These deposits are the first round of climate action incentive payments, also called carbon tax rebates, made to residents of Alberta, Saskatchewan, Manitoba and Ontario. This money replaces the climate action incentive credit you claimed on your personal income tax returns in the past couple of years. The payments started in July 2022, and they will go out automatically four times a year, on the 15th of April, July, October and January.
Why is there a carbon tax rebate?
Carbon tax rebates are paid out from money collected as part of Canada’s carbon pricing system. In 2019, the federal government put a price on carbon pollution, with the aim of reducing greenhouse gas (GHG) emissions. At the time, the national minimum price was $20 per tonne of carbon dioxide equivalent (CO2e). It went up to $50 in 2022, and it will rise $15 every April until it reaches $170 per tonne in 2030.
Carbon prices are collected through fuel charges and an output-based pricing system for industry. Drivers may have noticed the fuel charge at the pumps. Currently, drivers in Alberta, Saskatchewan, Manitoba and Ontario pay a fuel charge of $0.1105 per litre of gas; rates for other fuel types vary. You can also view the fuel charge rates for 2023 to 2030. (MoneySense hack: You can’t avoid fuel charges and other fuel consumption levies, but you might be able to find cheaper gas or get cash back.)
Across Canada, climate action incentive payments and tax credits are meant to offset the cost of fuel charges for individuals and families while also encouraging them to reduce their GHG emissions. Provinces and territories can use the federal carbon pollution pricing system—as Ontario and the prairie provinces are doing—or develop their own carbon pricing model or cap-and-trade system, as long as it meets or exceeds federal standards.
Ottawa returns 90% of the carbon pricing money it collects back to the jurisdictions where it came from, either to the provincial and territorial governments or, in the case of CAIP, directly to residents. The other 10% is used to support schools, small and medium-sized businesses, hospitals and Indigenous programs. (For example, store owners can apply for partial funding to make energy-efficient retrofits.)
The federal Department of Finance says that eight out of 10 families will receive more in CAIP than they pay in direct costs, although this is a matter of some debate.
Note that if you received a CAIP deposit in your bank account (or by cheque) on July 15, 2022, you’ll get half the amount next time—this round of payments was doubled up to include April’s amount, to accommodate 2021 tax filing deadlines.
Who can receive climate action incentive payments?
To be eligible for CAIP deposits, you must be a resident of Alberta, Saskatchewan, Manitoba or Ontario on the first day of the payment month and the last day of the previous month. You must also meet one of these criteria during that same period: