What is carbon pricing?
Restricting the pollution that causes climate change makes sense. The more someone pollutes, the more they ought to pay. A carbon price makes polluting more expensive and solutions like clean energy and electric vehicles more affordable.
Economists believe that carbon pricing is the most effective way to reduce the carbon pollution that is changing our climate. Seventy national and subnational governments have introduced a price on carbon pollution.
Accelerating the transition to a carbon-free future
Solutions to climate change are already at our disposal. Renewable energy, electric vehicles and fast, reliable public transportation can lead the way to a carbon-free future. Carbon pricing creates an incentive across the economy to shift to lower-carbon activities and behaviour.
Pricing carbon is fair. The organizations and people that create the most carbon pollution pay for the damage of their pollution. Governments can channel funds raised from pricing carbon pollution to provide better options for people to reduce their carbon footprints.
We need a fair response to climate change because all people living in Canada feel its impact. We need an effective response to climate change because we all benefit from least-cost solutions. We need to act urgently because extreme events from a rapidly changing climate are harmful to human health.
How does pricing carbon pollution build more sustainable communities?
Putting a price on carbon pollution through a carbon tax or cap-and-trade system helps speed the transition to cleaner, better energy solutions. We have low-carbon alternatives to our largest emissions sources that are improving by the day.
Renewable energy
Wind, solar and other low-impact ways to generate electricity reduce the need for fossil fuels and offer cleaner and less expensive solutions than nuclear power and large hydro projects. Investing in small-scale, community-owned renewable energy projects stimulates local economies and creates energy independence.
Public transportation
Fast, reliable public transportation networks make communities more livable. They get cars off the road, reduce congestion, relieve commuting stress and offer countless health benefits. Fewer cars on the road makes it easier to move goods and benefits local economies.
Low-carbon infrastructure
Carbon pricing can make it easier to expand active transportation choices like bike lanes and walking paths and build electric vehicle charging stations. You save time and money and improve your health.
Low-carbon lifestyles
Using carbon pricing funds for consumer incentive programs can help people switch to energy-saving options like better insulated homes or electric vehicles.
Carbon pricing facts
Carbon pricing decreases emissions
Fact: Since it was introduced in 2008, B.C.’s carbon tax decreased carbon emissions, according to research. The same holds true in other jurisdictions that price carbon emissions.
Rebates benefit individuals and families
Fact: Research shows that people in B.C. — where the provincial government sends out rebates from its carbon tax — pay less tax than they did before the carbon price was implemented.
Renewable energy is increasingly affordable
Fact: The price of renewable energy is now equal to or cheaper than coal power. Fossil fuels only appear to be affordable due to government subsidies ($3B a year in Canada) and the absence of a price on carbon emissions.
Carbon pricing FAQs
-
A: People in Canada feeling the impacts of rising costs want something to blame, and carbon pricing has been a convenient scapegoat. Yet other factors, such as price gouging by oil and gas companies and Russia’s invasion of Ukraine, play a much larger role in the volatile and rising price of gas at the pumps. The impacts from climate change itself, such as damage from heat waves, floods and droughts that reduce farm yields, are also increasing prices.
The direct effects of carbon pricing (impacts on the price of fossil fuels, for example) accounted for only 0.15 per cent of the inflation we’ve been experiencing — so the carbon levy is not a major driver of inflation. Including both the direct and indirect price impacts, the effect is 0.207 per cent a year in Ontario (one-15th of current inflation). This is much less than the increase in prices due to profiteering off the war, supply chain disruptions and industry profit-making.
Consider a box of cereal being shipped across the country in a transport truck full of groceries. The April 2024 increase in the carbon tax would add less than one cent per box in increased fuel costs.
-
A: Climate policies such as carbon pricing are not responsible for the economic hardships that people in Canada are facing. The revenue raised from carbon pricing does not go into the federal government’s general coffers. Ninety per cent is returned directly to households in provinces and territories that don’t have their own pricing systems (the exceptions are B.C., Quebec and the Northwest Territories). The remainder goes to Indigenous communities, farmers and businesses.
-
A: Eighty per cent of households come out ahead with rebates provided by the federal government, according to the Parliamentary Budget Office and economists. Many people have come to rely on the benefits to help with cost-of-living increases. Lower-income earners benefit more than higher-income earners.
The quarterly Canada Carbon Rebate can be found in your bank statements. Find out what your carbon tax rebate is: fairpathforward.ca
-
A: The carbon price incentivizes individuals and businesses to choose lower-carbon options, such as using gas-powered vehicles less often, while the rebate helps with affordability. Both parts are needed to make the system fair and to respond to the climate crisis.
-
A: Many countries are already using carbon pricing. Carbon-pricing systems around the world are increasing. As of 2023, there were 73 carbon-pricing instruments in operation worldwide covering around 23 per cent of global greenhouse gas emissions.
-
A: B.C. is a good case study of the policy’s effect. B.C.’s provincial carbon pricing was first implemented in 2008 and is reported to have cut emissions between five and 10 per cent.
