Regulations Amending Schedule 2 to the Greenhouse Gas Pollution Pricing Act, Amending the Fuel Charge Regulations and Repealing the Part 1 of the Greenhouse Gas Pollution Pricing Act Regulations (Alberta): SOR/2023-62

Canada Gazette, Part II, Volume 157, Number 8

Registration
SOR/2023-62 March 27, 2023

GREENHOUSE GAS POLLUTION PRICING ACT

P.C. 2023-264 March 27, 2023

Her Excellency the Governor General in Council, on the recommendation of the Minister of Finance, makes the annexed Regulations Amending Schedule 2 to the Greenhouse Gas Pollution Pricing Act, Amending the Fuel Charge Regulations and Repealing the Part 1 of the Greenhouse Gas Pollution Pricing Act Regulations (Alberta) under sections 166 and 168 of the Greenhouse Gas Pollution Pricing Act footnote a.

Regulations Amending Schedule 2 to the Greenhouse Gas Pollution Pricing Act, Amending the Fuel Charge Regulations and Repealing the Part 1 of the Greenhouse Gas Pollution Pricing Act Regulations (Alberta)

Schedule 2 to the Greenhouse Gas Pollution Pricing Act

1 The heading of Table 4 of Schedule 2 to the Greenhouse Gas Pollution Pricing Act footnote a is replaced by the following:

Rates of charge applicable for the period beginning on April 1, 2022 and ending on March 31, 2023

2 Schedule 2 to the Act is amended by adding the following after Table 4:

TABLE 5

Rates of charge applicable after March 31, 2023

Column 1

Item

Column 2

Type

Column 3

Unit

Column 4

Rates of charge applicable for the period beginning on April 1, 2023 and ending on March 31, 2024

Column 5

Rates of charge applicable for the period beginning on April 1, 2024 and ending on March 31, 2025

Column 6

Rates of charge applicable for the period beginning on April 1, 2025 and ending on March 31, 2026

Column 7

Rates of charge applicable for the period beginning on April 1, 2026 and ending on March 31, 2027

Column 8

Rates of charge applicable for the period beginning on April 1, 2027 and ending on March 31, 2028

 Column 9

Rates of charge applicable for the period beginning on April 1, 2028 and ending on March 31, 2029		 Column 10

Rates of charge applicable for the period beginning on April 1, 2029 and ending on March 31, 2030

Column 11

Rates of charge applicable after March 31, 2030
1 Aviation gasoline $/litre 0.1592 0.1959 0.2326 0.2694 0.3061 0.3428 0.3795 0.4163
2 Aviation turbo fuel $/litre 0.1678 0.2065 0.2453 0.2840 0.3227 0.3614 0.4001 0.4389
3 Butane $/litre 0.1157 0.1424 0.1691 0.1958 0.2225 0.2492 0.2759 0.3026
4 Ethane $/litre 0.0662 0.0815 0.0968 0.1121 0.1273 0.1426 0.1579 0.1732
5 Gas liquids $/litre 0.1081 0.1331 0.1581 0.1830 0.2080 0.2329 0.2579 0.2828
6 Gasoline $/litre 0.1431 0.1761 0.2091 0.2422 0.2752 0.3082 0.3412 0.3743
7 Heavy fuel oil $/litre 0.2072 0.2550 0.3028 0.3506 0.3984 0.4462 0.4941 0.5419
8 Kerosene $/litre 0.1678 0.2065 0.2453 0.2840 0.3227 0.3614 0.4001 0.4389
9 Light fuel oil $/litre 0.1738 0.2139 0.2540 0.2941 0.3342 0.3743 0.4144 0.4545
10 Methanol $/litre 0.0714 0.0878 0.1043 0.1208 0.1373 0.1537 0.1702 0.1867
11 Naphtha $/litre 0.1465 0.1803 0.2142 0.2480 0.2818 0.3156 0.3494 0.3832
12 Petroleum coke $/litre 0.2452 0.3018 0.3584 0.4149 0.4715 0.5281 0.5847 0.6413
13 Pentanes plus $/litre 0.1157 0.1424 0.1691 0.1958 0.2225 0.2492 0.2759 0.3026
14 Propane $/litre 0.1006 0.1238 0.1470 0.1703 0.1935 0.2167 0.2399 0.2631
15 Coke oven gas $/cubic metre 0.0455 0.0560 0.0665 0.0770 0.0875 0.0980 0.1085 0.1190
16 Marketable natural gas $/cubic metre 0.1239 0.1525 0.1811 0.2097 0.2383 0.2669 0.2954 0.3240
17 Non-marketable natural gas $/cubic metre 0.1654 0.2035 0.2417 0.2799 0.3180 0.3562 0.3944 0.4325
18 Still gas $/cubic metre 0.1396 0.1718 0.2040 0.2362 0.2684 0.3006 0.3328 0.3650
19 Coke $/tonne 206.68 254.38 302.07 349.77 397.46 445.16 492.86 540.55
20 High heat value coal $/tonne 145.02 178.48 211.95 245.41 278.88 312.35 345.81 379.28
21 Low heat value coal $/tonne 115.21 141.80 168.38 194.97 221.56 248.14 274.73 301.31
22 Combustible waste $/tonne 129.82 159.78 189.74 219.70 249.66 279.62 309.58 339.54

