Carbon levy and rebates

Putting a price on carbon is the most cost-effective way to reduce greenhouse gas emissions that cause climate change.

Overview

To encourage Albertans to reduce carbon pollution from their cars and homes, a carbon levy is charged on all transportation and heating fuels that emit greenhouse gases when burned.

The levy provides a financial incentive for families, businesses and communities to become more energy efficient and move away from higher-emission fuels.

As part of the Climate Leadership Plan, all revenue from the levy will be reinvested in our economy to pay for:

  • efforts to reduce emissions
  • rebates for Albertans to offset cost increases
  • renewable energy projects and green infrastructure
  • research and innovation

Carbon Levy

The carbon levy is applied to diesel, gasoline, natural gas and propane at the gas station and on heating bills. It does not apply to electricity.

Certain fuels, such as marked gas and diesel used on farms, are exempt.

The levy rate is based on the amount of carbon pollution that is released by the fuel, not the mass of fuel itself.

Table 1. Carbon levy on major fuels

Type of Fuel 2017 rate
($20/tonne)
Rate increased
Jan 1, 2018
2018 rate
($30/tonne)
Marked farm fuels Exempt Exempt Exempt
Diesel 5.35 ¢/L +2.68 ¢/L 8.03 ¢/L
Gasoline 4.49 ¢/L +2.24 ¢/L 6.73 ¢/L
Natural Gas 1.011 $/GJ +0.506 $/GJ 1.517 $/GJ
Propane 3.08 ¢/L +1.54 ¢/L 4.62 ¢/L

Source: Alberta Climate Change Office
Carbon levy rates: page 106 of the 2016-19 Fiscal Plan (PDF, 3.1 MB)

Cost on households

The amount of carbon levy you pay will depend on your energy use and driving patterns.

You can reduce costs by taking steps to lower emissions by:

  • taking advantage of energy efficiency programs
  • turning down the heat at night and when no one is home
  • installing smart thermostats
  • choosing more fuel efficient cars
  • using public transit, walking or biking

Calculate your carbon levy costs

Table 2. Estimated direct costs of the carbon levy on a household per year.

  Single Couple Couple with 2 children
Typical fuel use assumptions Natural gas use (GJ) 100 123 135
Gasoline use (L) 2,000 3,000 4,500
2018 costs and rebates Natural gas cost $152 $186 $205
Gasoline cost $134 $202 $303
Total levy cost $286 $388 $508
Full rebate $300 $450 $540

Source: Alberta Treasury Board and Finance

Estimated indirect costs

Businesses may pass some costs related to the carbon levy on to consumers. However, the increase is expected to be relatively small, since commodities imported from outside the province are not subject to the levy.

The indirect costs are estimated to range from $75 to $110 per household in 2018.

Indirect costs were calculated using Statistics Canada's Social Policy Simulation Database and Model. The assumptions and calculations underlying the simulation results were prepared by Treasury Board and Finance, and the responsibility for the use and interpretation of these data is entirely that of the author. To develop the ranges, it's assumed that businesses subject to the levy pass 50% to 75% of the related costs on to consumers.

Alberta's tax advantage

With no provincial sales tax, payroll tax or health-care premiums, Albertans across all income ranges generally pay the lowest overall taxes compared withother provinces.

When all tax measures and carbon charges are considered, Albertans pay at least $8.7 billion less in taxes than the next lowest province.

Carbon levy rebates

Single Albertans who earn less than $47,500/year and families who earn less than $95,000/year will receive a full rebate to offset costs associated with the carbon levy.

Carbon levy rebates protect low- and middle-income Albertans who spend a higher percentage of their income on energy costs and have fewer financial resources to invest in energy efficiency products. An estimated 60% of households will get a full or partial rebate.

Calculate your carbon levy rebate

Eligibility

Rebates are based on your family net income and the number of people in your household. It’s not tied to energy use, so there’s still an incentive to reduce household emissions.

To automatically receive a rebate you must:

  • be an Alberta resident
  • file a tax return
  • meet the income criteria

Table 3. Rebate income criteria

  2018
Rebate amounts First adult $300
Spouse/Equivalent to spouse $150
Each child (maximum 4) $45
Maximum family net income to receive full rebate Single $47,500
Couple/Single parent $95,000
Families $95,000
Phase-out rates Single 2.67%
Couple/Single parent 4.00%
Families 4.00%

Source: Alberta Treasury Board and Finance

Payments

Rebates will be mailed or deposited directly by the Canada Revenue Agency (CRA) in 4 quarterly payments: January, April, July and October.

If you have a spouse or common-law partner, the rebate will be paid to the person whose tax return is assessed first.

The CRA is administering the carbon levy rebate program on our behalf. For more information about receiving the rebate, visit the CRA website or call 1-800-959-2809.

Table 4. Maximum quarterly payment amounts

  2017-18 benefit year 2018-19 benefit year
  Jan 2018 Apr 2018 Jul 2018 Oct 2018 Jan 2019 Apr 2019
First adult $75 $75 $75 $75 $75 $75
Spouse/equivalent to spouse $37.50 $37.50 $37.50 $37.50 $37.50 $37.50
Each child (max 4) $11.25 $11.25 $11.25 $11.25 $11.25 $11.25

Source: Alberta Treasury Board and Finance

CRA will use your 2017 tax return to calculate rebates for the 2018-19 benefit year. Payment information will be sent to you in July 2018. If the quarterly rebate for your household is less than $25, you will not get a payment.

