Consumer Carbon Price Ends April 1, 2025
The Government of Canada has made regulations that cease the application of the federal fuel charge, effective April 1, 2025, and is also removing requirements for provinces and territories to have a consumer-facing carbon price as of that date. These actions refocus federal carbon pollution pricing standards on ensuring carbon pricing systems are in place across Canada on a broad range of greenhouse gas emissions from industry. A price on pollution for large emitters will continue to be a pillar of Canada’s plan to build a strong economy and greener future. It is a system that is fair and effective. Industrial carbon pricing is one of the most important greenhouse gas emission reduction policies in the government’s comprehensive Emissions Reduction Plan to bend the curve and meet Canada’s 2030 greenhouse gas emissions reduction target. Carbon pricing systems for industry are also designed to keep costs low to protect against competitiveness risks.
This backgrounder provides details on how removing the consumer carbon price will work and on how the proceeds return mechanisms (including the Canada Carbon Rebate) will be wound down.
The federal fuel charge currently applies in Newfoundland and Labrador, Prince Edward Island, Nova Scotia, New Brunswick, Ontario, Manitoba, Saskatchewan, Alberta, Nunavut and Yukon (referred to as listed provinces). Under the Greenhouse Gas Pollution Pricing Act, the fuel charge generally applies to 21 fossil fuels and combustible waste upon delivery, importation or use in listed provinces.
The federal government removed the fuel charge, effective April 1, 2025, via regulations. It will also be considering broader amendments to the Greenhouse Gas Pollution Pricing Act, including proposed amendments to complete the orderly wind-down of the fuel charge.
After March 31, 2025, the applicable fuel charge rates for all types of fuel and for combustible waste will be set to zero. Therefore, beginning on April 1, 2025, the fuel charge ceases to apply.
The regulations will also cease the application of certain administrative requirements that are no longer necessary. Specifically:
The regulations do not affect obligations for reporting periods prior to April 1, 2025. Fuel charge payers are still required to pay amounts owed, continue to be able to claim rebates to which they are entitled, and are subject to assessments and re-assessments in respect of past reporting periods.
The Canada Carbon Rebate was introduced to return direct proceeds from the federal fuel charge to residents of provinces where it applied. With the removal of the federal fuel charge effective April 1, 2025, eligible Canadians will receive a final Canada Carbon Rebate payment, starting April 22.
In provinces where the federal fuel charge currently applies, a family of four will receive up to $456 under the base Canada Carbon Rebate for April 2025 (see table below for specified amounts by province). In addition to the base rebate amounts, a rural top-up of 20 per cent is provided for individuals residing in small and rural communities.
To receive their Canada Carbon Rebate for April 2025, Canadians need to file their 2024 tax return. For Canadians who are registered for direct deposit with the Canada Revenue Agency, the Canada Carbon Rebate will be deposited directly into their bank account; otherwise, the Canada Carbon Rebate will be delivered via cheque. For those who have a spouse or common-law partner, the person who files their tax return first will receive the Canada Carbon Rebate amount for all members of the household, including children.
In provinces where the fuel charge currently applies, a portion of fuel charge proceeds from the price on pollution is returned to eligible small- and medium-sized businesses via the Canada Carbon Rebate for Small Businesses, an automatic, refundable tax credit provided directly to eligible businesses.
With the removal of the federal fuel charge effective April 1, 2025, the Canada Carbon Rebate for Small Businesses payment in respect of the 2024-25 fuel charge year will be the final payment to eligible businesses.
The Minister of Finance will specify payment rates to return the previously specified $623.1 million in proceeds for the 2024-25 fuel charge year once sufficient information is available from the 2024 taxation year.
In provinces where the fuel charge was in place prior to April 1, 2025, a portion of fuel charge proceeds from the price on pollution is being returned to eligible federally recognized Indigenous governments by Environment and Climate Change Canada (ECCC) through grant agreements delivered by the Fuel Charge Proceeds Fund for Indigenous Governments (FCPFIG). The FCPFIG offers maximum flexibility for eligible First Nations, Inuit, and Métis governments to manage and use their share of fuel charge proceeds towards self-determined priorities.
Following the removal of the federal fuel charge effective April 1, 2025, ECCC will continue to work with eligible recipients to return $531.5 million in proceeds for the 2020-21 to 2024-25 period, consistent with the amounts previously specified by the Minister of Finance. The Government of Canada is committed to establishing the necessary grant agreements and issuing payments through the FCPFIG to eligible Indigenous governments as soon as possible.
Recognizing that many farmers use natural gas and propane in their operations, the federal government provides a refundable tax credit to return fuel charge proceeds to farming businesses that operate in provinces where the federal fuel charge currently applies.
The Minister of Finance has the authority under the Income Tax Act to specify payment rates for eligible farming expenses that are incurred in the 2025 calendar year, which would have corresponded to returns of fuel charge proceeds for the 2025-26 fuel charge year, and the designated provinces in which these payment rates will apply. Those provinces are Alberta, Saskatchewan, Manitoba, Ontario, New Brunswick, Nova Scotia, Prince Edward Island, and Newfoundland and Labrador.
With the removal of the federal fuel charge effective April 1, 2025, the Return of Fuel Charge Proceeds to Farmers Tax Credit in respect of the 2024-25 fuel charge year will be the final credit available to eligible farming businesses. Consequently, the Minister of Finance has specified the payment rate per $1,000 in eligible farming expenses that are incurred in the 2025 calendar year (in respect of the 2025-26 fuel charge year), in the designated provinces, to be nil.
This nil payment rate replaces the payment rate for the same calendar year (and fuel charge year) that was previously announced on January 10, 2025.
Canada’s Emissions Reduction Plan contains a comprehensive suite of mitigation measures, strategies, and investments, including policies that complement carbon pricing. A price on pollution for large emitters will continue to be a pillar of Canada’s plan to build a prosperous net-zero economy and make progress on climate targets. According to independent estimates, industrial carbon pricing is the climate policy with the single largest contribution to achieving our climate targets, all while helping us transform and grow our economy. The government intends to refocus federal carbon pollution pricing requirements on ensuring carbon pricing systems are in place across Canada on a broad range of greenhouse gas emissions from industry. The government intends to strengthen Canada’s approach to carbon pricing for industry to ensure its continued effectiveness.
The federal government intends to engage with provinces, territories, Indigenous Peoples, and stakeholders on changes to the minimum national stringency standards for carbon pollution pricing, known as the federal ‘benchmark’ criteria.
Changes would focus the benchmark on ensuring industrial pricing systems continue to maximize emissions reductions and encourage the transition to low carbon technologies, while protecting industry against competitiveness and carbon leakage impacts. Improving the emissions performance of Canadian industry makes it more efficient and can support its competitiveness as Canada works to diversify its trading relationships and deepen market access, especially in jurisdictions that increasingly value lower emitting goods, such as the European Union.
The goal of the benchmark criteria would continue to be that systems are similarly stringent, fair and effective. The benchmark review will consider opportunities to strengthen industrial carbon markets so that they deliver the incentives needed for major decarbonization projects across industry, while creating jobs and driving investment in the technologies that will shape the clean economies of the future.
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Hon. François-Philippe Champagne
https://www.canada.ca/en/department-finance/news/2025/03/removing-the-consumer-carbon-price-effective-april-1-2025.html