Carbon pollution pricing systems in Canada have applied since April 1, 2019 under the Greenhouse Gas Pollution Pricing Act and the Fuel Royalty Regulations.
The federal pricing system consists of two parts: a regulatory charge on fossil fuels, such as gasoline and natural gas, known as the fuel charge, and a regulatory trading system for industry, known as the output-based pricing system. One or both parts combined may apply in a province or territory.
Both parts of the federal pricing system apply in Manitoba, Nunavut, Prince Edward Island, and Yukon. The federal fuel charge applies in parallel with provincial carbon pollution pricing systems for industry in Alberta, New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, and Saskatchewan.
As an example of fuels covered by the fuel charge, below are the tax rates applicable for Alberta, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Prince Edward Island, Ontario, and Saskatchewan from April 1st, 2024 to March 31, 2025:
Gasoline: ¢17.61 per litre
Aviation gasoline: ¢19.59 per litre
Light fuel oil (diesel): ¢21.39 per litre
Heavy fuel oil: ¢25.50 per litre
Propane: ¢12.38 per litre
Marketable natural gas: ¢15.25 per cubic metre
Please note that we have chosen examples of known fuels, but that there are over 20 types of fuel subject to the charge.
Exemptions from the fuel charge
Certain fuel consumers can benefit from a total or partial exemption from fuel tax by presenting a certificate attesting to the use of the fuel:
- a registered distributor, a registered designated air carrier, a registered designated ocean carrier or a registered designated rail carrier for this type of fuel;
- a registered emitter and that this fuel is intended for use in its reporting facility;
- a fuel user registered for that type of fuel and that fuel is intended for use in a non-taxable activity*;
- an agriculturist, and that all the following conditions are met:
- the fuel is delivered to a farm;
- the fuel is intended for use exclusively in the operation of eligible farm machinery or an auxiliary component of eligible farm machinery;
- all or almost all of the fuel is intended for use in eligible agricultural activities;
- a fisherman, and that all the following conditions are met:
- the fuel is to be used exclusively in the operation of a qualifying fishing vessel;
- all or almost all of the fuel is intended for use in eligible fishing activities.
*non-taxable activity Activity in respect of which fuel, both:
a) is used:
-
- (i) as a raw material in an industrial process that produces another fuel or another substance, material or thing;
- (ii) as a solvent or diluent in the production or transportation of crude bitumen or any other substance, material, or thing;
- (iii) in the circumstances prescribed by regulation;
b) is not put into a fuel system that produces heat or energy and is not burned or flared. (non-covered activity)
In addition, the Government of Canada offers relief when a person delivers light fuel oil to a remote power plant operator who generates electricity for remote communities*. There is also partial relief (80%) available when a person delivers natural gas or propane to a greenhouse operator.
*Remote community means a geographic area that is served neither by an electrical distribution network under the jurisdiction of the “North American Electric Reliability Corporation” nor by a natural gas distribution network.
You can get a refund of overpaid fuel charge within two years of the day on which you took the amount into account to determine your net charge and the fuel charge was paid.
Motor carrier
Registered motor carriers are required to declare the fuel charge in their supply tanks that has been transferred to a levy province or removed from a supply tank in a federal levy province.
The return may result in a refund if the fuel purchased in a federally-regulated province exceeds the fuel used in that province during the same period under the International Fuel Tax Agreement (IFTA).
We can help you determine whether your organization is eligible for exemptions or refunds, and put in place the processes to enable your organization to benefit from carbon tax relief or any other tax.
Be sure to reach out with any questions on the matter.
