Canada’s Carbon Pricing Policy

Pricing carbon pollution is recognized as one of the most effective ways to reduce greenhouse gas emissions that cause climate change, according to Environment and Climate Change Canada. Carbon pricing is a tax or fee that is placed on carbon-based fuels and industries that produce carbon emissions, such as gasoline for your car. The good news is most of the money from the federal price on pollution charged to fuel is returned to families through Climate Action Incentive payments.

What is Carbon Pollution?

Carbon dioxide (CO2) is a greenhouse gas that is colourless, odourless and non-poisonous. It is formed by combustion of carbon—which is a key element in biology. It is used to make fuel and high-tech car parts, along with many other things. When any object with carbon is burned, the carbon atoms combine with two oxygens to form Carbon dioxide (CO2).

CO2 has always been a part of the earth—it keeps the planet warm. However, its content levels are reaching an excess in the atmosphere. Earth’s climate varied between 180 and 280 parts per million during the last million years. Since the 19th century, human activities (deforestation, land clearing, burning fossil fuels, etc.) have raised the carbon dioxide content by about 50 per cent in less than 200 years. As a result, it has become a huge factor in climate change. 

Climate change is becoming very real for not only people in Canada, but for everyone around the globe. Extreme weather events affect people’s safety, health and livelihoods. In the event of a flood or wildfire caused by climate change, people are forced to repair and rebuild their homes and businesses. It also affects ocean acidity. The ocean absorbs extra CO2, and combined with the oxygen in the water, it forms carbonic acid. This, combined with higher temperatures, is detrimental to coral reefs and other marine life. 

There is a clear cost that we are paying for the changing climate. This is why the Government of Canada introduced a price on carbon pollution across Canada in 2019.

How Does Canada’s Carbon Pollution Pricing System Work?

Every jurisdiction in Canada has a price on carbon pollution.  According to Environment and Climate Change Canada, the federal government set minimum national stringency standards to ensure that everyone is contributing to reducing greenhouse gas emissions. Each province and territory can either design its own pricing system tailored to their needs, or choose the federal pricing system. The system has two parts: a regulatory charge (also known as the fuel charge) on fossil fuels such as gasoline and natural gas, and a performance-based system for industries. This encourages companies to use cleaner energy and cut down on pollution. 

Climate Action Incentives

The Government of Canada implemented the pricing system in 2019, and also committed to direct all proceeds from the fees back to the jurisdiction of origin, so they can decide where to reinvest it. In the provinces that opted to exercise the federal pricing system, the Government of Canada uses about 90 per cent of the proceeds to give families Climate Action Incentive payments that are returned through quarterly payments. Canadians can claim CAI payments when they file their annual federal taxes. In most cases, families in Canada receive more money than they paid. Eight out of 10 households get more money back than they spend on pollution pricing, according to Environment and Climate Change Canada—low-income families benefit the most. The remaining proceeds are used to help support small- and medium-sized businesses, famers and Indigenous communities.

Canadians can also avoid paying the carbon tax by making more environmentally friendly choices such as purchasing the energy-efficient home appliance or car. For example, when the price of gasoline increases, people are more likely to carpool, take public transportation, or buy a more fuel-efficient car. People who live in more rural areas may not have the same options, such as biking instead of driving. For this reason, the Government has applied another 10 per cent top-up to their Climate Action Incentive payment. 

Low-Carbon Alternatives

The David Suzuki foundation emphasizes the importance of putting a price on carbon pollution to help make the transition to cleaner, and better energy solutions. Only half of Canada’s carbon emission come from industrial sources. The other half comes from motor vehicles, buildings and landfills. Both the government and Canadians have to work together to move toward low-carbon alternatives that decrease emissions. Putting funding into renewable energy sources such as wind and solar energy reduces the need for fossil fuels, and is a less expensive solution in the long run. Choosing public transportation is another low-carbon alternative that reduces road congestion and relieves commuting stress. Expanding low-carbon infrastructure and putting in more active transportation resources like bike lanes and sidewalks also helps to move away from carbon emissions. Consumer incentive programs spearheaded by the government can also help people switch to energy-saving options such as electric vehicles or home appliances.

There’s research that proves the carbon tax works. But also, it just makes sense: the more someone wants to pollute, the more they have to pay. Carbon pricing makes polluting more expensive and clean energy solutions more affordable. The results solidify that this system is an extremely effective way to reduce the carbon pollution that is so damaging to climate change.//

Helen Jacob | Contributing Writer



Edge Newsletter

Subscribe to our newsletter for updates from The Edge, A Leader’s Magazine.

Trending Articles

Available in all Indigo & Chapters stores. 

Exploring The Galaxy

Featuring Col. Chris Hadfield, the distinguished retired Canadian astronaut, highlighting his commitment to advancing space science and inspiring millions.