Ontario and pollution pricing

Protecting the environment and growing the economy go together. In 2016, the federal government worked with provinces, territories, and with input from Indigenous Peoples on Canada’s first comprehensive climate action plan, which includes a stringent, fair, and efficient price on carbon pollution.

As part of Canada’s plan, provinces and territories had the flexibility to maintain or develop a carbon pollution pricing system that works for their circumstances, provided it meets the federal standard. The Government of Canada worked with provinces and territories on this for over two years.

On July 3, 2018, the Government of Ontario ended its climate plan, including its cap-and-trade pollution pricing system. This has resulted in a projected annual increase of emissions of approximately 48 million tonnes of carbon pollution in 2030, equivalent to the emissions from about 30 coal-fired electricity units. The province has also cancelled their investments in energy efficiency and low-carbon projects that help schools, businesses, and hospitals reduce emissions and reduce costs, therefore costing Ontarians money and good jobs.

The federal carbon pollution pricing system will apply in Ontario.

Federal system highlights

The federal carbon pollution pricing system will be implemented in Ontario, under the federal Greenhouse Gas Pollution Pricing Act with the following features:

  • For larger industrial facilities, an output-based pricing system for emissions-intensive trade-exposed (EITE) industries will start applying in January 2019. This will cover facilities emitting 50,000 tonnes of carbon dioxide equivalent (CO2e) per year or more, with the ability for smaller EITE facilities that emit 10,000 tonnes of CO2e per year or more to voluntarily opt-in to the system over time.
  • A charge applied to fossil fuels, generally paid by registered distributors (fuel producers and distributors), as set out in the Greenhouse Gas Pollution Pricing Act, Part 1, will start applying in April 2019. Information on targeted relief for rural and remote residents, farmers, and fishers is available from Finance Canada.

Use of proceeds

The Government of Canada has committed to return all direct proceeds collected in Ontario, under the federal carbon pollution pricing backstop system through direct payments to families and investments to reduce emissions, save money, and create jobs. In Ontario, we will return the direct proceeds as follows:

  • Climate Action Incentive payments: Under the proposed approach, most of the proceeds the federal government collects from Ontario through the fuel charge will be returned directly to Ontario’s individuals and families through Climate Action Incentive PaymentsFootnote 1.
  • Support for particularly affected sectors: The remainder of fuel charge proceeds will be used to provide support to the province’s schools, hospitals, small and medium-sized businesses, colleges and universities, municipalities, not-for-profit organizations and Indigenous communities, which will help save money and create good jobs. In Ontario, this amount is estimated at $1.45 billion over the next five fiscal years.
  • Direct proceeds from industrial facilities under the federal output-based pricing system will be directed to supporting reductions in greenhouse gas emissions in Ontario.

How Climate Action Incentive payments will be calculated – An Ontario family of four will receive $307 in 2019

Under the proposed approach, most of the proceeds the federal government collects from Ontario through the fuel charge will be returned directly to Ontario’s individuals and families through Climate Action Incentive Payments.

  • $154 for a single adult or the first adult in a couple.
  • $77 for the second adult in a couple. Single parents will receive this amount for their first child.
  • $38 for each child in the family (starting with the second child for single parents).

Under this proposal, an Ontario family of four will receive $307 in 2019. The average household in Ontario will receive $300, taking into account the various family sizes and circumstances.

Family of four

Joseph and Bianca, who have two young children, live in Windsor. They decide that Bianca will be the parent claiming the Climate Action Incentive payment for their family when she files her 2018 tax return in early 2019. She will claim $154 for herself, $77 for Joseph, and $38 for each child, for a total amount of $307. She will see this full amount when her tax return is assessed.

Supplement for residents of small and rural communities

To further support small and rural community residents in Ontario, the Government proposes to provide a supplementary Climate Action Incentive amount for people who live in small and rural communities, in recognition of their increased energy needs and reduced access to energy-efficient transportation options. This supplement will be an additional 10 per cent of the payment amount to which they are entitled. Small and rural communities will be defined as anywhere outside of a census metropolitan area (CMA), as defined by Statistics Canada Footnote 2 .

Delivery of payments

Under the proposal, individuals will claim the Climate Action Incentive payment on their tax return. This will involve filling out a short schedule identifying the number of adults and children in the family unit for which payments would be claimed. There will be one claim per family.

The provision of Climate Action Incentive payments through the Canada Revenue Agency will ensure timely, accurate, and cost-efficient delivery.

Single parent with one child eligible for rural supplement

Melissa is a single mother who lives in Petawawa, with her three-year-old son. Under the proposed Climate Action Incentive payment, Melissa will claim $154 for herself and $77 for her son when she files her 2018 tax return in early 2019, for a total Climate Action Incentive payment of $231. Given that the family lives in a small and rural community, Melissa will indicate on her tax return that her family qualifies for the small and rural community supplement, meaning that their payment will be boosted by 10 per cent. As a result, Melissa will see an amount of $254 when her tax return is assessed.