Studies that look at how carbon pricing is working around the world show yearly emissions reductions of up to two per cent. Those reductions are often associated with low carbon prices. As the price increases and the years pass, these reductions add up significantly to address climate change during this critical time for action.
Modelling projections for carbon pricing show it plays a key role in reducing emissions. The Canadian Climate Institute projects that industrial carbon pricing systems will be the single biggest driver of emissions reductions in 2030.
Climate policies currently in place — from carbon pricing to support for heat pumps — could prevent 226 million tonnes (Mt) of carbon emissions in 2030. That’s equivalent to current emissions from Quebec and Ontario combined.
Among other benefits, economists point to the policy as the least costly way to lower emissions. More than 200 economists in Canada signed on to this open letter supporting carbon pricing.
Large industry emissions
While much media focus has been on the consumer side of carbon pricing, the system in place for large emitting industries such as steel is projected to play a larger role in reducing emissions than the fuel charge. The industry-focused system will cover a higher share of Canada’s emissions. The system for large emitters is also designed to protect the competitiveness of Canadian companies and to ensure that firms can meet growing demand for products that have a lower climate footprint. Carbon pricing is supported by over 181 large international firms. -
A: The world is transitioning to clean, renewable energy as a response to the climate crisis and energy insecurity. Policies such as carbon pricing speed up this transition. A carbon levy sends a price signal to companies and consumers to move away from polluting, climate-altering activities. It encourages investments in technologies such as electric vehicles and heat pumps, making them more available and lowering their prices.
During our transition to a cleaner economy, working class jobs will be lost in the fossil fuel industry. However, evidence from pricing carbon in British Columbia and the U.K. suggests carbon pricing changes the kinds of jobs we do, not the total number of jobs. In Canada, more than 98 per cent of the workforce is outside the fossil fuel industry. Analysis by Clean Energy Canada found that there will be 2.2 million jobs created in clean energy by 2050, more than the 1.5 million job decline in fossil fuels.
Workers and communities affected by declining demand for fossil fuels will need support. The Foundation supported a collaborative multi-year research project led by Indigenous organizations to produce a “Just Transition Guide” and has called for MPs to pass the Sustainable Jobs Act.
-
A: The federal fuel charge doesn’t apply to gasoline or diesel fuels used by farmers for agricultural purposes. There is a negligible effect on farmer’s costs. Farmers get 80 per cent of the levy back for fuel used to heat greenhouses. Fuel used to heat buildings or dry grain is taxed. The federal government recycles the carbon levy farmers pay back to them and supports them to make grain dryers more efficient.
Pricing pollution across Canada
A win at the Supreme Court
The David Suzuki Foundation has been advocating for carbon pricing as a climate solution since 1998, in reports, advocacy and the courts.
Saskatchewan, Ontario and Alberta took the federal government to court to challenge the constitutionality of the Greenhouse Gas Pollution Pricing Act. Represented by Ecojustice lawyers and acting as an intervener, we sided with the federal government’s authority to put in place a national minimum price on carbon pollution. We were the first organization to argue in court that the climate emergency is an issue of national concern and warrants a national emergency response.
In March 2021, the Supreme Court agreed that climate change was a matter of national concern that justified Parliament’s authority to enact laws under the Constitution’s “peace, order and good government” clause.
Judges found that climate change poses a grave threat to humanity’s future. They validated federal law aimed at limiting the harms from one province on another. The court noted that a lack of co-operation among provinces could expose other provinces to “grave harm.”
The court found that the act recognizes jurisdiction for a pricing mechanism, not greenhouse gas emissions more broadly. Provinces can still address climate change with their own laws and regulations.
What does this decision mean for climate action?
The decision was specifically about carbon pricing, but it signals that the federal government has the authority to enact national climate and clean energy regulations. By confirming that the federal government has the legal authority to take co-ordinated, national action and impose a minimum carbon price, the ruling means Canada can ensure that no province creates a stumbling block to progress being made in other parts of the country. It’s an essential part of responding to the climate emergency.
Climate change is “a threat of the highest order to the country, and indeed the world. The undisputed existence of a threat to the future of humanity cannot be ignored.… A provincial failure to act directly threatens Canada as a whole.”
Supreme Court of Canada
Expert views
The carbon tax rollback will boost giant oil company profits
While cloaking their calls for carbon-pricing relief around affordability, many critics are, in reality, helping the oil and gas industry profit off the backs of people in Canada for as long as possible.
Senior Climate Policy Adviser
Anchoring Canada’s path to net-zero credibility
The steps that Canada takes now will set the course for our net-zero future. The more we do now the more likely we are to reach our targets. It’s critical for the 2030 Emissions Reduction Plan to set us in the right direction and offer bold, ambitious action.
Director General, Quebec and Atlantic Canada
Charged Up
Renewable energy is empowering communities across the country. This is the story of you — of all of us — on a mission for a cleaner, healthier, charged-up Canada.