Several provinces in Canada, including Ontario, are subject to paying a carbon tax. If you aren’t sure exactly how this applies to you, you’re not alone. Many affected Canadians report that they don’t fully understand what the federal carbon tax is, why it’s in place, or how it affects them directly. In this blog, we are going to help you understand the federal carbon tax.

What is carbon tax?

In 2018, the federal government passed the Greenhouse Gas Pollution Pricing Act (GHGPPA), which imposed a carbon tax to put a direct fee on emissions. It was designed to help combat the effects of global climate change by motivating Canadians to decrease their use of fossil fuels.

Who is required to pay a carbon tax & why?

All Canadians are required to pay some form of tax on products that produce fossil fuels. Residents of Ontario, Manitoba, Saskatechewan, and New Brunswick are subject to paying the federal carbon tax. However, residents in other provinces are also paying a similar carbon tax, mandated at the provincial level.

What products are taxed?

Under the federal tax, products such as gasoline, diesel, furnace oil, natural gas, and propane are among taxable emissions.

Are there exemptions?

Yes. Currently, farmers, fisheries, and greenhouse operators are exempt either fully or partially, based on some conditions outlined here.

How much carbon tax are we paying?

The federal carbon tax was originally set at $20 per tonne with a $10 increase every year, until it hits $50 a tonne in 2022. Click here for a full breakdown of tax per product.

Are there rebates?

Yes. In Ontario, the rebate is higher than that cost of the tax, on average. When you are completing your income taxes, you can claim the Climate Action Incentive. An average family of four in Ontario will pay about $258 this year and receive a rebate of about $300.

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