Carbon Tax Rebate, Credits, and CAI in Canada

How Carbon Taxes Work

With the increase in climate change and the cost of rebuilding due to climate change, such as repairs from flooding and wildfires, the government had to start charging for carbon pollution. This tax is on fossil fuels and anything with carbon emissions, such as carbon dioxide. It is also meant to help combat people's use of carbon-emission products. This is referred to as a carbon tax or carbon pricing and depending on where you live in Canada, this carbon tax amount is different. It is also important to note that this carbon tax levy is revenue neutral to the federal government.

The federal government gives provinces and territories the ability to choose how they are implementing these taxes. They can choose to either use the federal pricing system or they can create their own carbon pricing system as long as it falls within federal guidelines showing that the province or territory contributes fairly to reducing greenhouse gas emissions. In order to create consistency, if the province or territories did not choose to charge for pollution or their proposed plan did not meet the federal standards, then the federal system will be put into place.

Federal Pricing

How the federal pricing system works is that there are two parts to it. This is from the Greenhouse Gas Pollution Pricing Act that was adopted in June of 2018. The first part of the pricing is the fuel charge. The fuel charge is a regulatory charge on gas, natural gas and other fossil fuels. This is implemented in:

• Ontario
• Manitoba
• Yukon
• Alberta
• Saskatchewan
• Nunavut

The second part is a performance based system for industries, this is known as the Output-Based Pricing System. This part applies in:

• Manitoba
• PEI
• Yukon
• Nunavut
• Saskatchewan (partially)

All of the other Canadian provinces and territories have their own provincial government programs. .

Cost of Carbon Taxes per Province

Because provinces can choose whether they create their own pollution charges or go with the federal plan, the amount varies per province. Because of this, the carbon tax credits they qualify for also vary per province.

The provinces that receive the Climate Action Incentive refundable tax credit will also get a 10% rural supplement (also a tax free amount) if they qualify for it. This is available to certain small and rural communities in the provinces that qualify.

British Columbia

In British Columbia, the federal system isn’t used. In fact, the provincial government’s system has been in effect since 2008, before the federal levy was instituted. The charge in BC is $50 per ton on fossil fuels. This includes what you purchase at the pump and translates to somewhere around 11 cents per litre, which isn’t too much different from the federal levy.

Unlike the federal system, the BCCATC (BC Climate Action Tax Credit) is based on income. Whether or not you are approved for this credit is based on your yearly income after you file your income tax return. If you qualify, then the most you can get for the tax-free benefit will be $447 for yourself, $223.50 for a spouse or common-law partner (includes single parents with one child), and $111.50 for each child (excludes the first child in a single parent family.

Alberta

Alberta, although they tried to fight it, was added to the program under the Federal System in 2020. They even went all the way to the supreme court to avoid the tax, but they ultimately lost. That means what Alberta charges is $50 per tonne.

Because Alberta is under the Federal System, the tax credit is not based on your net income when you file your taxes. You have to file your taxes to receive it though. This is known as the Climate Action Incentive and is distributed 4 times per year through direct deposit, or however you receive your tax refund. The amounts are $772 for an individual, $386 for a spouse or common law partner, $193 per child and $386 for the first child in a single parent household.

Saskatchewan

Saskatchewan also strongly opposed the carbon tax. This makes a lot of sense, because just like Alberta, Saskatchewan is very involved in the oil and gas industry. They also had to go with the federal system when the supreme court case was lost.

The price of the tax in Saskatchewan is also the federal amount of $50 per tonne. The carbon tax rebate available in Saskatchewan is $680 for an individual, $340 for a spouse or common law partner, $170 per child and $340 for the first child in a single parent family.

Manitoba

Again, Manitoba wasn’t very happy with the carbon tax. They strongly opposed it just like Alberta and Saskatchewan. While they did attempt to create their own program, ultimately they had to go with the federal system.

This means that the tax in Manitoba is also $50 per tonne. The tax credit, just like Alberta and Saskatchewan, is the Climate Action Incentive. The carbon tax rebates are $528 for an individual, $264 for a spouse or common law partner, $132 per child and $264 for the first child in a single parent home.

