This week, Canadians are receiving their final Canada Carbon Rebate cheques. And while some are celebrating the end of the "carbon tax" as a win for affordability, we need to be clear about what's actually happening here and what we're giving up.
The federal fuel charge was never perfect or popular. But it was one of the few tools we had that did two things at once: it helped reduce emissions, and it returned most of the money directly to households. For lower- and middle-income Canadians, the Canada Carbon Rebate (formerly the Climate Action Incentive) more than offset the cost of the federal carbon tax. That redistribution of funds was a lifeline for many household budgets.
So why are we treating the end of this program like a victory? The truth is: this should be a wake-up call.
Let's back up. The federal fuel charge imposed a tax on consumer fuel use and then redistributed that revenue through quarterly rebates. The idea was to make polluting more expensive while protecting households from rising costs. The rebate landed directly in your bank account every three months, scaled to family size and location.
In other words, the policy was designed to incentivize lower emissions, without making life unaffordable for most people.
And yes, it worked. According to the Canadian Climate Institute, carbon pricing has played a meaningful role in reducing emissions. Taking it away makes hitting our climate targets even harder, and Canada's already falling behind. Recent analysis shows that the fuel charge was projected to provide 8 to 14 percent of needed emissions reductions between 2025 and 2030. That's a significant slice of our climate strategy.
Even with every federal climate policy in the government's Emissions Reduction Plan fully implemented, including large emitter pricing systems, oil and gas caps, methane regulations, and clean fuel rules, Canada is still on track to miss its 2030 targets by 42 megatonnes. That gap only gets wider when policies are weakened or scrapped.
What about affordability? Truth is, the affordability crisis wasn't caused by the carbon tax.
The Centre for Future Work found no correlation between inflation and carbon pricing in Canada. And a report from the International Institute for Sustainable Development (IISD) found that of a $0.73/litre rise in fuel prices over a year, just $0.03 came from the carbon tax. The real driver? The volatile global oil market, something no federal carbon pricing system controls.
Now, as we lose the rebate, we also lose one of the buffers protecting some Canadians from those kinds of price shocks. We're removing a mechanism that returned cash to lower-income households and doing nothing to prevent oil companies from raising prices in the face of global instability, whether it's war, supply shortages, or tariff threats out of the U.S.
We saw this last year when wildfires ripped through many regions in the country, including in Jasper, Alberta, where people were forced to evacuate and insured losses hit nearly $1 billion. Air quality across Canada hit dangerous levels. These types of climate disasters come with massive price tags and ordinary people are left to pay them.
The estimated cost of climate-related damages in Canada is expected to reach $100 billion annually by 2055. That includes damage to infrastructure, health costs, lost productivity, and more. These costs are already showing up, in rising insurance premiums, unpredictable food prices, and underfunded emergency responses.
So, instead of celebrating the death of one climate tool, we should be demanding better ones.
If we're serious about climate action and affordability, we need policies that shift the responsibility to where it belongs: off of working people and onto the wealthiest polluters. That means:
- Taxing the excess profits of oil and gas giants, especially when they're raking in record profits while Canadians pay the price.
- Phasing out subsidies and ending tax breaks for fossil fuel companies, which still hand public money to highly profitable corporations.
- Investing in public transit and clean energy, so people actually have affordable alternatives.
- Taxing the rich, so those who contributed most to and benefitted from historic emissions pay their fair share in funding a transition to a green economy.
The fuel charge and carbon rebate were small steps in the right direction. Let's not let their end become another excuse to give up. Canadians deserve a climate strategy that's ambitious, fair, and rooted in economic justice.