Fuel Charge Regulations

3 Section 1 of the Fuel Charge Regulations footnote 1 is amended by adding the following in alphabetical order:

bio-aviation fuel
means a particular substance
  • (a) that is derived entirely from biological matter available on a renewable or recurring basis;
  • (b) that may contain water if the proportion of the water does not exceed 1% of the particular substance;
  • (c) that may contain other substances, materials or things that are not described in paragraph (a) or (b) if the combined proportion of those other substances, materials or things does not exceed 6% of the particular substance; and
  • (d) that is suitable for generating power by means of an aircraft engine when used
    • (i) on its own,
    • (ii) after being blended with aviation gasoline or aviation turbo fuel,
    • (iii) after being blended with an aviation gasoline-like blendstock to produce aviation gasoline, or
    • (iv) after being blended with an aviation turbo fuel-like blendstock to produce aviation turbo fuel. (bio-carburant d’aviation)

4 The Regulations are amended by adding the following after section 1:

Definition of marketable natural gas

1.1 For the purposes of the fuel charge system, the definition marketable natural gas in section 3 of the Act is modified as follows:

marketable natural gas
means natural gas that meets the specifications for pipeline transport and sale for general distribution to the public. (gaz naturel commercialisable)

5 The Regulations are amended by adding the following after section 1.1:

Application

Aviation fuel that contains bio-aviation fuel

1.2 For the purposes of subsection 8(8) of the Act, if a quantity of fuel that is aviation gasoline or aviation turbo fuel contains a particular proportion of bio-aviation fuel (expressed as a percentage), for the purposes of Part 1 of the Act, the quantity of the fuel is deemed to be the number of litres determined by the formula

A × (100% − B)
where
A
is the number of litres that the fuel would occupy at 15°C; and
B
is the particular proportion.

Natural gas that contains hydrogen

1.3 (1) For the purposes of subsection 8(8) of the Act, if a quantity of fuel that is marketable natural gas or non-marketable natural gas contains a particular proportion of hydrogen (expressed as a percentage), for the purposes of Part 1 of the Act, the quantity of the fuel is deemed to be the number of cubic metres determined by the formula

A × (100% − B)
where
A
is the number of cubic metres that the fuel would occupy at 15°C and 101.325 kPa; and
B
is the particular proportion.

Natural gas that contains hydrogen and biomethane

(2) Despite subsection (1) and subsection 8(7) of the Act, for the purposes of subsection 8(8) of the Act, if a quantity of fuel that is marketable natural gas or non-marketable natural gas contains a particular combined proportion of hydrogen and biomethane (expressed as a percentage), for the purposes of Part 1 of the Act, the quantity of the fuel is deemed to be the number of cubic metres determined by the formula

A × (100% − B)
where
A
is the number of cubic metres that the fuel would occupy at 15°C and 101.325 kPa; and
B
is the particular combined proportion.

