Federal Carbon Tax: Costs and Rebates

Federal Carbon Tax: Costs and Rebates

On October 23, 2018, draft amendments to the Federal Fuel Charge Regulations and the Greenhouse Gas Pricing Act were released. As of April 1, 2019, a federal carbon tax is scheduled to be imposed in respect of Ontario, New Brunswick, Manitoba, and Saskatchewan. The federal backstop legislation will be partially used in Prince Edward Island, Yukon, and Nunavut. The other provinces and territory are not subject to this regime as they have, or are, instituting their own custom carbon pricing structures.

In the first year, the federal tax will, for example, subject gasoline purchases to a 4.42 cents/L tax while 3.91 cents/cubic meter will be assessed on marketable natural gas. The rates will be increased annually until 2024.

According to a Government Backgrounder entitled Ensuring Transparency the direct proceeds from the federal carbon tax will be returned to the territory or province of origin. For the provinces subject to the federal carbon tax, approximately 90% of funds will be returned directly to individuals and families through a Climate Action Incentive (CAI) payment. The remainder will be returned through electricity generation support in remote communities; support for small and medium enterprises; and support for municipalities, universities, schools, colleges, hospitals, non-profit-organizations, and indigenous communities.

The following are sample published payout amounts and estimated costs for 2019.

Province Climate Action Incentive Payments ($) Carbon Tax Cost ($)
Family of 4 Avg.




2nd Adult Each Child Avg. House-hold
Ontario 307 300 154 77 38 244
Manitoba 339 336 170 85 42 232
Saskatchewan 609 598 305 152 76 403
New Brunswick 256 248 128 64 32 202


Also note that a 10% top-up will apply for those residing in rural areas.

The legislation does not set out the amounts of the payments. Rather, it provides that the amounts for each year may be specified by the Minister of Finance. Absent amounts specified for any specific province, the amounts are nil. It is not clear whether the amounts included in the above release are estimates, or are the amounts specified in accordance with this provision. Payments are expected to increase annually to reflect increases in the federal carbon tax, until at least 2022.

The Government of Canada website (https://www.canada.ca/en/


pollution-how-it-will-work.html) provides additional information specific to each jurisdiction.

The other provinces which are not subject to the federal program generally have similar systems in place which include the collection of levies, and a partial refund to individuals, with the remainder being used to fund the programs or other credits and direct expenditures. For example, in Alberta, the carbon levy is applied at a rate of $30/ton in 2019 to diesel, gasoline, natural gas and propane at the gas station and on heating bills. It does not apply to electricity. A carbon rebate valued at $300 for the first taxpayer, $150 for the spouse, and $45 for each child will be available with the payments beginning to be phased out at an income of $47,500 for individuals ($95,000 for families).

ACTION ITEM: Review the above website to review exposure and potential rebates in your particular jurisdiction. Businesses may want to budget for increased costs to operate.

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