Carbon pollution pricing systems across Canada

Carbon pricing is about recognizing the cost of pollution and accounting for those costs in daily decisions. Putting a price on carbon pollution is widely recognized as the most efficient means to reduce greenhouse gas emissions while also driving innovation. Since 2019, every jurisdiction in Canada has had a price on carbon pollution. Canada’s approach is flexible: any province or territory can design its own pricing system tailored to local needs, or can choose the federal pricing system. The federal government sets minimum national stringency standards (the federal ‘benchmark’), that all systems must meet to ensure they are comparable and effective in reducing greenhouse gas emissions. If a province or territory decides not to price pollution, or proposes a system that does not meet these standards, the federal system is put in place. This ensures consistency and fairness for all Canadians. The federal government published strengthened standards in August 2021 for the 2023 to 2030 period.

The federal pricing system has two parts: a regulatory charge on fossil fuels like gasoline and natural gas, known as the fuel charge, and a performance-based system for industries, known as the Output-Based Pricing System. One or both parts can apply in a jurisdiction.

Both parts of the federal pricing system apply in Manitoba, Nunavut, Prince Edward Island, and Yukon. The federal fuel charge applies alongside provincial carbon pricing systems for industry in Alberta, New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, and Saskatchewan. For further information on integration of these systems with the federal fuel charge, visit Fuel Charge Relief: Facilities subject to provincial carbon pricing systems for industry.

Carbon pollution pricing systems in British Columbia, the Northwest Territories and Quebec, currently continue to meet the federal benchmark stringency requirements. As a result, neither parts of the federal pricing system applies in those jurisdictions.

The provinces and territories on the map of Canada are one of three colours depending on whether the federal backstop applies in full, in part or not at all.

Proceeds from the federal carbon pricing system remain in the jurisdiction where they were collected. Provinces and territories that requested the federal system receive these proceeds directly and can use them as they see fit. In other jurisdictions, the federal government delivers all proceeds to individuals, families, and businesses through payments and climate action programs. This helps make carbon pricing affordable and enables households to make investments to increase energy efficiency and further reduce emissions. Returning proceeds to households works because the amounts received by households do not depend on their energy consumption, so households are still rewarded for using less energy. Proceeds are also returned through targeted support to recognize the unique circumstances of the territories and Indigenous Peoples, such as high costs of living and energy, challenges with food security, and emerging economies.

Going forward, the federal carbon price will continue to be revenue neutral, and the Government of Canada remains committed to ensuring that the federal price on pollution remains affordable, and to helping households to make investments to increase energy efficiency and further reduce emissions. On November 22, 2022, the Government of Canada announced changes to the application of the federal carbon pollution pricing system for 2023 to 2030 based on the updated benchmark criteria. This page will be updated to reflect these changes once they have taken effect.

Related links

• The federal carbon pollution pricing benchmark
• The Government of Canada strengthens pollution pricing across the country
• Additional information on the federal carbon pollution pricing benchmark
• Update to the Pan-Canadian Approach to Carbon Pollution Pricing 2023-2030 (August, 2021)
• Greenhouse Gas Pollution Pricing Act: Annual report for 2021
• Greenhouse Gas Pollution Pricing Act: Annual report for 2020
• Greenhouse Gas Pollution Pricing Act: Annual report for 2019
• Pan-Canadian Approach to Pricing Carbon Pollution: Interim Report (2020)
• 2020 Expert Assessment of Carbon Pricing Systems
• Output-Based Pricing System