Global warming isn't just a catchphrase, it's an important issue for Canadians and concerned citizens across the world. The environment pays the price as factories, businesses, and everyday vehicles continue to churn out carbon emissions. And that's just what the carbon tax rebate in Canada aims to fix. 

As part of the Greenhouse Gas Pollution Pricing Act, the carbon tax rebate is money given back to Canadians when it’s time to file taxes. Learn more about the carbon tax rebate, including why it exists, the variances among provinces, and how it can help your wallet and the planet.

The Greenhouse Gas Pollution Pricing Act

As a staunch supporter of reducing greenhouse gases and curbing climate change, Canada has become one of the most active nations in reducing global warming through legislation. In 2018, the federal government introduced the Greenhouse Gas Pollution Pricing Act.

This climate plan aims to incentivize lower greenhouse gas emissions by taxing carbon emissions — primarily in the fossil fuel and natural gas industries — while providing an income tax rebate to Canadian citizens. The result is a win-win with Canadians reaping financial and environmental benefits without costing anything out of pocket thanks to a "revenue-neutral" policy.

How Pollution Is Taxed

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 implements a backstop of a $40 tax per tonne of carbon dioxide emissions in 2021.

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. However, this number will continue to grow yearly as Canada aims to reach its climate goals by 2030 after Prime Minister Justin Trudeau increased the tax to $15 a year. At that point, 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.

How the Tax Affects Individual Canadians

Although the carbon pricing system is levied upon fossil fuels, natural gas, and other manufacturers, the tax has a trickle-down effect on individual Canadian consumers. As a result, Canadians will notice increased home heating costs and extra fuel charges at the pump, as seen below.

Tax Increases on Gasoline Through March 31, 2022

Gas Tax Increases

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.

However, the opportunity to curb these costs lies in electric vehicles, hybrid cars, and renewable energy sources for home heating. More specifically, electric cars can provide savings on gas of up to almost $800 per year, a figure that will grow as the carbon tax increases through 2030.

Why Do Provincial Carbon Taxes Vary?

As you can see above, carbon taxes can vary from province to province. The reason for this rests in the hands of each provincial government, and to some degree, individual municipalities.

For example, Quebec and Nova Scotia implement a cap-and-trade system. In this system, the provincial (or municipal) governments set a cap for carbon emissions by industry. Then, they allow companies to buy and sell carbon credits in an open market whether they’re over or below the cap.

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.

How Much Can You Get Back on the Carbon Tax Rebate?

Also known as the Climate Action Incentive Payment (CAIP) — formerly known as the Climate Action Incentive (CAI) — the carbon tax rebate varies in each province. The amount received per individual or family varies on how the provincial government uses the revenue. In fact, 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 choose to either reduce other types of taxes or put the revenue toward 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, go to the “provincial section” of your taxes. Then, look for Line 45110 of your T1, where you’ll see the information for how much of a rebate you’ll get.

If you live in one of the following provinces, here's how much you can expect to receive as a payment from the Canada Revenue Agency (CRA) as of 2023. These payments are broken up into 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

  • Single adult — $539
  • Second adult in a couple (or first child of single-parent family) — $270
  • Each child under 18 — $135

Manitoba

  • Single adult — $416
  • Second adult in a couple (or first child of single-parent family) — $208
  • Each child under 18 — $104

Ontario

  • Single adult — $373
  • Second adult in a couple (or first child of single-parent family) — $186
  • Each child under 18 — $93

Saskatchewan

  • Single adult — $550
  • Second adult in a couple (or first child of single-parent family) — $275
  • Each child under 18 — $138

Nova Scotia

  • Single adult — $124
  • Second adult in a couple (or first child of single-parent family) — $62
  • Each child under 18 — $31

Prince Edward Island (PEI)

  • Single adult — $120
  • Second adult in a couple (or first child of single-parent family) — $60
  • Each child under 18 — $30

Newfoundland & Labrador

  • Single adult — $164
  • Second adult in a couple (or first child of single-parent family) — $82
  • Each child under 18 — $41

British Columbia's system works similarly with a rebate of $193.50 for an individual or first adult in a couple, $193.50 for a spouse/common-law partner, and $56.50 per child.

How to Get the Most of the Carbon Tax Rebate

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, switching from a gas-powered vehicle to a hybrid or electric vehicle (EV) makes even more sense. Canada's climate plan lays the groundwork for more charging stations around the country. In addition, you can take advantage of the government's electric car rebates for both 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 via the rebate program includes:

Up to a 100% tax write-off for business-use zero-emission vehicles purchased between March 19, 2019, and January 1, 2028, up to $55,000.

Take Advantage of the Carbon Tax Rebate With Clutch

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 at the same time. That's a win-win scenario that every Canadian can get behind.