Carbon pricing is here to stay in Canada. What is it anyway?

The federal carbon-pricing law introduced in 2018 has been ruled to be constitutional by the Supreme Court of Canada after a challenge by three provinces, but what is carbon pricing anyway and how will it affect consumers?

EXPLAINER: Canada’s carbon pricing: How much is it and how does it work? What you need to know –…

What is carbon pricing? Carbon pricing means charging a minimum cost for fossil fuels like gasoline, diesel and coal, and the goods made from them, so that their prices come closer to the real environmental costs. This can be applied either as a fee on goods produced or sold, or as carbon permits that corporations can trade on a regional market (we’ll get into the difference in more detail later).

HOW MUCH IS CANADA’S CARBON PRICE? For consumers, the federal minimum price started at $20 per tonne of CO2 equivalent in 2019. As of this April it’s $40, rising to $50 in 2022 and increasing by $15 annually until it reaches $170 in 2030. Participating provinces and territories set their own fees that meet or exceed that standard, or use a cap-and-trade system that achieves the same result. If a province has no plan, or if it’s below the standard, the federal government applies a “backstop” that applies the minimum price through federal taxes. Currently, the backstop for consumers applies to Alberta, Saskatchewan, Manitoba and Ontario. It used to apply to New Brunswick until it introduced a carbon-tax system in 2020.