Carbon levy and rebates
Putting a price on carbon is the most cost-effective way to reduce greenhouse gas emissions that cause climate change.
Alberta’s carbon levy provides a financial incentive for families, businesses and communities to lower their emissions. Economists agree that a price on carbon is the most cost-effective way to reduce emissions. It drives innovation and changes behaviour by encouraging individuals and businesses to become more energy efficient and shift away from higher emission fuels.
The levy will also help diversify our energy industry and create new jobs, and is already improving access to new markets and better prices for our traditional energy products.
Carbon rebates will offset costs associated with the levy to help low-and middle-income households adjust. To help businesses, the small business tax rate is being cut by one third.
Together with the new performance standards for large industrial emitters, the carbon pricing model covers 70-90% of Alberta’s emissions.
As of January 1, a carbon levy is charged on all fuels that emit greenhouse gas emissions when combusted at a rate of $20/tonne in 2017 and $30/tonne in 2018. The rate is based on the amount of carbon pollution released by the fuel when it's combusted, not on the mass of fuel itself.
These include transportation and heating fuels such as diesel, gasoline, natural gas and propane. Certain fuels, such as marked gas and diesel used on farms, will be exempt from the levy.
The levy doesn't apply to electricity.
All revenue from the levy will be reinvested back into Alberta to grow and diversify our economy as we reduce carbon pollution.
With no provincial sales tax, payroll tax or health care premiums, Albertans across all income ranges generally pay the lowest overall taxes compared to other provinces. When all tax measures and carbon charges are considered, Alberta’s tax advantage is at least $8.7 billion.
Table 1. Carbon levy on major fuels
|Type of Fuel||January 1, 2017
|January 1, 2018
|Marked farm fuels||Exempt||Exempt|
|Diesel||+5.35 ¢/L||+2.68 ¢/L|
|Gasoline||+4.49 ¢/L||+2.24 ¢/L|
|Natural Gas||+1.011 $/GJ||+0.506 $/GJ|
|Propane||+3.08 ¢/L||+1.54 ¢/L|
Source: Alberta Climate Change Office
Impact on households
Impacts of the carbon levy will vary, depending on a household’s energy use and driving patterns.
All Albertans who take steps to reduce their emissions – by turning down the heat when no one is home, installing smart thermostats, choosing more fuel efficient cars, using public transit, walking, biking, or taking advantage of coming energy efficiency programs – can reduce the cost of the carbon levy.
Six of 10 Alberta households will receive a rebate that covers the average cost of the carbon levy.
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|
|2017 costs and rebates||Natural gas cost||$101||$124||$136|
|Total levy cost||$191||$259||$338|
|2018 costs and rebates||Natural gas cost||$152||$186||$205|
|Total levy cost||$286||$388||$508|
Source: Alberta Treasury Board and Finance
Estimated indirect cost on households
In addition to direct costs, there will be indirect costs from the carbon levy in the form of higher prices for other goods and services. However, the impact is expected to be relatively small since a large portion of commodities bought by Alberta households are imported from outside the province. Imported commodities are not subject to the levy, although the distribution and retailing of those goods will face some carbon levy related charges.
The indirect costs of the carbon levy are estimated to range between:
- $50 to $70 per household in 2017
- $70 to $105 per household in 2018
Indirect costs of the carbon levy on Alberta households were calculated using a detailed Alberta Input-Output model, which is based on Statistics Canada data and reflects inter-industry as well as cross-border trade flows that occur while producing a specific good or service consumed by Alberta households. To develop the ranges, it is assumed that businesses subject to the levy pass through 50% to 75% of the related costs to consumers.
Calculate your carbon levy costs and rebate
Use our online calculator to find out the estimated cost of the carbon levy for your household and the rebate you will receive.
Carbon levy rebates
Rebates are provided to lower- and middle-income Albertans to offset costs associated with the carbon levy. The rebates protect those 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 rebate: In 2017, rebate amounts are $200 for an adult, $100 for a spouse and $30 for each child under 18 (up to four children). Single parents can claim the spouse amount for one child, and the child amount for up to 4 more children.
Full rebates will be provided to single Albertans who earn $47,500 or less, and to couples, single parents and families who earn $95,000 or less. Additional households will receive a partial rebate.
You don't need to apply. You'll automatically receive a rebate if you're an Alberta resident, file a tax return and meet the income criteria.
The rebate is tied to income and the number of people in a household. It's not tied to energy use, so eligible recipients have a financial incentive to reduce household emissions.