6 (1) Section 3.1 of the Regulations is amended by adding the following after paragraph (a):

(2) Section 3.1 of the Regulations is amended by striking out “and” at the end of paragraph (c) and by adding the following after paragraph (d):

7 The Regulations are amended by adding the following after section 3.2:

January 1, 2020 — Alberta

3.3 Except if section 10 or 16 applies, for the purposes of the fuel charge system and applying subsection 38(1) of the Act in respect of the adjustment day that is January 1, 2020, paragraph (a) of the description of B in that subsection is adapted as follows:

8 The Regulations are amended by adding the following before Part 2:

PART 1.2
Rates of Charge

Prescribed condition — rates after March 31, 2023

3.4 (1) For the purposes of paragraph (b) of the definition rate in section 3 of the Act, the rate in respect of a type of fuel, or in respect of combustible waste, for a listed province at a particular time that is after March 31, 2023 is equal to the rate that is set out in whichever column of Table 5 in Schedule 2 to the Act is applicable for the period that includes the particular time and that is opposite that type of fuel or combustible waste, as the case may be, set out in column 2 of that Table.

Exception — Yukon and Nunavut

(2) Despite subsection (1), for the purposes of paragraph (b) of the definition rate in section 3 of the Act, the rate in respect of a type of fuel for a listed province at a particular time that is after March 31, 2023 is equal to zero dollars per litre if

9 The Regulations are amended by adding the following after section 5:

Rebate — fuel removed from listed province

5.1 (1) For the purposes of section 48 of the Act, if a quantity of fuel is, at a particular time, removed from a listed province and brought into another province by a person that is neither registered nor required to be registered as a distributor in respect of that type of fuel and if the quantity of fuel was delivered in the listed province at an earlier time to the person by a registered distributor in respect of that type of fuel, the Minister must pay a rebate to the registered distributor in respect of the quantity of fuel, the listed province and the reporting period of the registered distributor that includes the particular time if the following conditions are met:

Amount of rebate

(2) For the purposes of section 48 of the Act, the amount of the rebate under subsection (1) is equal to the amount of the charge referred to in paragraph (1)(a).

Non-application — supply tank

(3) The rebate under subsection (1) is not payable to the extent that the fuel is removed from a listed province in a supply tank of a vehicle.

Non-application — small quantity

(4) The rebate under subsection (1) is not payable if the type of fuel is gasoline, kerosene, light fuel oil or propane and the quantity of the fuel that is removed from a listed province otherwise than in a supply tank of a vehicle does not exceed 1000 L.

10 Section 6 of the Regulations is amended by adding the following after paragraph (d):

11 Paragraph (a) of the description of D in section 10 of the Regulations is amended by striking out “or” at the end of subparagraph (i), by replacing “and” with “or” at the end of subparagraph (ii) and by adding the following after subparagraph (ii):

12 Paragraph (a) of the description of D in section 16 of the Regulations is amended by striking out “or” at the end of subparagraph (i), by replacing “and” with “or” at the end of subparagraph (ii) and by adding the following after subparagraph (ii):

13 (1) Paragraph 24(a) of the Regulations is replaced by the following:

(2) Paragraph 24(a) of the Regulations is replaced by the following:

14 Subsection 25(1) of the Regulations is replaced by the following:

Application for determination

25 (1) A person responsible for a facility located in a province referred to in paragraph 24(a) may apply to the Minister of the Environment for a determination of whether the condition in paragraph 24(d) is met in respect of the facility. The person must provide to that Minister the information in respect of the facility necessary for that Minister to determine if that condition is met in respect of the facility and any other information in respect of the facility that that Minister considers relevant for the purposes of this Part.

15 The Regulations are amended by adding the following after section 27:

Combustible waste burned at covered facility

28 For the purposes of section 27 of the Act, no charge is payable under section 25 of the Act in respect of combustible waste that is burned in a listed province by a person if the person is a registered emitter and the combustible waste is burned at a covered facility.

Part 1 of the Greenhouse Gas Pollution Pricing Act Regulations (Alberta)

16 Sections 1 and 2 of the Part 1 of the Greenhouse Gas Pollution Pricing Act Regulations (Alberta) footnote 2 are repealed.

17 The Regulations are repealed.

Application

18 (1) Sections 1, 2 and 8 and subsection 6(2) come into force or are deemed to have come into force on the day that is the earlier of April 1, 2023 and the day on which these regulations are published in the Canada Gazette.

(2) Sections 3 and 5 are deemed to have come into force on August 10, 2022.

(3) Sections 4, 7, 10 to 12 and 16 and subsection 6(1) are deemed to have come into force on January 1, 2020.

(4) Section 9 applies in respect of fuel that is removed from a listed province after August 9, 2022 if the fuel was delivered by a registered distributor after that date.

