments here.

Baseline and Credit System

Ontario’s baseline and credit system is called the Ontario Emissions Performance Standard (EPS), and is scheduled to replace the Federal OBPS starting January 1, 2022. The performance standard system applies to industrial facilities that emit more than 50,000 tonnes of CO2e per year.

Under the province’s performance standard system, each emitter is required to reduce its emissions annually, starting with a baseline amount determined by the facility’s historical emissions.

If an emitter releases more than their allocated baseline amount, they must purchase emissions credits. If they release less, then they earn credits that they can carry forward for future years.


Prince Edward Island

Government of Prince Edward Island

Emissions in Prince Edward Island are covered by a combination of provincial and federal carbon pricing mechanisms:

  1. Provincial Carbon Levy (for fuel emissions)
  2. Federal Output-Based Emissions Pricing System (for industrial emissions)

Carbon Levy

The Prince Edward Island Carbon Levy works by applying an additional charge to the sale of fossil fuels, based on their carbon content.

For example, here are the 2021 fuel charges rates for some common fossil fuels:

  • Gasoline: $0.0663 per litre
  • Diesel: $0.0805 per litre
  • Propane: $0.000 per cubic metre

As of April 1, 2021, the carbon tax in the Prince Edward Island is $40 per tonne of CO2e. It will increase $10 per tonne annually in July until reaching $50 per tonne in 2022.

You can see the full list of PEI fuel charge rates here.

Carbon Tax Rebate

There is no provincial carbon tax rebate program in PEI. Proceeds from the carbon tax are used to reduce the existing provincial gas tax, drivers license and registration fees, as well as a 10% reduction on public transit fare.

Baseline and Credit System

Prince Edward Island is subject to the Federal Output-Based Pricing System.


Québec

Government of Quebec

All emissions in Quebec, including industrial emissions, are covered by the province’s cap and trade program.

Cap and Trade System

The Quebec Cap and Trade Program (CaT) is linked with California’s CaT (and previously with Ontario’s CaT, before it was cancelled by the current Ontario conservative government) through the Western Climate Initiative. This means that CaT participants in Quebec and California can trade emission credits with each other.

The Quebec CaT applies to all emissions from provincial fuel distributors, and all facilities in the industrial and electricity generation sectors that emit more than 25,000 tonnes of CO2e annually. The full list of Quebec participants can be found here.

Under the CaT, the government sets a limit on the total emissions can be released annually. Emissions allowances are then sold in auction to participating facilities.

If an emitter releases more emission than they purchased credits for, they must buy more credits in the auction or from another participant. If they release less, then they earn credits that they can sell in the auction or directly to another participant.

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. (auction history)


Saskatchewan

Government of Saskatchewan

Emissions in Saskatchewan are covered by a combination of provincial and federal carbon pricing mechanisms:

Fuel Charge (Carbon Tax)

Because Saskatchewan is subject to the Federal Fuel Charge, the federal carbon tax also applies:

As of April 1, 2021, the carbon tax in Saskatchewan is $40 per tonne of CO2e. It will increase $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.

Federal Climate Action Incentive

Because Saskatchewan is subject to the Federal Fuel Charge, all Saskatchewan residents receive Federal Climate Action Incentive payments to help offset personal carbon tax costs.

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.

You can see the full details about the federal climate action incentive payments here.

Baseline and Credit System

Saskatchewan’s baseline and credit system is called the Saskatchewan Output Based Performance Standards (OBPS). The OBPS applies to industrial facilities that emit more than 25,000 tonnes of CO2e per year, except in the electricity generation and natural gas transmission sectors.

Under Saskatchewan’s OBPS, each industrial polluter will be allowed to release a baseline amount of emissions per unit of product produced, based on the facilities historical emissions. The baseline will then decrease every year, by approximately 5% by 2030 for most sectors.

If an emitter releases more than their allocated baseline amount, they will need to purchase a credit or contribute to the province’s technology fund. If they release less, then they earn credits that they can carry forward for future years.


Yukon Territory

Government of Yukon

The Yukon Territory has decided not to develop its own carbon pricing mechanism. Therefore, emissions released within the territory are covered by the federal programs:

  1. Federal Fuel Charge (for fuel emissions)
  2. Federal Output-Based Emissions Pricing System (for industrial emissions)

Fuel Charge (Carbon Tax)

Because the Yukon is subject to the Federal Fuel Charge (with one adjustment), the federal carbon tax also applies:

As of April 1, 2021, the carbon tax in the Yukon is $40 per tonne of CO2e. It will increase $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.

Carbon Tax Rebate

Yukon residents receive carbon tax rebates to help offset personal carbon tax costs.

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.

The Government of Yukon has also worked with the federal government to get a fuel charge exemption for the aviation, electricity generation, and fishing sectors.

Baseline and Credit System

Yukon Territory is subject to the Federal Output-Based Pricing System.


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2 thoughts on “Canadian Carbon Prices & Rebates (Updated 2021)”

  1. Thanks – it’s hard to find all of this information in one place. At least the links are here, so I can look into the content further.

    Reply

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