Carbon Tax & Climate Guide 2026
Canada’s carbon pollution pricing system puts a price on carbon to reduce emissions while returning revenues to households and businesses. In 2026, the federal benchmark continues to rise, and rebates keep growing. Here’s what you need to know.
Federal fuel charge
Applies in provinces without a qualifying provincial system: Alberta, Saskatchewan, Manitoba, Ontario, New Brunswick, Nova Scotia, PEI, and Newfoundland and Labrador.
2026 rate: $110/tonne
Carbon price increases by $15 annually, from $80 in 2024 to $170 by 2030. In 2026 it reaches $110 per tonne of CO₂e.
Output‑Based Pricing System
Large industrial emitters face carbon pricing on part of their emissions to maintain competitiveness and reduce pollution.
Fuel levy impact (2026)
Estimated additional cost per litre / cubic metre:
- Gasoline: ≈ 24.5¢ per litre
- Diesel: ≈ 29.6¢ per litre
- Natural gas: ≈ 21.5¢ per m³
- Propane: ≈ 16.2¢ per litre
* based on $110/tonne carbon price. Actual retail impact may vary by province and blending.
Climate Action Incentive (CAI) rebates
Households in backstop provinces receive quarterly CAI payments to offset the cost of the federal fuel charge. The 2026‑2027 amounts (for a family of four) are estimated as:
| Province | Annual rebate (family of four) | Quarterly payment |
|---|---|---|
| Alberta | $1,544 | $386 |
| Saskatchewan | $1,401 | $350 |
| Manitoba | $1,032 | $258 |
| Ontario | $1,120 | $280 |
| New Brunswick | $920 | $230 |
| Nova Scotia | $824 | $206 |
| Prince Edward Island | $880 | $220 |
| Newfoundland & Labrador | $1,152 | $288 |
Rural and small‑community residents receive an extra 10% top‑up. Payments are delivered via income tax return or direct deposit.
Provincial carbon pricing systems
Some provinces operate their own carbon pricing that meets the federal benchmark:
- British Columbia: carbon tax (since 2008) – currently at $110/tonne in 2026, with revenue used for tax cuts and credits.
- Québec: cap‑and‑trade system linked with California, proceeds fund green initiatives.
- Northwest Territories and Nunavut: use their own tailored pricing.
- Yukon: exempt due to low emissions, but monitors federal system.
Small business & agricultural relief
Farming & fishing
Qualified farmers can claim a refundable tax credit for fuel charges on grain drying, livestock heating, and certain farm activities.
Small business rebate
A portion of carbon tax revenues is returned to small and medium‑sized enterprises through provincial programs and the federal CAI for businesses.
Frequently asked questions
Who receives the Climate Action Incentive?
Residents of federal backstop provinces who file an income tax return. The amount depends on province, family size, and eligibility for rural supplement.
Is the carbon tax increasing every year?
Yes, the federal benchmark rises by $15 per tonne annually until 2030. In 2026 it’s $110, in 2027 it will be $125, and so on.
How do I claim the CAI if I live in a non‑backstop province?
If your province has its own carbon pricing (BC, QC, NWT, Nunavut), you don’t receive the federal CAI. Check your provincial carbon tax rebate programs instead.
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