(5) Subsection 13(1) is deemed to have come into force on December 6, 2019.

(6) Subsection 13(2) and section 14 are deemed to have come into force on December 3, 2021.

(7) Section 15 applies in respect of combustible waste burned after August 9, 2022.

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Issues

The Greenhouse Gas Pollution Pricing Act (GGPPA) provides the legal framework and enabling authorities for the federal carbon pollution pricing system for the purpose of ensuring that the pricing of greenhouse gas emissions is applied broadly in Canada. The federal carbon pollution pricing system has two components: a regulatory charge on fossil fuels (the fuel charge) and an output-based pricing system for large industry (the federal OBPS).

In recent years, the Department of Finance Canada has released various packages of draft amendments to regulations made under Part 1 of the GGPPA, which pertain to the fuel charge. These draft amendments refine the application of the fuel charge system to respond to the changing carbon pricing landscape in Canada and to respond to issues brought to the attention of the Department of Finance Canada by Canadians, businesses, governments or other stakeholders or by the Canada Revenue Agency (CRA). These measures have retroactive coming-into-force dates and are currently being administered by the CRA on a provisional basis. To provide legal certainty to all stakeholders, these measures need to be made to the fuel charge system by way of regulations.

Additionally, the fuel charge rates, which are set out in Schedule 2 to the GGPPA, are currently set at levels that represent $50 per tonne of carbon dioxide equivalent for 2022–2023 and would remain at that level if no update is made. This would not align with the minimum national carbon pollution price schedule for the 2023–2030 period, which includes a carbon price rising to $170 per tonne of carbon dioxide equivalent, set out in the minimum national stringency standards that carbon pricing systems across Canada must meet.

The Regulations Amending Schedule 2 to the Greenhouse Gas Pollution Pricing Act, Amending the Fuel Charge Regulations and Repealing the Part 1 of the Greenhouse Gas Pollution Pricing Act Regulations (Alberta) [the amending regulations] give effect to these measures and implement the new fuel charge rates.

Background

Part 1 of the GGPPA is under the purview of the Minister of Finance and is administered by the CRA and, at the border, the Canada Border Services Agency. It provides the legal framework and enabling authorities for the fuel charge system. The fuel charge system applies in those provinces, territories and areas listed in Part 1 of Schedule 1 to the GGPPA (listed provinces). For 2022–2023, the fuel charge applies in Ontario, Manitoba, Saskatchewan, Alberta, Yukon and Nunavut. The fuel charge is generally paid by fuel producers or distributors and generally applies to fuels produced, delivered or used in a listed province, brought into a listed province from another place in Canada, or imported into Canada at a location in a listed province. The fuel charge applies at the rates set out in Schedule 2 to the GGPPA and those rates vary by fuel type, based on global warming potential factors and emissions factors associated with the combustion of each fuel type. As of April 1, 2022, the rates represent a carbon price of $50 per tonne.

Part 1 of the GGPPA establishes the fuel charge system and provides the Governor in Council with authority to determine the rates of the fuel charge by amending Schedule 2 to the GGPPA through regulations. Part 1 of the GGPPA also provides that certain modifications and additions to the fuel charge system may be made by way of regulation. The Fuel Charge Regulations and the Part 1 of the Greenhouse Gas Pollution Pricing Act Regulations (Alberta) were previously made to provide such additional rules for the proper functioning of the fuel charge system.

Part 1 of the GGPPA includes rules that integrate the fuel charge system with the federal OBPS system under Part 2 of the GGPPA. Similarly, the existing rules of the fuel charge system, both under Part 1 of the GGPPA and the Fuel Charge Regulations, integrate the fuel charge with Saskatchewan’s provincial output-based pricing (the Saskatchewan OBPS).

GGPPA application in Alberta

In Alberta, the fuel charge component of the GGPPA applies as of January 1, 2020. The Government of Alberta administers a separate output-based pricing system (the Alberta OBPS), which was announced by the Government of Alberta on October 29, 2019, and came into force on January 1, 2020, that is applicable to certain businesses in certain industries.

During the lead up to the implementation of the Alberta OBPS, the federal government announced on December 6, 2019, that the Alberta OBPS would meet the federal government’s minimum stringency benchmark requirements for carbon pollution pricing systems, for the emission sources that it covers. Accordingly, the federal government announced that the province would not be subject to the federal OBPS. In support of the announcement on December 6, 2019, the Minister of Finance released draft regulatory proposals, under Part 1 of the GGPPA, that would integrate the Alberta OBPS with the fuel charge for 2020 by expanding to Alberta the existing integration mechanism that is already in place for the Saskatchewan OBPS.

