The Government of Canada on Saturday published an extra edition of Canada Gazette, Part II to eliminate the “consumer-facing” carbon price (i.e., the federal fuel charge), effective April 1, 2025. The change was originally announced by new Prime Minister Mark Carney on Friday as his first official act. The new regulations amend the Greenhouse Gas Pollution Pricing Act (GGPPA) and related regulations. This bulletin briefly summarizes the amendments and highlights key aspects of the associated Regulatory Impact Analysis Statements (RIASs).
The amendments most consequentially set the rate of charge applicable after March 31, 2025 set out in Table 5 of Schedule 2 to the GGPPA to “zero” dollars for all 22 types of fuel. The rates previously set out in that table represented a carbon price of $80 per tonne in 2024-25. The Governor in Council (i.e., the Governor General acting on the advice of Cabinet) has the authority to set the fuel charge rates to zero under section 166(4) of the GGPPA. The government has also made related amendments to the Fuel Charge Regulations (particularly around removal of registration requirements after March 31, 2025) and coordinating amendments to the Output-Based Pricing System (OBPS) Regulations.
The RIASs note that:
- The government estimates that the elimination of the fuel charge will lead to a loss of 12.57 Mt cumulative GHG emissions reductions from 2025 to 2030 (p. 12).
- The monetized cost of foregone emissions reductions over the 2025-2030 period of the elimination of the fuel charge is estimated to be about $3.83B (in 2024 dollars, discounted at 2% to 2025-26), using social cost of carbon figures for 2025 to 2030 (p. 13).
- The elimination of the fuel charge increases Canada’s GDP by 0.5% in 2030 (p. 14).
- The total welfare gains, not accounting for the social cost of carbon, for households would be equivalent to a 0.3% increase in household consumption in 2030 ($5.4B 2024 dollars) (pp. 14-15).
- While the elimination of the fuel charge is “likely to offer short-term fuel price decreases to consumers, all else being equal”, it is also likely to have “long-term negative effects, such as higher costs from climate change impacts (because of foregone emissions reductions) and missed opportunities to transition to sustainable and lower-carbon emitting energy sources” (pp. 17-18).
- The federal government intends to engage with provinces, territories, Indigenous peoples, industry, and stakeholders on ways to strengthen industrial carbon pricing and updating related minimum national stringency requirements (p. 20, emphasis added).
- Independent research by the Canadian Climate Institute finds that industrial carbon pricing systems will be the main driver of emissions reductions attributable to carbon pricing by 2030.
Pierre Poilievre, leader of the Conservative Party of Canada on Monday announced that, if elected, he would repeal carbon pricing in its entirety, including the industrial carbon pricing backstop (OBPS). “Instead, provinces will continue to have the freedom to address this issue how they like,” he said.
For further information or to discuss the contents of this bulletin, please contact Lisa DeMarco at lisa@resilientllp.com or Jonathan McGillivray at jonathan@resilientllp.com.
