The Carbon Tax Rebate is Canada's way to combat greenhouse gas (GHG) emissions, giving people and businesses incentives to reduce their carbon footprint. In accordance with the Greenhouse Gas Pollution Pricing Act, the Canadian government imposes a tax on fossil fuels and other GHG emission sources. Below we'll dive deep into how the tax works, its impact on Canadians, and how you can make the most of the Carbon Rebate program.
The Canadian federal government introduced the Greenhouse Gas Pollution Pricing Act in 2018. Its primary objective is to address climate change by adding a price tag to carbon dioxide and other GHG emissions. This carbon pricing program imposes a carbon tax on fossil fuels, including gasoline, diesel, natural gas, and coal. The federal carbon tax applies to industrial emissions from large-scale facilities, too.
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Canada's federal carbon tax revenue supports initiatives to reduce greenhouse gas emissions. It also supports programs supporting the transition to a cleaner and more sustainable economy.
A key component of the Greenhouse Gas Pollution Pricing Act is establishing a federal carbon pollution pricing system for provinces and territories lacking their own federally accepted carbon pricing mechanisms. This ensures carbon emission pricing consistency nationwide and allows for intergovernmental collaboration.
The Act also includes provisions for regular reviews and modified carbon pricing mechanisms so they are effective in achieving emission-reduction targets throughout the years. This act helps solidify the government's dedication to addressing climate change comprehensively and adaptively.
With British Columbia pioneering the way in 2008, several provinces have enacted their own carbon pollution pricing models to create a provincial carbon tax. As of 2019, these carbon pricing models must meet or exceed federal standards. Otherwise, the Government of Canada will implement pricing backstops to keep provinces compliant.
The amount of tax initially started as $20 per tonne of carbon dioxide, but the government levied an additional $10 per year tax until 2023. Prime Minister Justin Trudeau increased the tax to $15 a year starting in 2023. The tax will continue to grow at $15 per year as Canada aims to reach its climate goals by 2030. By 2030, it will reach its highest tax at $170 per tonne.
Because of the 467% tax increase from 2021 through 2030, provincial governments sought legal action. Alberta, Ontario, and Saskatchewan all challenged the tax as unconstitutional. After a drawn-out legal battle, Canada's Supreme Court ruled in favour of the federal government in March 2021, keeping the federal carbon tax enacted through 2030.
Finally, provinces that have failed to set adequate carbon price models pay the federal rate of 6.6 cents per litre of gas and $1.53 per cubic metre of their house.
As of 2023, taxes on unleaded gasoline have reached a rate of 14.7 cents per litre. While provincial and federal governments have yet to release information on additional tax increases, CBC estimates that these rates will rise to 37.57 cents per litre by 2030.
You can curb these costs by purchasing electric vehicles and hybrid cars or converting to renewable energy sources for home heating. Electric cars lead to savings of up to almost $800 per year on gasoline, a figure that will grow as the carbon tax increases through 2030.
Note: The federal government lowered the national gasoline tax to just 9 cents per litre starting July 1, 2022, but this is set to expire on June 30, 2024.
Carbon taxes vary between provinces because provincial governments, and to some degree, individual municipalities, can set their own carbon taxes as long as they meet the federal government's requirements.
For example, Quebec and Nova Scotia implement a cap-and-trade system allowing provincial (or municipal) governments to set caps for carbon emissions by industry. Companies can then buy and sell carbon credits in an open market when they are over or below the cap.
Some provinces also attempted to limit the increase in fuel and heating costs through lower individual taxes on gas, oil, propane, and natural gas. This helps alleviate the financial burden on residents and puts it upon the government through lowered taxes.
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Other provinces have sought to limit the increase in fuel and heating costs by lowering their individual taxes on gas, oil, propane, and natural gas. The financial burden isn't passed on to their residents by lowering these taxes.
Finally, provinces that have failed to set adequate carbon price models pay the federal rate of 6.6 cents per litre of gas and $1.53 per cubic metre of their house.
Also known as the Climate Action Incentive Payment (CAIP) and formerly known as the Climate Action Incentive (CAI), each province has its own carbon tax rebate. How the provincial government uses the carbon tax revenue impacts the amount each individual or family receives. Only seven provinces receive Climate Action Incentive Payments (British Columbia has its own similar program that's not affiliated with the CAIP), while other provinces either reduce other types of taxes or invest the revenue into green energy.
Be sure to fill out the specific section of your taxes to receive the carbon tax rebate. If you're filling out tax forms by hand, find the “provincial section” and look for Line 45110 of your T1. This is where you'll find information on the Canada carbon rebate you'll get.
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If you live in one of the following provinces, here's how much you can expect to receive as a payment per year from the Canada Revenue Agency (CRA) as part of the Canada carbon rebate in 2024. The government disburses these annual rebates as quarterly payments in April, July, October, and January. Your eligibility and payout amount will be reassessed at each payout instance. So, if your family situation changes, your payout may go up or down. Note that these prices will increase in each subsequent year through 2030.
Alberta
Manitoba
Ontario
Saskatchewan
Nova Scotia
Prince Edward Island (PEI)
Newfoundland & Labrador
New Brunswick
British Columbia's system works similarly with a rebate of $447 for an individual or first adult in a couple, $223.50 for a spouse/common-law partner, and $111.50 per child.
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If you want to see some money back on your personal income tax return or reduce your tax liability, the carbon tax rebate offers the opportunity but not just through the rebate alone. You can also implement new ideas to help the environment and your budget.
Cutting your home heating costs can lower your bill and cut the amount of carbon tax you pay, but many areas of Canada have particularly cold winters. During the winter, cutting heating costs is more difficult, although dressing warmly indoors can help.
The best way to cut costs and maximize the value of the carbon tax rebate is to reduce fuel consumption. The good news is that you have several ways to do this. Taking public transit, riding a bike, or carpooling are just a few examples.
However, opting for a hybrid or electric vehicle (EV) over your traditional gasoline or diesel one makes even more sense. Canada's climate plan is installing the infrastructure needed for more charging stations nationwide. On top of this, you can pick up the government's electric car rebates on electric vehicles and plug-in hybrids, effectively giving you two rebates and a vested effort toward a greener future.
Potential tax savings from an electric car rebate program include:
With the increasing costs of home heating and driving over the next decade, now is the time to maximize your carbon tax rebate. That's where Clutch can help. With a diverse inventory of electric vehicles and hybrids, you can cut your price at the pump and maximize your tax return, all without the hassle of going to a dealership. Plus, you're doing your part to save the planet simultaneously. That's a win-win scenario that every Canadian can get behind.
