Under the federal carbon pollution pricing system, the Government applies a fuel charge in jurisdictions that voluntarily adopt that component of the system, as well as in jurisdictions whose systems do not meet the federal stringency requirements for the sources covered.
The Government of Canada does not keep any direct proceeds from carbon pollution pricing. Instead, direct proceeds from carbon pollution pricing under the federal system are returned to the province or territory of origin in the following way:
- For those jurisdictions that have voluntarily adopted the federal system, direct proceeds are returned to the governments of those jurisdictions.
- For those provinces that do not meet the federal stringency requirements-Ontario, Manitoba, Saskatchewan and Alberta-the bulk of the direct fuel charge proceeds is returned to residents of those provinces through Climate Action Incentive payments.
The Minister of Finance has now specified Climate Action Incentive payment amounts for 2020 for the four provinces mentioned above. Individuals will be able to claim these payments through their 2019 personal income tax returns.
or first adult in a couple1
|B||Second adult in a couple,2
or first child of a single parent
|C||Each child under 183
(starting with the second child for single parents)
|Example: Baseline amount for a family of four||$448||$486||$809||$888|
|Note: Exceptionally, the 2020 Climate Action Incentive payment claimed by eligible Albertans will reflect fuel charge proceeds generated over a 15-month period. This consists of three months (January-March 2020) with a carbon price of $20, plus 12 months (April 2020-March 2021) with a carbon price of $30.
1 Referred to as a qualified individual in the legislation.
2 Referred to as a qualified relation in the legislation.
3 Referred to as a qualified dependant in the legislation.
In recognition of the fact that people who live in small and rural communities have reduced access to cleaner transportation options, a supplementary amount in addition to these baseline Climate Action Incentive payments will be provided for eligible individuals and families who live outside a census metropolitan area, as defined by Statistics Canada. This supplement will increase the baseline amount by 10 per cent.
Climate Action Incentive payment amounts have been adjusted based on updated projections of fuel charge proceeds generated in each province for the relevant period.
In the case of Alberta, as announced in June 2019, these first Climate Action Incentive payments claimed by eligible Albertans reflect projected fuel charge proceeds to be generated over a 15-month period. This consists of three months (January-March 2020) with a carbon price of $20 per tonne of carbon dioxide equivalent (CO2e), plus 12 months (April 2020-March 2021) with a carbon price of $30 per tonne of CO2e.
For Ontario, Manitoba and Saskatchewan, these Climate Action Incentive payment amounts reflect projected fuel charge proceeds to be generated over the usual 12-month period (April 2020-March 2021).
The Minister of Finance will specify the amounts for subsequent years as these calculations are finalized in advance of those years.
Environment and Climate Change Canada recently announced that New Brunswick’s proposed carbon levy on fuels, to apply as of April 1, 2020, meets the federal stringency requirements for the sources it covers. Accordingly, no Climate Action Incentive payment amounts have been specified for New Brunswick for 2020 as the federal fuel charge will no longer apply in that province as of April 2020.
Impact of the Federal Carbon Pollution Pricing System on Households
In the provinces in which the Government of Canada is returning proceeds of the federal carbon pollution pricing system to individuals and families through Climate Action Incentive payments, most households will receive more than they pay as a result of the federal carbon pollution pricing system. For 2020, the table below presents updated estimates of the average cost impact of the federal system per household in each of these provinces, as well as the average Climate Action Incentive payment per household in those provinces.
|Average cost impact per household1 of the federal system||$362||$358||$641||$534|
|Average Climate Action Incentive payment per household||$436||$486||$792||$880|
|Source: Department of Finance Canada calculations using inputs from Environment and Climate Change Canada and Statistics Canada.
1 The estimated average impact per household reflects the impact on household spending costs, accounting for direct impacts (reflecting consumption of fuels to which the federal carbon pollution pricing system applies) and indirect impacts (reflecting consumption of goods and services with federal carbon pollution pricing embedded in them). These impacts are inclusive of carbon pollution pricing embedded in imports that households purchase from other provinces/territories on which a federal carbon pollution price is applied. They do not include the costs associated with carbon pricing systems implemented by other jurisdictions; accordingly, they do not include the costs associated with the provincial systems for large industrial facilities in Saskatchewan and Alberta. Estimates assume full-year application of the federal system for 2020-21. Estimates also assume full pass-through from businesses to consumers.
2 The $880 which households in Alberta will receive on average in early 2020 consists of $126 for the first three months of the fuel charge (January-March 2020) and $754 for the next 12 months (April 2020-March 2021). These amounts are greater than the estimated average cost impacts per household (which are $76 for the first three-month period and $458 for the following 12-month period).