Carbon pricing in Canada is implemented either as a regulatory fee or as a tax levied on the carbon content of fuels at the provincial, territorial, or federal level. Provinces and territories of Canada are allowed to create their own systems of carbon pricing as long as they comply with the minimum requirements set by the federal government; individual provinces and territories thus may have higher taxes than the federally mandated one but not a lower one. Currently, all provinces and territories are subject to a carbon pricing mechanism, either by an in-province program or by one of two federal programs. , the federal minimum tax was set at per tonne of equivalent, set to increase to in 2030.
In the absence of a provincial system, or in provinces and territories whose carbon pricing system does not meet federal requirements, a regulatory fee is implemented by the federal Greenhouse Gas Pollution Pricing Act (GHGPPA), which passed in December 2018. In provinces where the fee is levied, 90% of the revenues are returned to taxpayers. The carbon tax is levied because of a need to combat climate change, which resulted in federal commitments to the Paris Agreement. According to NASA's Jet Propulsion Laboratory (JPL), the air today contains 400 ppm of , while the average CO2 level over the past 400,000 years was between 200 and 280 ppm.
Saskatchewan never had a carbon pricing system, and other provinces—Manitoba, Ontario, New Brunswick, and Alberta—have opted out of previous provincial carbon tax systems. Revenue from the federal GHGPPA, which came into effect in April 2019, is redistributed to the provinces, either through tax credits to individual residents or to businesses and organizations that are affected by the tax but are unable to pass on the cost by raising consumer prices.
The introduction of the tax was met with political resistance, mainly by the Conservative Party of Canada, which attempted to "make the carbon tax the single issue" of the 2019 federal election campaign. This argument did not succeed, as the Canadian voting public supported parties that also supported the carbon tax, leading CBC News to declare Canada's carbon tax to be "the big election winner" and "the only landslide victor" in the election. Similarly, legal challenges to the law failed on March 25, 2021, when the Supreme Court of Canada rejected the 2019 appeal of the provinces of Manitoba, Ontario, Alberta, and Saskatchewan, ruling in Reference re Greenhouse Gas Pollution Pricing Act that the GHGPPA was constitutional.
In 2024, amidst an affordability crisis, carbon pricing became an increasingly divisive policy. Following a government crisis, prime minister Justin Trudeau resigned pending the results of a leadership election, which was won by Mark Carney. On March 14, 2025, in his first act as prime minister, Mark Carney signed a prime ministerial directive to effectively remove the federal consumer carbon tax implemented via the GHGPPA by setting it to 0% effective April 1, 2025. However, the industrial carbon tax still remains in place.
History
2003: Alberta becomes first jurisdiction in North America to put price on carbon In 2003, Alberta signaled its commitment to manage greenhouse gas emissions by passing the Climate Change and Emissions Management Act. One of the first actions taken under the legislation was to develop a mandatory reporting program for large emitters in Alberta. In March 2007, Alberta passed Specified Gas Emitters Regulation. The first compliance cycle was from July 1 to December 31, 2007.
2007: Quebec implements first carbon tax In June 2007, Quebec implemented the first carbon tax in Canada, which was expected to generate $2 million annually. On December 11, 2008, ExxonMobil CEO Rex Tillerson said that a carbon tax is preferable to a cap-and-trade program, which "inevitably introduces unnecessary cost and complexity". A carbon tax is "a more direct, more transparent and more effective approach". Tillerson added that he hoped that the revenues from a carbon tax would be used to lower other taxes so as to be revenue neutral.
2008: Dion election proposal An unpopular revenue-neutral carbon tax was proposed during the 2008 Canadian federal election by Stéphane Dion, then leader of the Liberal Party. It was the main plank of Dion's platform and allegedly contributed to the defeat of the Liberal Party, which at the time won its lowest-ever share of the popular vote in the country's history. The Conservative Party, which won the 2008 election, had promised to implement a North America–wide cap-and-trade system for greenhouse gases. During the 2008 Canadian federal election, the Conservative Party promised to develop and implement greenhouse gas emissions trading by 2015, also known as cap and trade, to encourage certain behaviours through economic incentives regarding the control of emissions and pollution.
2014: Ecofiscal Commission In 2014, public policy economists and superannuated politicians came together to begin discussions on what would become Canada's Ecofiscal Commission. The commission was established with the participation of Paul Martin, Jim Dinning, Preston Manning, and Jack Mintz on November 4, 2014, and became the leading advocacy group in Canada for carbon pricing. It published reports in 2015, 2016, and 2017.
2015: Trudeau pledges to act if elected In February 2015, Justin Trudeau announced that he would impose carbon pricing if elected. Trudeau's proposed system would resemble the Medicare model, in which provinces would design systems suitable for their needs, with the federal government setting national targets and enforcing principles.