Changes in household status

The carbon rebate is paid in the second month of each 3-month eligibility period. If your household status changes during the benefit period, your eligibility for the rebate may change. For example:

  • if you have another child, your household may qualify for a greater rebate
  • if your family leaves Alberta, you may have to return some money for the months you were not living in the province

The CRA reassesses eligibility on a regular basis, as updated household information is received.

  • If your household qualifies for a greater rebate than what was originally paid, the CRA will issue an additional payment for the difference.
  • If your household qualifies for a smaller rebate, or no rebate, you will receive a letter from CRA indicating the amount you will have to return. To find out how to return payments, contact the CRA at 1-800-959-2809.

If your household receives a rebate for a family member who has died, the amount owing will be forgiven so the rebate will not have to be returned.

Reinvesting in our economy

The carbon levy is the key tool that will pay for the transition to a more diversified economy.

Over the next 3 years, revenue from the Climate Leadership Plan, including the carbon levy, is expected to raise $5.4 billion, all of which will be reinvested in the economy and rebated to Albertans:

  • $1.5 billion for carbon rebates to help low- and middle-income families
  • $1.3 billion for green infrastructure such as public transit
  • $998 million for large scale renewable energy, bioenergy and technology, coal community transition and other Climate Leadership Plan implementation initiatives
  • $566 million for energy efficiency, which includes Energy Efficiency Alberta, a new provincial agency that will support programs and services for homes and businesses
  • $565 million to pay for a cut in the small business tax rate to 2% from 3%
  • $291 million in transition payments as part of the coal phase-out agreements
  • $151 million to assist Indigenous communities move to a cleaner economy

Support for businesses

Small business tax cut

Alberta’s small business corporate income tax rate was reduced from 3% to 2% in Jan 2017 to help businesses adjust to the carbon levy. It’s estimated to save small business owners $175 million in 2017-18.

With the tax relief, Alberta is now tied with Saskatchewan for the second-lowest provincial small business tax rate. While Manitoba has a lower rate, Alberta small business owners pay lower taxes when they take money out of their business for personal use.

Alberta maintains the lowest overall tax regime in Canada, with no provincial sales tax, health premium or payroll tax.

Find more small business supports.

Administering the carbon levy

Registration forms, guides and instructional videos are available for businesses that are responsible for remitting the carbon levy, such as retailers of fuels.

Businesses that sell certain fuels – such as gasoline, diesel, propane, kerosene, butane and more – may need to complete a carbon levy inventory declaration.

For more information, visit Tax and Revenue Administration.

Support for farmers

Energy efficiency programs for farms

The Climate Leadership Plan is funding programs to help farm operations reduce emissions and save on energy bills through efficiency upgrades:

  • On-Farm Energy Management Program helps producers buy equipment that to improve energy efficiency or monitor energy consumption, such as lighting, pumps, meters, boilers, heaters and low-energy, livestock-watering fountains.
  • On-Farm Solar PV Program helps producers by grid-connected solar panel systems that can be used to generate electricity and reduce emissions on farms.
  • Irrigation Efficiency Program helps producers invest in new or upgraded low-pressure irrigation equipment to improve water efficiency and reduce energy use.
  • Accelerating Innovation Program
    • Helps agricultural societies, industry organizations and producer groups collaborate on proof-of-concept and commercialization of new products, new processes or new business practices in Alberta.
    • Assists primary producers, agri-processors and other for-profit companies with the early adoption of new technologies or practices that have the potential for sector-wide impact.

Farm fuel exemption

The carbon levy does not apply to dyed diesel or gasoline used in farming operations. Agriculture is the only economic sector with a levy exemption.

The farm fuel carbon levy exemption uses the same eligibility criteria as the Alberta Farm Fuel Benefit (AFFB) fuel tax exemption. The AFFB registration number will also be used for the carbon levy exemption certificate.

Carbon levy exemptions

In addition to marked farm fuel, some other fuels are exempt from the carbon levy, including the following:

  • purchases of fuel on reserves or at other prescribed locations by eligible First Nations and individuals for personal and band use
  • marked gasoline and diesel used by farmers in farming operations
  • biofuels, including biomethane, biodiesel and ethanol
  • inter-jurisdictional flights
  • fuel sold for export
  • industrial exemptions in cases where fuel is used in industrial processes but not combusted
  • natural gas produced and consumed on site by conventional oil and gas producers (until Jan 1, 2023)
  • the use of heating fuels on sites subject to the Specified Gas Emitters Regulations (SGER)/output-based allocation regime

For a full list of carbon levy exemptions, see pages 94-96 of the 2016-19 Fiscal Plan (PDF, 3.1 MB)

Large industrial emitters

Large Industrial Emitters transitioned from the Specified Gas Emitters Regulation (SGER) framework to the Carbon Competitiveness Incentives program on Jan 1, 2018.

The new program, which is endorsed by energy leaders, is designed to:

  • reduce emissions from large industrial emitters
  • attract investment in clean technology
  • create jobs and diversify our economy

It's expected to cut emissions by 20 million tonnes by 2020, and 50 million tonnes by 2030.

On-site combustion in conventional oil and gas will be levied starting Jan 1, 2023 while that sector works to reduce methane under the government’s new joint initiative on methane reduction and verification.

Learn more: