Canada carbon pricing policy

The Pan-Canadian Approach to Pricing Carbon Pollution, released in October 2016, set a ‘federal benchmark’ (or price floor) requiring all provinces and territories to implement carbon pricing systems with a certain level of stringency, while also ensuring the provinces and territories have the flexibility to design their own policies and programmes. A ‘federal backstop’ carbon pollution pricing system applies in any jurisdiction that requested it or that did not implement its own system that meets the federal benchmark’s stringency requirements. The Canadian government does not keep any of the direct proceeds from carbon pollution pricing; direct proceeds from the federal carbon pollution pricing system are returned to the province or territory of origin. Provincial and territorial governments that have voluntarily adopted the federal system receive these proceeds directly from the federal government and have the flexibility to decide on how to use them. For provinces that do not meet the federal stringency requirements, the federal government returns the bulk of direct proceeds (approximately 90%) from the carbon charge directly to individuals and families in these jurisdictions in the form of tax-free Climate Action Incentive payments when they file personal income taxes. A family of four received CAD 600 in Ontario for the 2020 tax year, CAD 720 in Manitoba, CAD 1 000 in Saskatchewan and CAD 981 in Alberta, while families in rural and small communities receive an extra 10%. 

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