Carbon pollution pricing proceeds programming and use of proceeds 

Since 2019, every jurisdiction in Canada has had a price on carbon pollution. Canada’s approach is flexible: any province or territory can design its own pricing system tailored to local needs, or can choose the federal pricing system. The federal government sets minimum national stringency standards that all systems must meet to ensure they are comparable and contribute their fair share to reducing greenhouse gas emissions. If a province decides not to price carbon pollution, or proposes a system that does not meet these standards, the federal system is put in place. This ensures consistency and fairness for all Canadians. Under the Greenhouse Gas Pollution Pricing Act, the federal carbon pollution pricing system has two parts:

  • a regulatory charge on fuel (the federal fuel charge)
  • a regulatory trading system for industry – the Output-Based Pricing System (OBPS)

For provinces that have not committed to pricing carbon pollution and where the federal fuel charge is currently in place – Ontario, Manitoba, Saskatchewan, and Alberta – the federal government is returning approximately 90% of proceeds from the federal fuel charge directly to families through Climate Action Incentive payments. This helps keep life affordable for individuals and families in the province of origin. With Climate Action Incentive payments, the majority of families receive more money back than they pay. The remainder of the proceeds from the federal fuel charge are returned to the province of origin through federal GHG reduction programs.

The federal OBPS is designed to ensure there is a price incentive for industrial emitters to reduce their greenhouse gas emissions, spur innovation, maintain competitiveness, and protect against the risk of industrial facilities moving from one region to another to avoid paying a price on carbon pollution (known as “carbon leakage”). The federal OBPS currently applies in Ontario, Manitoba, New BrunswickFootnote 1 , Prince Edward Island, Yukon, Nunavut, and partially in Saskatchewan.

Pricing carbon pollution is working in Canada. It is encouraging industries to become more efficient and use cleaner technologies, and it is spurring new and innovative approaches for cutting pollution, using energy differently, and saving money. All carbon pollution pricing proceeds will be returned to the jurisdictions of origin.

Output-Based Pricing System Proceeds Fund

The Output-Based Pricing System Proceeds Fund returns proceeds collected under the federal OBPS and is comprised of two streams: the Decarbonization Incentive Fund and the Future Electricity Fund. The OBPS Proceeds Fund leverages clean technology to support grid-greening and clean electricity projects and initiatives, as well as projects that reduce GHG emissions, in order to help decarbonize Canada’s industrial sectors.

Climate Action Incentive payments

If you are a resident of Ontario, Manitoba, Saskatchewan, or Alberta, you can claim the Climate Action Incentive payment when you file your income tax return. The Climate Action Incentive payment includes a 10% supplement for residents of small and rural communities. Starting in 2022, these payments will change from a refundable credit claimed annually on personal income tax returns to quarterly payments.

Climate Action Incentive Fund

The Climate Action Incentive Fund was active until March 31, 2021. The program is now closed. The program used a portion of federal fuel charge proceeds to support small- and medium-sized enterprises and schools in Ontario, Manitoba, Saskatchewan, and New Brunswick. As a part of Canada’s strengthened climate plan, A Healthy Environment and a Healthy Economy, options are under consideration to ensure the continued efficient and effective return of all federal fuel charge proceeds to jurisdictions of origin.

Indigenous Community-Based Climate Monitoring Program

Funding for Métis Nation programming was provided through Crown-Indigenous Relations and Northern Affairs Canada’s Indigenous Community-Based Climate Monitoring Program. This funding program responds to needs identified by Indigenous partners through the development of the Pan-Canadian Framework on Clean Growth and Climate Change and is focused on building Indigenous capacity to monitor climate change and co-apply Indigenous Knowledge and science to track changes in climate and the impacts of climate change.

Capital Facilities and Maintenance Program (CFMP)/First Nations Infrastructure Fund (FNIF)

Indigenous Services Canada utilized the Capital Facilities and Maintenance Program (CFMP)/First Nations Infrastructure Fund (FNIF) to support First Nation communities located below the 60th parallel. Fuel charge proceeds of $1.64 million were returned to New Brunswick, Manitoba and Saskatchewan to support First Nations recipients that are seeking to reduce energy costs and consumption, and reduce GHG emissions through alternative energy options.

Clean Energy for Rural and Remote Communities

Natural Resources Canada received $4.45 million to be spent over 2019-20 and 2020-21, for the purposes of returning fuel charge proceeds to jurisdictions, towards transitioning Indigenous communities onto clean energy through its Clean Energy for Rural and Remote Communities (CERRC) Program. The CERRC program aims to increase renewable energy generating capacity in rural and remote communities and off-grid industrial sites to displace diesel and fossil fuel usage, while also building community capacity to pursue and operate these projects.

Energy Manager Program

Natural Resources Canada also received $3.1 million to be spent over 2019-20 and 2020-21 for the purposes of returning fuel charge proceeds to jurisdictions through the Energy Manager Program which is focused on reducing energy-use, GHG emissions and operating costs in small and medium sized enterprises, municipalities, universities, schools, hospitals (MUSH), not-for-profit organizations, as well as Indigenous organizations.

Other climate change funding programs

Funding for projects to support Canada’s climate plan.

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