Carbon pricing works by creating a price signal that incentivizes people and businesses to choose cleaner technologies or practices. In 2023, more than 250 of Canada’s leading economists signed a letter pointing to the effectiveness of carbon pricing at reducing emissions with minimal cost to Canadians and the economy.

There are several carbon pricing systems in place in Canada. The following summarizes the most prominent of those systems and explores the impact on Canadian households.

The federal consumer carbon price

How it works:

• The federal carbon price applies in all provinces except B.C., Quebec, and the Northwest Territories (as they have their own systems). 
• The carbon price is revenue neutral, which means that the federal government does not keep any of the money collected. For the Yukon and Nunavut, the proceeds are returned to their governments. For all other provinces, the money is returned to eligible Canadians, predominantly via quarterly rebate cheques.

Its impact:

• In 2024, the carbon price added 17.6 cents to the price of gasoline, around 3 cents more than in the previous year. However, the vast majority of households (80%) get more back then they pay at the pump thanks to federal rebates, with only the wealthiest share of Canadians paying slightly more overall. The government of Canada has a carbon rebate calculator that helps households see how much they pay versus how much they receive in rebates. 
• In 2022, Canada’s emissions would have been approximately 19 megatonnes higher without carbon pricing systems (including industrial carbon pricing)—almost the equivalent of Manitoba’s emissions that year.
• The carbon price is responsible for just 0.15 percentage points of a given year’s inflation increase according to the Bank of Canada.
• Carbon pricing is designed to encourage the adoption of cleaner technologies. A family that adopts a few common clean energy solutions—including EVs and heat pumps—could knock $800 off their monthly energy bills (including equipment costs), compared to one that is largely reliant on fossil fuels.

Industrial carbon pricing

• Most provinces have their own industrial carbon pricing systems that encourage industries to reduce emissions.
• The provinces and territories that don’t (Manitoba, Nunavut, Prince Edward Island, and the Yukon) use the federal industrial carbon price, known as the Output-Based Pricing System.
• Proceeds from the federal industrial carbon price are returned to provinces to support industrial projects to cut emissions.
• By 2030, industrial carbon pricing (which includes various types of large-emitter trading systems across Canada) is projected to contribute between 23% and 39% of avoided emissions from all currently implemented climate policies, according to the Canadian Climate Institute.

The B.C. carbon tax

• Implemented in 2008, B.C.’s carbon tax was the first in North America.
• Unlike the federal version, B.C.’s carbon tax returns a portion of the money collected directly to medium- and low-income households via climate action tax credits, and B.C. maintains one of the lowest total tax rates in Canada (revenue collected through a carbon tax can also be used to lower other taxes). 
• In its 2024 budget, the province increased the income threshold for receiving the tax credit and announced that all revenue from the year’s increase will be returned to British Columbians.

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From the rapid rise of cheap solar power to the growing number of EVs on the road, the world’s transition from fossil fuels to clean energy can already be seen happening almost everywhere. This global transformation has implications for Canada’s energy economy, with research showing significant declines in Canada’s fossil fuel industry in a net-zero world. But the sunsetting of one industry does not mean Canada will be worse off. The rapid growth of new energy jobs in more sustainable fields, from EV manufacturing to energy efficiency, can result in a net increase in Canadian energy jobs overall. Below is a summary of what net zero means for Canada’s energy sector and economy, according to the most relevant research.

• Modelling from Clean Energy Canada and Navius Research finds that Canada sees 700,000 more total energy jobs in a net-zero 2050 than exist today, with gains in clean energy jobs outpacing the decline in fossil fuel ones.
  • Clean energy jobs increase five-fold from 509,000 in 2025 to 2.7 million in 2050, growing 7% annually, while fossil fuel jobs decline by 1.5 million over the same period (note: both sectors are defined more broadly than the conventional oil and gas sector and include, for example, jobs transporting goods).
  • Regionally, Canada’s fossil-fuel-producing provinces—Alberta and Saskatchewan—experience the highest rate of clean energy job growth, growing 10% and 9% annually.
    • In Alberta, clean energy jobs grow from 41,500 in 2025 to 460,400 by 2050, almost 100,000 more than the 324,300 decline expected for fossil fuel jobs in the province. 
    • Since 2019, renewable energy projects alone have already created more than 6,200 jobs in Alberta, according to the Business Renewables Centre’s online deal tracker.
  • Canada is already home to 13 of the world’s top 100 most promising cleantech companies.
    • B.C. performs particularly well, with seven of those companies calling the province home.
  • Sustainable projects attracted 29% of all foreign direct investment into Canada in 2023, up from 25% in 2022, 10% in 2021, and 5% in 2020.

• Research from Clean Energy Canada and the Trillium Network for Advanced Manufacturing in 2022 found that a domestic EV battery supply chain could add $48 billion to the Canadian economy annually and support 250,000 direct and indirect jobs by 2030.
  • The modelling showed that the more ambitious Canada goes on batteries, the more jobs and economic benefits await.
  • Since the research was published, Canada has landed four gigafactories, exceeding even the most optimistic scenario modelled, while investments in Canada’s EV battery supply chain have grown to a whopping $37.4 billion (up four-fold from $7.3 billion in 2021). 
  • By the start of 2024, Canada had risen to the top of BloombergNEF’s global battery supply chain ranking, becoming the world’s most promising EV battery manufacturing destination.
  • Meanwhile, a 2024 TD analysis estimates that developing just six of Canada’s 31 listed critical minerals would contribute more than $500 billion to the country’s GDP over the life of the mines while supporting economic reconciliation with Indigenous communities.

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