Canada Carbon Tax Guide (Federal Fuel Charge)
the federal carbon tax in Canada. The federal fuel charge (the "carbon tax" on the fossil fuels) is the $80 per tonne of the CO2 equivalent for the 2025 year, increasing by $15 per year to $170 per tonne by 2030. The fuel charge applies to the "backstop provinces" — the provinces where the federal carbon pricing system applies (the "federal backstop" — the provinces that have NOT adopted the equivalent provincial carbon pricing). The backstop provinces (as of the 2025 year): Ontario, Manitoba, Saskatchewan, Alberta, New Brunswick, Nova Scotia, Prince Edward Island, and Newfoundland and Labrador. The provincial carbon pricing — the BC carbon tax at $80 per tonne (2025), the Quebec cap-and-trade system (the "Quebec Carbon Market" — the "Western Climate Initiative" — the "WCI"), and the "Alberta TIER" (the "Technology Innovation and Emissions Reduction" system — the industrial carbon pricing). The Output-Based Pricing System (OBPS) — the "industrial carbon pricing" for the large industrial emitters (the "OBPS" — the "emissions performance standards" — the "output-based allocation" of the emissions credits). The Climate Action Incentive Payment (CAIP) — the "carbon tax rebate" for the households in the backstop provinces (the "CAIP" — the "tax-free quarterly payment" — the "CAIP amounts" for the 2025-26 year). The carbon tax exemptions — the "agricultural fuels" (the "farming and the fishing" — the "marked gasoline and the diesel" for the farm use), the "greenhouse growers" (the "natural gas for the greenhouse heating"), and the "school buses" and the "emergency vehicles".
Federal Fuel Charge Rates (2025)
- Carbon price: $80 per tonne of the CO2 equivalent (the 2025 rate). The fuel charge is applied to the "fossil fuels" — the gasoline ($0.18 per litre), the diesel ($0.21 per litre), the natural gas ($0.14 per cubic metre), the propane ($0.13 per litre), and the aviation fuel ($0.19 per litre).
- Price escalation: The carbon price increases by $15 per year to $170 per tonne by 2030. The 2026 rate is $95 per tonne, the 2027 rate is $110 per tonne, the 2028 rate is $125 per tonne, the 2029 rate is $140 per tonne, and the 2030 rate is $170 per tonne.
- Backstop provinces: The federal fuel charge applies in the "backstop provinces" (the provinces that have NOT adopted the equivalent provincial carbon pricing). The backstop provinces for the 2025 year: Ontario, Manitoba, Saskatchewan, Alberta, New Brunswick, Nova Scotia, PEI, and Newfoundland.
Provincial Carbon Pricing
- BC carbon tax: $80 per tonne of the CO2 equivalent (the 2025-26 rate). The BC carbon tax applies to the "fossil fuels" (the gasoline, the diesel, the natural gas, the propane). The BC carbon tax is the "revenue-neutral" — the tax revenue is returned to the households and the businesses through the tax credits (the "BC Climate Action Tax Credit" and the "BC business tax cuts").
- Quebec cap-and-trade: The Quebec Carbon Market (the "Western Climate Initiative" — the WCI) — the "cap-and-trade" system for the industrial emitters and the fuel suppliers. The carbon price in Quebec is determined by the "emissions allowance auctions" (the "WCI allowance" — the price is approximately $40 to $60 per tonne for the 2025 year).
- Alberta TIER: The Technology Innovation and Emissions Reduction system — the "industrial carbon pricing" for the large emitters in Alberta. The TIER price is $80 per tonne for the 2025 year (the same as the federal price).
OBPS (Industrial Emitters)
- Output-Based Pricing System (OBPS): The federal carbon pricing for the "large industrial emitters" (the "OBPS" — the "industrial carbon pricing" for the facilities that emit 10,000+ tonnes of the CO2e per year). The OBPS applies the "emissions performance standards" (the "output-based allocation" — the "free emissions credits" for the "product output").
- OBPS price: The same as the fuel charge — $80 per tonne (2025). The industrial emitter pays the carbon price on the "excess emissions" (the "emissions above the standard"). The emitter receives the "free credits" for the "production output" (the "carbon credits" — the "OBPS credits").
For the Climate Action Incentive Payment (CAIP) and the household rebates, see our Climate Action Incentive Guide →. For the energy efficiency and the green energy tax credits, see our SR&ED Tax Credit Guide →.