Carbon pollution pricing systems across Canada

Carbon pricing is about recognizing the cost of pollution and accounting for those costs in daily decisions. Putting a price on carbon pollution is widely recognized as the most efficient means to reduce greenhouse gas emissions while also driving innovation. 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 (the federal ‘benchmark’), that all systems must meet to ensure they are comparable and effective in reducing greenhouse gas emissions. If a province or territory decides not to price 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.

The Government of Canada has confirmed that the carbon pollution pricing systems in Quebec, Nova Scotia, Newfoundland and Labrador, the Northwest Territories, and British Columbia continue to meet federal benchmark stringency requirements, and as of 2021, New Brunswick has a carbon pollution pricing system that also meets the benchmark 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 emissions sources the provinces do not cover.

The federal pricing system has two parts: a regulatory charge on fossil fuels like gasoline and natural gas, known as the fuel charge, and a performance-based system for industries, known as the Output-Based Pricing System. The fuel charge applies in Ontario, Manitoba, Yukon, Alberta, Saskatchewan and Nunavut. The Output-Based Pricing System applies in Ontario, New Brunswick, Manitoba, Prince Edward Island, Yukon, Nunavut, and partially in Saskatchewan.

As announced by the Minister of Environment and Climate Change in September 2020, New Brunswick and Ontario have proposed provincial output-based pricing systems that align with the current federal benchmark. As a result, the Government of Canada is taking the necessary steps to transition from the federal Output-Based Pricing System to enable the provincial systems to take effect in New Brunswick in 2021, and Ontario in 2022. More information on this is available on the main page of the Output-Based Pricing System.

The provinces and territories on the map of Canada are one of three colours depending on whether or not the federal backstop applies in full, in part or not at all. Provinces and territories in which the provincial or territorial system applies are Newfoundland and Labrador, Nova Scotia, New Brunswick, Quebec, British Columbia, and the Northwest Territories. Provinces in which the federal backstop applies in part are Prince Edward Island, Saskatchewan and Alberta. Provinces and territories in which the backstop applies in full are Ontario, Manitoba, Nunavut and the Yukon.

Proceeds from the federal carbon pricing system remain in the jurisdiction where they were collected. Provinces and territories that requested the federal system receive these proceeds directly and can use them as they see fit. In other jurisdictions, the federal government delivers all proceeds to individuals, families, and businesses through payments and climate action programs. This helps make carbon pricing affordable, and enables households to make investments to increase energy efficiency and further reduce emissions. Returning proceeds to households works because the amounts received by households do not depend on their energy consumption, so households are still rewarded for using less energy. Our plan also includes targeted support to recognize the unique circumstances of the territories and Indigenous Peoples, such as high costs of living and energy, challenges with food security, and emerging economies.

Going forward, the federal carbon price will continue to be revenue neutral, and the Government of Canada remains committed to ensuring that the federal price on pollution remains affordable, and to helping households to make investments to increase energy efficiency and further reduce emissions.

Related links

• Greenhouse Gas Pollution Pricing Act: Annual report for 2019
• Pan-Canadian Approach to Pricing Carbon Pollution: Interim Report (2020)
• 2020 Expert Assessment of Carbon Pricing Systems
• Output-Based Pricing System
• Additional information on the federal carbon pollution pricing benchmark