The ‘Second Carbon Tax’ That Will Start in 2025

A man pumps gas in Montreal, on March 4, 2022. The Canadian Press/Graham Hughes

If Canadians are already finding prices at the gas pump high, things will get more expensive after a “second carbon tax” hits in 2025, on top of the carbon tax hike in April, warns a consumer advocate.

Ottawa’s Clean Fuel Regulations (CFR) were introduced in July 2023, and are expected to impact Quebec, Ontario, Manitoba, Saskatchewan, and Alberta in 2025.

The CFR replaces the Renewable Fuels Regulations and aims to reduce the carbon intensity of gasoline and diesel used in Canada by 15 percent below 2016 levels by 2030.

Fuel suppliers who fail to meet the standard can buy credits, which is expected to increase the cost that is passed on to Canadians using gas or diesel.

The CFR is separate from the current carbon tax on gasoline to reduce greenhouse gas emissions. The price of that tax is set to increase to 17 cents per litre in April, up from 14 cents. In April 2025, Ottawa’s carbon tax on gas will increase again to 20 cents per litre. It will continue to increase each year until it reaches 37 cents per litre in 2030.

Consumers will pay higher costs for gas and diesel as suppliers face higher prices under pressure to develop more clean fuel sources, the president of Canadians for Affordable Energy Dan McTeague told The Epoch Times.

Mr. McTeague says CFR fees will be on top of the current carbon tax on gasoline, and over and above provincial sales taxes.

B.C. already has a program similar to CFR to reduce carbon.

“British Columbia currently has a clean fuel standard, which runs about 17 cents a litre,” he said.

In Atlantic Canada, gas suppliers have already started to pass along the cost of CFR to consumers, Mr. McTeague said.

“The Atlantic provinces have chosen to start to pass that price on. So for instance, in the case of Nova Scotia, it’s already five cents a litre. It will head to 17 cents a litre before HST is applied by 2030.”

All of this leads to pain for Canadian drivers and consumers, he said.

“This is going to deal a lethal blow to every consumer in this country, I have no doubt, if it is allowed and permitted to continue.”

Mr. McTeague said that by 2030, consumers in Ontario would be paying 61.5 cents per litre in carbon taxes, which includes the current carbon tax of 37.43 cents per litre, and the CFR at an additional 17 cents per litre, plus the 13 percent sales tax.

In Alberta, Saskatchewan,  and Manitoba, the cost of the duel carbon taxes, along with the 5 percent HST, will add 57.2 cents a litre to gasoline prices.

“That includes 37.43, which is the existing carbon tax plus the 17 cents on top of that which is the second carbon tax to clean fuel regulation,” Mr. McTeague said.

Atlantic Canada will see that number rise to 61.5 cents per litre, he said.

The calculations were supported by a report from Parliamentary Budget Officer Yves Giroux released in May 2023.

The report notes that Environment and Climate Change Canada (ECCC) has estimated a 17 cents per litre increase in the price of gas and 16 cents per litre in the price of diesel.

“At the national level, in 2030, the cost of the CFR to households ranges from 0.62 per cent of disposable income (or $231) for lower income households to 0.35 per cent of disposable income (or $1,008) for higher income households,” Mr. Giroux wrote.

He added that ECCC has estimated the CFR to “decrease real GDP in Canada by up to 0.3 per cent (or up to $9.0 billion) in 2030.”