Rebates are calculated using the Family Adjusted Net Income from your annual personal income tax return and your household information.
Table 3. Rebate income parameters
|Rebate amounts||First adult||$200||$300|
|Spouse/Equivalent to spouse||$100||$150|
|Each child (maximum 4)||$30||$45|
|Maximum income to receive full rebate
(Family Net Income)
Source: Alberta Treasury Board and Finance
Each benefit year runs from July to June, based on the previous year's tax return. Payments will now be delivered in four quarterly payments over the benefit year: July, October, January and April. Rebate amounts will increase in 2018 to coincide with the increased carbon levy rates.
Payments will be automatically mailed or direct deposited by the Canada Revenue Agency (CRA) if you file a tax return. If you have a spouse or common-law partner, the rebate will be paid to the person whose tax return is assessed first.
2016 tax returns will be used to calculate payments for the 2017-18 benefit year. The CRA will send you information on these payments in July 2017. Total annual household rebate amounts under $100 will not be paid.
Table 4. Maximum quarterly payment amounts
|Jul 2017||Oct 2017||Jan 2018||Apr 2018||Total 2017-18 Amount|
|Spouse/equivalent to spouse||$25||$25||$37.50||$37.50||$125|
|Each child (max 4)||$7.50||$7.50||$11.25||$11.25||$37.50|
Source: Alberta Treasury Board and Finance
Changes in household status
Eligibility for the carbon levy rebate is determined at the beginning of each three-month eligibility period. If your household’s status changes during the benefit period, your eligibility for the rebate may change. For example, if you have a child or someone in the household moves to another province, you may qualify for a greater or lesser rebate than you initially receive. As with other benefit programs administered by the CRA, eligibility is reassessed on a regular basis, as updated household information is received. If your household qualifies for a greater rebate than what was initially 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 that any additional amounts received over your entitlement will have to be returned. For information on how to return amounts owing, contact the CRA at 1-800-959-2809.
If a household member passes away
For households where a member passed away after receiving a carbon levy rebate payment, the following will apply:
- amounts owing will be forgiven, so the rebate will not have to be returned
- households that have already returned the rebate will receive a repayment from CRA by fall 2017
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 like 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 from 3% to 2%
- $291 million in transition payments as part of the coal phase out agreements
- $151 million to assist Indigenous communities transition to a cleaner economy
Support for businesses
Small business tax cut
To help businesses adjust to the carbon levy, Alberta’s small business corporate income tax rate was reduced by one third, from 3% to 2% effective Jan 1, 2017. The reduction is projected to save small business owners $185 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.
For more information about government support for small businesses, please visit Alberta Jobs Plan.
Administering the carbon levy
Registration forms, guides and instructional videos are now 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 Alberta’s Tax and Revenue Administration website.
Support for farmers
Energy efficiency programs for farms
Through the Climate Leadership Plan, the government is investing $10 million to help farm operations reduce their emissions and save on energy bills through efficiency upgrades. The programs include:
- On-Farm Energy Management Program assists producers with the purchase of equipment that improves energy efficiency or monitors energy consumption. This includes lighting, pumps, meters, boilers, heaters and low-energy, livestock-watering fountains.
- On-Farm Solar PV Program assists producers with the purchase of 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, improving water efficiency and reducing energy use.
- Accelerating Innovation Program
- Facilitates collaboration between agricultural societies, industry organizations and producer groups to collaborate through 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
Marked farm fuels are exempt from the carbon levy. This means that 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 program 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-reserve 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 (3.0 MB)
Large industrial emitters
Large Industrial Emitters will continue to be subject to the SGER framework until the end of 2017, when the province will transition to an output-based allocation approach. Further details will be available after stakeholder engagement.
The new framework, which is endorsed by energy leaders, is designed to reduce the amount of carbon pollution in every barrel of oil.
Under SGER, facilities that emit 100,000 tonnes or more of greenhouse gas emissions are required to annually reduce their site-specific emissions intensity by 20% as of Jan 1, 2017.
There are 4 ways facilities can comply:
- make improvements at their facility to reduce emissions
- use emission performance credits generated at facilities that achieve more than the required reductions
- purchase Alberta-based carbon offset credits
- contribute to Alberta’s Climate Change and Emissions Management Fund (Fund)
Facilities that contribute to the Fund pay $30 for every tonne over their reduction target as of Jan 1, 2017.
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.