2016: Paris Agreement The Paris Agreement ()Also known as Paris climate accord or Paris climate agreement. is an agreement within the United Nations Framework Convention on Climate Change (UNFCCC), dealing with greenhouse-gas-emissions mitigation, adaptation, and finance, signed in 2016. The agreement's language was negotiated by representatives of 196 state parties at the 21st Conference of the Parties of the UNFCCC in Le Bourget, near Paris, France, and adopted by consensus on December 12, 2015. Under the Paris Agreement, each country must determine, plan, and regularly report on the contribution that it undertakes to mitigate global warming.Article 3, Paris Agreement (2015) No mechanism forces a country to set a specific target by a specific date.
A special report by The Guardian in partnership with Climate Action Tracker compared pledges made by some 200 countries that participated in the 2015 United Nations round of talks on a "new climate deal" hosted in Paris.Carbon dioxide equivalent e emissions (Mte) The co-authors wrote an in-depth analysis of 14 key countries and blocs, including Canada. The article, which summarized the report, said that Canada's climate targets were the "weakest ... of any major industrialised economy which experts say was a "direct result" of Stephen Harper government's hard line policies" and its "promotion" of the "vast reserves of tar sands in Alberta" that are highly polluting". By December 2016, the ten provinces and the Canadian government presented their "executive, mitigation and adaptation" strategies towards a clean economy. The "extensive document"—"Pan-Canadian Framework on Clean Growth and Climate Change"—"lean[-ed] heavily on carbon pricing".
In 2018, Canada passed the GHGPPA, implementing a revenue-neutral carbon tax starting in 2019,Greenhouse Gas Pollution Pricing Act, in force since June 21, 2018 (page visited on October 26, 2018).Dana Nuccitelli, "Canada passed a carbon tax that will give most Canadians more money" , The Guardian, October 26, 2018 (page visited on October 26, 2018). which applies only to provinces whose carbon pricing systems does not meet federal requirements. Revenue from the carbon tax was to be redistributed to the provinces. According to a report by the Canadian Chamber of Commerce (CCC) released on December 13, 2018, Canada's largest business group endorsed the carbon pricing introduced by the federal government, saying it offers flexibility and is the "most efficient way to cut emissions", as well as "solidly backs carbon pricing". According to a December 13, 2018, CTV News article, Stewart Elgie, from the Environment Institute at the University of Ottawa, the CCC's "endorsement of the carbon tax as the most efficient emissions-cutting tool" and its support of "Canada's investments in clean technology at home and abroad" provides the Canadian economy with a "major opportunity ... to market itself in a low-carbon future".
In December 2018, the Senate Committee on Agriculture and Forestry submitted a report based on a year-long study of the "impacts of climate change and carbon pricing on agriculture, agri-food and forestry". Although some witnesses raised concerns that Canada's international competitiveness could be diminished compared with producers "who do not bear these additional, carbon-related costs", the committee noted that a "study of the effects of British Columbia's carbon tax — which launched in 2008 — suggested the province's international competitiveness was not diminished". The report recommended that Environment and Climate Change Canada consider exemptions for agricultural activities under the GHGPPA, with "special attention to competitiveness for producers and food affordability for Canadians". The committee recommended exempting fuels used for heating or transportation in farming activities.
2018: Canadian government enacts GHGPPA
The Parliament of Canada passed the Greenhouse Gas Pollution Pricing Act (GHGPPA) in fall 2018 under Bill C-74. The GHGPPA refers to a charge or pricing instead of taxation. The charge, which will rise to $50 per tonne of CO2 by 2022, begins at in 2019 and increases by per year until 2022. Under the GHGPPA, provinces have the flexibility to implement their own solutions to mitigate GHG emissions in their own jurisdictions. All provinces were required to place a minimum price of per tonne of GHG emissions by January 1, 2019. The tax was retroactive to January 2019. The tax increased to per tonne in 2020 and per tonne in 2021.
The federal government sends an annual rebate ranging from adequate emissions pricing plans. For example, if under the GHGPPA a family of four in Ontario pays an additional per month for gas, home heating, and other costs, it will receive in annual rebates. Compared to the in costs, the GHGPPA should leave the family better off in 2019. The rebate increases each year along with the carbon price. Taxpayers had to request the Climate Action Incentive Payment (CAIP) rebate on their annual income tax return until filing their 2021 tax return, since which eligibility for the rebate has been automatic and the taxpayer sent a cheque or had a direct deposit made into their bank account.
In her October 23, 2018 Power & Politics podcast, Vassy Kapelos interviewed Dominic LeBlanc, the Minister of Intergovernmental Affairs, Northern Affairs and Internal Trade, Saskatchewan Premier Scott Moe, and Ontario Minister of Environment Rod Phillips. Carbon pricing in Canada is forecast by Environment Canada to remove 50–60 MT of emissions from the air annually by 2022, representing about 12% of all Canadian emissions. However, Canada needs to reduce emissions to 512 MT by 2030 to meet its commitments under the Paris Agreement. This would mean reducing annual emissions by about 200 MT from 2018 levels. In addition to carbon pricing, the government is pursuing a range of additional policies, including improving fuel standards, energy efficiency, and closing coal plants.
Forecast economic impact