Why Canada Is Ending the Carbon Price for Consumers

Prime Minister Mark Carney’s first action after taking office on Friday, March 14, was to eliminate the consumer carbon price — effectively undoing the flagship climate policy introduced by Justin Trudeau’s government for household fuel use.

Speaking to reporters after the Friday afternoon cabinet meeting, Carney said the government is “focused on action.” He announced that the Canada fuel charge, the consumer fuel charge applied at the pump and on home heating, would be eliminated immediately.

The order-in-council Carney signed in front of cabinet ministers and the press, however, specifies that “the fuel charge be removed as of April 1, 2025.” That date corresponds with the next scheduled increase in the consumer carbon price; rather than allowing the rate to rise, the government says it will stop applying the fuel charge to consumer purchases from that date.

The federal industrial carbon price — the levy applied to large industrial emitters — remains in place under the new decision. Carney has signalled he intends to strengthen the industrial pricing mechanism while removing the consumer-facing charge.

Will Canadians get another carbon rebate payment?

Carney also confirmed that individuals who have been receiving quarterly carbon rebate payments will receive one final payment for the next quarter, scheduled for April. This payment reflects the federal government’s prior approach of returning all revenue collected through the consumer carbon charge directly to households, territories, Indigenous governments, and eligible organizations.

During the Liberal leadership campaign, Carney pledged to end the consumer carbon price and to shift emphasis onto a tougher industrial carbon price for major polluters. Agriculture Minister Kody Blois described the move as positive, saying the consumer carbon policy had become divisive. Blois noted that the Atlantic Liberal caucus had previously advocated for changes to the policy and had negotiated a specific carve-out for home heating oil in 2023.

Why Canada is ending the consumer price on carbon

The consumer carbon pricing policy had been a prominent target of Conservative criticism for more than two years and had become a focal point for public frustration over the cost of living. Conservative Leader Pierre Poilievre, who ran on an “axe the tax” platform and had seen strong poll numbers until recently, challenged Carney’s move on legal grounds, arguing that the government could not permanently abolish the carbon price without recalling Parliament to repeal the law.

At a press conference in Ottawa, Poilievre suggested the government might temporarily instruct the Canada Revenue Agency to stop collecting the consumer charge before the election and implied the policy could be reinstated after the campaign. He also raised questions about whether cabinet ministers who previously voted in favour of the consumer carbon price would truly end it.

Legal and policy experts point out that the federal government can end the consumer price without repealing the entire law because the Greenhouse Gas Pollution Pricing Act, passed in 2019, establishes a regulatory framework for both the consumer and industrial components. Under that law, the fuel charge can be set or adjusted by regulation, allowing cabinet to change the consumer price through an order-in-council rather than through immediate legislative repeal.

The federal consumer price had been set to rise again in April. The previous schedule set the minimum carbon price rising annually; the consumer charge was due to increase by $15 per tonne, which would have pushed it to $95 per tonne. Instead, the government will stop applying the consumer fuel charge starting on the date specified in the order-in-council.

Will it impact Canadians’ finances?

Removing the consumer charge will lower the retail cost of fuel: the government estimated it will reduce the price of a litre of gasoline by 17.6 cents and lower the cost of a cubic metre of natural gas by a little more than 15 cents. Because consumer carbon revenues were returned to households through the Canada Carbon Rebate and related payments to territorial or Indigenous governments and organizations, ending the consumer charge changes both the point of collection and the distribution of those funds.

Steven Guilbeault, who served as environment minister under Justin Trudeau and a vocal supporter of carbon pricing, was appointed minister of Canadian culture and identity and named Carney’s Quebec lieutenant. Guilbeault told reporters he supports focusing policy on the industrial price, arguing that the industrial mechanism yields substantially more emission reductions than the consumer portion.

The Liberals have defended carbon pricing as sound climate policy that suffered from poor communication and prolonged Conservative political attacks. Environmental advocates, including representatives from Greenpeace Canada, noted Friday that public debate over the consumer carbon tax had been skewed by misinformation and urged the new prime minister to maintain and reinforce industrial carbon pricing and other climate and biodiversity protections.

Poilievre has repeatedly promised a future Conservative government would end the consumer carbon price. He has not provided public details on what his party would do regarding the industrial price, saying that policy specifics would be released during an election campaign. He continues to use “axe the tax” as a key campaign theme.

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