Ontario

Ontario is another province that was opposed to the federal system. In their case though, they were able to start implementing their own system. Until that is in place though, the federal system applies and the cost is $15 per tonne.

The rebate for those in Ontario is $488 for individuals, $244 for a spouse or common law partner, $122 per child and $244 for the first child in a single parent household.

Quebec

Quebec, similar to BC, had their own program implemented before the federal system came about in 2018. The tax that drivers have to pay is around 3 cents per litre in provincial carbon tax and their charge is around $17 per tonne.

Quebec’s cap and trade system was designed to mainly affect producers instead of consumers, so the carbon tax is much lower on fuel than that of other provinces. Because they do not participate in the federal system or have their own rebate system, there are no carbon tax credits in Quebec.

Newfoundland and Labrador

Newfoundland and Labrador had its own system as well. The tax was 11 cents per litre or $50 per tonne and there were no rebates like you would see with the federal system. Now they are with the federal system and have rebates of the amounts $656 for an individual, $328 for a spouse or common law partner and $164 per child.

Nova Scotia

Nova Scotia also had a system similar to Quebec's cap and trade system. It started in 2019 and offered no rebates. They have recently implemented the federal system and will start giving out rebates in July 2023. The amounts are $496 for an individual, $248 for a spouse or common law partner and $124 per child.

New Brunswick

New Brunswick doesn’t use the federal system but they still charge the federal rate of $50 per tonne. This means consumers are still paying that extra 11 cents at the pump. Unlike other provinces though, there are no rebates in New Brunswick. They are choosing to put that extra revenue into the province rather than a tax credit.

Prince Edward Island

PEI has only recently started using the federal system on $50 per tonne. As of 2023, residents will start receiving rebates. The amounts are $480 per individual, $240 for a spouse or common law partner and $120 per child.

Northwest Territories

The Northwest Territories also have their own system. They charge around 11.7 cents per litre in carbon levies but their rebate system is different from that of the federal government. There is a 100% rebate on all levies paid on fuels used to heat the home. They also have a cost of living offset. This is around $104 per adult and $120 per child.

Yukon and Nunavut

Both the Yukon and Nunavut are now part of the government system. That means that the tax is $50 per tonne and the rebate works out to $80 per individual. It may be more depending on where you live in this region.

Carbon Tax Increase Schedule

AS of this point, there is no schedule on the next increase of the federal carbon tax. The last increase happened in April of 2022 and made the price $50 per tonne. This is up from $20 per tonne in 2019. That leaves us with an average of roughly $10 per year.

Why You May Not Have Received Your Rebate

If you haven’t received a rebate, the most likely reason is that you haven’t filed your tax return. That is, as long as you are located in a province or territory that offers a rebate. In some cases, you may not meet the income requirement.

You may also not receive a rebate if you have an amount owing to the Canada Revenue Agency (CRA). This can be any federal debt including any income tax balances. This is a very likely reason if you are expecting Climate Action Incentive Payments. This payment can be kept by the CRA to pay towards tax debt you owe or another debt regulated by the CRA. Once the debt is paid, then you will start receiving the rebate again as long as you are eligible.

Is the Carbon Tax Working?

According to the CRA, implementing the carbon tax and pricing pollution is working. Because of these extra charges, industries are being more innovative when it comes to reducing carbon emissions and using more energy efficient alternatives. These industries are also becoming more efficient by using cleaner technology. That being said, it hasn’t had much of an impact on overall fuel consumption.

Overview

Overall, how much you pay in carbon tax and if you receive a tax credit depends on where you live in Canada. While most provinces are using the federal pollution pricing system. Other provinces like British Columbia and Quebec, have their own systems that they use. The provinces and territories that are using the federal system give back a tax credit to the residents of that province or territory. The provinces that are not involved in the federal system have their own rebates or they don’t offer rebates at all. These rebates are meant to ease the financial burden of Canadians, especially now while inflation is so high.