Putting a price on pollution: Carbon pollution pricing systems across Canada

A price on carbon pollution is an essential part of Canada’s plan to fight climate change and grow the economy. It is one of the most efficient ways to reduce greenhouse gas emissions and stimulate investments in clean innovation. It creates incentives for individuals, households, and businesses to choose cleaner options.

As part of Canada’s plan, provinces and territories have the flexibility to maintain or develop a carbon pollution pricing system that works for their circumstances, provided it meets federal benchmark stringency requirements. To ensure carbon pollution pricing applies throughout Canada, the federal backstop carbon pollution pricing system applies in whole or in part in any province or territory that requests it or that does not have a pricing system in place that aligns with the federal benchmark stringency requirements.

The Government of Canada has confirmed that the carbon pollution pricing systems in Quebec, Nova Scotia, the Northwest Territories, and British Columbia continue to meet federal benchmark stringency requirements. Provincial systems in place in Prince Edward Island, Alberta, and Saskatchewan also meet them for the emission sources they cover. The federal backstop supplements these systems by applying to other sources the provinces do not cover.

The federal fuel charge took effect in Alberta, on January 1, 2020. The charge will increase every April 1 thereafter, beginning on April 1, 2020.  Alberta’s TIER system, which also took effect on January 1, 2020, replaced Alberta’s previous approach to pricing carbon pollution for industry. In 2019, the Government of Canada announced that Alberta’s carbon pollution pricing system for large emitters aligns with the federal benchmark for the emission sources it covers.

In December 2019, the federal government announced that New Brunswick’s proposed provincial fuel charge meets the federal stringency requirements for the emission sources that it covers. New Brunswick’s carbon price took effect April 1, 2020. The federal output-based pricing system remains in place in the province.

The federal backstop is in place in Ontario, Manitoba, Yukon, and Nunavut.   

The federal carbon pollution pricing system is not about raising revenues. It is about recognizing that pollution has a cost, empowering Canadians, and encouraging cleaner growth and a more sustainable future. Under the federal approach to pricing carbon pollution, all direct proceeds are returned to the province or territory of origin.

The majority of the direct proceeds generated from the federal fuel charge in Alberta, Manitoba, Ontario, and Saskatchewan go back to individuals and families as Climate Action Incentive payments. The payment amounts for 2020 are available on the Finance Canada website. Individuals can claim these amounts through their 2019 personal income tax and benefits returns. In Nunavut, Yukon, and Prince Edward Island, direct proceeds are returned directly to the provincial or territorial government.

The Pan-Canadian Framework on Clean Growth and Climate Change

The Pan-Canadian Framework on Clean Growth and Climate Change is Canada’s climate plan. It is the country’s overarching framework to reduce greenhouse gas emissions across all sectors, grow the economy, and build climate resilience. It includes commitments by federal, provincial, and territorial governments. Carbon pollution pricing is one of the four pillars of the plan.

More information on the Pan-Canadian Framework.

Related links

Greenhouse Gas Pollution Pricing Act: Annual report for 2019