Impact on individuals and families

Climate Action Incentive payments enable the Government to encourage lower greenhouse gas (GHG) emissions without imposing a financial burden on households. The federal backstop system helps the environment and the economy because it puts a price on pollution and supports cleaner alternatives. Most households in Ontario will receive more in Climate Action Incentive payments than they incur in total costs resulting from pollution pricing.  As the pollution price itself encourages fewer GHG emissions, it will both protect the environment and promote green innovation.

Payment amounts in subsequent years

Climate Action Incentive payments will increase annually to reflect increases in the price on pollution under the federal backstop system, until at least 2022. The federal Minister of Finance will make annual announcements of Climate Action Incentive payment amounts, reflecting the increasing price on pollution and updated levels of direct proceeds.

Based on current projections, Climate Action Initiative payment amounts (excluding the supplement for residents of small and rural communities) in future years would be as follows:

  2020 2021 2022
First adult $226 $295 $360
Spouse $113 $147 $180
Child $56 $73 $89
Family of four $451 $588 $718

Building on the examples above and based on current projections, Bianca will receive $718 for her family of four, and Melissa will receive $594 (including the supplement for residents of small and rural communities) for her family of two in 2022.

Costs summary

Federal fuel charges – Starting in April 2019 and increasing in stringency over time, the federal pollution pricing system will add a nominal cost to everyday fuels.

In Ontario, for example, the fuel charge on gasoline, in 2019, will be 4.42 cents per litre and the fuel charge for natural gas used in home heating will be 3.91 cents per cubic metre. These rates will increase over time. A complete list of fuel charge rates is available on Finance Canada’s website.

Estimated annual costs – We know from experience in British Columbia, Alberta, and Quebec that provinces with a price on carbon pollution in 2017 were the fastest-growing economies in Canada.

Under the federal system, the estimated average cost impact for a household in Ontario is $244, in 2019, which is less than the average for Climate Action Incentive payments ($300). Households of Ontario can also reduce this cost through many options, such as better home insulation, switching to a more fuel-efficient vehicle, using public transit, and lower-cost solutions like LED lightbulbs.   

Studies consistently show the cost of inaction is much greater than the cost of addressing climate change. Extreme weather events like floods and wildfires are becoming more severe and happening more frequently due to climate change.  These disasters can carry huge costs from damaged homes, businesses, and infrastructure. For example, insurance losses related to climate change and severe weather averaged $405 million per year between 1983 and 2008, and $1.8 billion between 2009 and 2017.

Canada’s clean growth investments in Ontario

Since 2016, the Government of Canada has allocated over $9.8 billion for investments in Ontario for public transit projects. Through our investments, Sudbury was able to expand its fleet of busses, make it easier and faster for people to get to around. In addition to investing in the Yonge subway extension, the Government of Canada helped the TTC buy clean diesel and electric busses, all of which help reduce emission and improve air quality. The Government of Canada also invested in Toronto’s cycling network, helping install bike lanes on Lakeshore and Woodbine, which keep cyclists safe. This is how we’re working to make sure that public transit is available for all and that people can get where they need to go, quickly and safely, while reducing pollution. It’s a part of the Government’s Investing in Canada Plan.

Over $2.8 billion is also allocated for investments in Green Infrastructure in Ontario, for projects that reduce emissions, build resilience to the impacts of climate change, or provide additional environmental benefits such as clean air and clean water. For example, the Government of Canada contributed $384 million to the Toronto Port Lands Flood Protection Project to protect residents and businesses. The Government of Ontario and Canada are working together to fund priority projects that will help reduce pollution and grow the economy.

Canada is investing in electric-vehicle charging stations to help people drive to more places, with low-emission vehicles. Natural Resources Canada’s Electric Vehicle and Alternative Fuel Infrastructure Deployment Initiative gave $1.2 million to install electric-vehicle charges across the Greater Toronto Area (GTA) and southern Ontario, from Niagara Falls, to London, to Pickering. The Initiative has also made investments in hydrogen and natural gas fueling stations.

Investing in new technologies is also critical to Canada’s economic and environmental plan. For example, Morgan Solar received almost $3 million to support the development of products that provide solar power for large buildings.

Specific initiatives to increase resilience to climate impacts within Ontario include community-based climate-risk assessments, address the impacts of extreme events to the shores of Lake Huron, and build the resilience of nature and wildlife in addition to developing a regional climate organization to work with the Government of Canada’s Canadian Centre for Climate Services. Furthermore, the Government of Canada is investing $44.84 million for the Great Lakes Protection Initiative, protecting the world’s largest body of fresh water for swimmers, boaters, and wildlife.

Report a problem or mistake on this page
Please select all that apply:

Thank you for your help!

You will not receive a reply. For enquiries, contact us.

Date modified: