A Guide to the Carbon Tax Rebate in Canada


a row of gas pumps sitting in a parking lotThe bad news is that no matter where you live in Canada, you’re going to be paying more at the gas pumps, and not just because the cost of fuel is going up. 

The price you pay includes a carbon tax, whether it’s levied by the federal government, or the province or territory where you live. 

The good news is that you will get at least part of that tax back in quarterly rebates. 

The Carbon Tax: Some Background

Since 2019, every province and territory in Canada has been subject to some type of carbon pricing. While some provinces had already instituted their own carbon tax by then, starting with Alberta and Quebec in 2007, and followed by British Columbia in 2008, federal legislation passed in 2019 has extended carbon pricing to the entire country. white clouds on blue sky during daytimeSo far, carbon pricing appears to be doing what it’s meant to do, which is reduce the overall emission of carbon dioxide into the atmosphere. 

The best example of this is British Columbia, which has been taxing carbon since 2008, much longer than the rest of the country. 

In the past 15 years, consumption of fossil fuels has dropped 15%, and the emission of greenhouse gases has dropped substantially as well. 

The federal carbon tax is only levied in those provinces where they have failed to implement a system that meets the federal requirements. 

That means that because their current provincial governments have refused to tax carbon, residents of Ontario, Manitoba, Saskatchewan and Alberta have been receiving their rebates directly from the federal government, and starting this year all the Atlantic provinces are also included, as their proposed carbon pricing policies did not meet federal standards.

What does this mean for you, the consumer and taxpayer? 

In short, you pay a bit more at the pumps, or on your home heating bill, and then get a refund from the government 4 times a year. The amount of the carbon tax goes up every year until 2030, when it will be at $170 a ton of carbon dioxide. In 2023, that adds 14 cents per litre at the pumps. Not insignificant.

The Carbon Tax Rebate: The Theory Behind ItCO2 letters trimmed on hedges in a green field, signifying Carbon Taxes and the environment

The theory behind the carbon tax and rebate is that you have a definite incentive to reduce your carbon footprint to save money. That’s because although the tax is based directly on how much fossil fuel you use, the rebate is calculated on the number of people living in your household. 

As well, the rebate is not the same in all provinces. For instance, in Ontario, a household of 4 can expect to receive $244 four times a year, while in British Columbia, which administers its own carbon tax and rebate system, that family would get $233 every three months. In Alberta, it’s $386 every quarter.

In practice, this usually means that low-income Canadians get more money back in the rebate than they pay in carbon taxes. Only the highest income households will lose money in the deal. That’s because they spend more on home heating because their houses are larger, and usually have at least 2 vehicles, increasing their fossil fuel consumption overall. 

Thinking About the Carbon Tax When Buying a Car

What does all this mean for you, especially if you’re looking for a new vehicle? 

Obviously, it’s to your advantage to shop for an automobile with the best fuel economy possible, as that will cut down on the tax that you pay up front. 

Of course, a hybrid or electric car is an even better choice in that regard.

While electricity is not completely immune from the carbon tax, as some electricity is generated from coal and natural gas, it certainly has much less of an impact on the price of electricity, especially as more and more renewable sources such as wind and solar are brought online across the country.

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Whether you are buying a new or used fuel-efficient vehicle, or adjusting your driving habits to consume less gas, the carbon tax and rebate are worth considering as part of your decision-making process.