Carbon pricing in Canada

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Carbon pricing in Canada is implemented either as a regulatory fee or tax levied on the carbon content of fuels at the Canadian provincial, territorial or federal level. Provinces and territories of Canada are allowed to create their own system of carbon pricing as long as they comply with the minimum requirements set by the federal government; individual provinces and territories thus may have a higher tax than the federally mandated one but not a lower one. Currently, all provinces and territories are subject to a carbon pricing mechanism, either by an in-province program or by one of two federal programs.^[1] As of April 2023^[update] the federal minimum tax is set at CA$65 per tonne of CO₂ equivalent, set to increase to CA$170 in 2030.^[2][3]

In the absence of a provincial system, or in provinces and territories whose carbon pricing system does not meet federal requirements, a regulatory fee is implemented by the federal Greenhouse Gas Pollution Pricing Act (GHGPPA), which passed in December 2018. In provinces where the fee is levied, 90% of the revenues are returned to tax-payers.^[4]

The carbon tax is levied because of a need to combat climate change, which resulted in Federal commitments to the Paris Agreement. According to NASA's Jet Propulsion Laboratory (JPL), the air today contains 400 ppm of CO₂ while the CO₂ level average over the past 400,000 years was between 200 ppm and 280 ppm.^[5][6]

Saskatchewan never had a carbon pricing system and other provinces—Manitoba, Ontario, New Brunswick, and Alberta—have opted out of previous provincial carbon tax systems. Revenue from the federal GHGPPA, which came into effect in April 2019, is redistributed to the provinces, either through tax credits to individual residents or to businesses and organizations that are affected by the tax but are unable to pass on the cost by raising consumer prices.^[7][4]

The introduction of the tax was met with political resistance, mainly by the Conservative Party of Canada which attempted to "make the carbon tax the single issue" of the 2019 federal election campaign.^[8] This argument did not succeed, as the Canadian voting public supported parties that also supported the carbon tax, leading CBC News to declare Canada's carbon tax to be "the big election winner" and "the only landslide victor" in this election.^[9] Similarly, legal challenges to the law failed on March 25, 2021 when the Supreme Court of Canada rejected the 2019 appeal of the provinces of Manitoba, Ontario, Alberta, and Saskatchewan, ruling in Reference re Greenhouse Gas Pollution Pricing Act that GHGPPA was constitutional.^[10]