GGPPA application in Ontario

In Ontario, the fuel charge component of the GGPPA applies as of April 1, 2019. The Government of Ontario administers a separate output-based pricing system (the Ontario OBPS), which came into force on January 1, 2022, that is applicable to certain businesses in certain industries. Prior to the implementation of the Ontario OBPS, the federal OBPS applied in that province.

During the lead up to the implementation of the Ontario OBPS, the Minister of the Environment, who is responsible for analyzing the federal stringency benchmark, informed the Government of Ontario on September 20, 2020, that the Ontario OBPS meets the federal government’s minimum stringency benchmark requirements for the sources that it covers and that the federal government intended to stand down the federal OBPS in that province for 2022. Subsequently, on December 3, 2021, the Minister of Finance released draft regulatory proposals, under Part 1 of the GGPPA, that integrate the Ontario OBPS with the fuel charge for 2022 by expanding to Ontario the existing integration mechanism that is already in place for the Saskatchewan OBPS.

Carbon pricing trajectory to 2030

On December 11, 2020, the Prime Minister announced Canada’s strengthened climate plan, A Healthy Environment and a Healthy Economy. Under that plan, the federal government proposed to increase the carbon price by $15 per tonne per year starting in 2023, rising to $170 per tonne in 2030. On July 12, 2021, the Minister of the Environment formally submitted Canada’s enhanced Nationally Determined Contribution to the United Nations, committing Canada to cut its greenhouse gas emissions by 40% to 45% below 2005 levels by 2030. At the same time, the Government of Canada confirmed publicly that the minimum price on carbon pollution would increase by $15 per tonne each year starting in 2023 through to 2030. Accordingly, this price schedule was included in the Update to the Pan-Canadian Approach to Carbon Pollution Pricing 2023–2030 and the update to the federal benchmark stringency requirements. Following up on the confirmation of the carbon price trajectory, in December 2021, the Minister of Finance released a backgrounder of proposed fuel charge rates reflecting this trajectory for the 2023–2030 period. These rates are based, in part, on global warming factors and emissions factors used by the Department of the Environment to report Canada’s emissions to the United Nations Framework Convention on Climate Change.

Other technical refinements

On August 9, 2022, several technical amendments that are required in order to refine the application of the fuel charge system in listed provinces were announced, including relief for certain renewable fuels blended with aviation fuels or natural gas similar to other existing relief for renewable fuels in the GGPPA and ensuring that the fuel charge does not apply to combustible waste used at facilities that are subject to an output-based pricing system.

Objective

The objectives of the amending regulations are to integrate the Alberta OBPS and the Ontario OBPS with the fuel charge, to specify the fuel charge rates in Schedule 2 of the GGPPA to reflect the new carbon price trajectory, to implement measures released for consultation on August 9, 2022, and to incorporate minor technical amendments related to the fuel charge system.

Description

The amending regulations include the following amendments.

Integration of the fuel charge with the Alberta OBPS and the Ontario OBPS

Under the GGPPA, a person who is responsible for a facility subject to the federal OBPS and who has been issued a certificate in respect of the covered facility by the Minister of the Environment may apply to the CRA to be registered as an emitter for purposes of Part 1 of the GGPPA. A registered distributor can deliver fuel to a registered emitter without paying the fuel charge if the fuel is for use at a covered facility of the person, subject to certain conditions.

Similarly, under existing rules in Part 1 of the GGPPA and the Fuel Charge Regulations, a person who is responsible for a facility subject to the Saskatchewan OBPS and who has been issued a statement in writing in respect of the covered facility by the Minister of the Environment may apply to the CRA to be registered as an emitter for purposes of Part 1 of the GGPPA. Specifically, for purposes of the fuel charge, the following rules apply under the existing integration mechanism for the Saskatchewan OBPS:

Other technical rules apply to those facilities that choose to participate in the integration mechanism. These include an obligation to notify the Minister of the Environment of certain changes that would have an impact on the application of the fuel charge (e.g. ceasing to be a person responsible for a covered facility prescribed by the Fuel Charge Regulations).

The amending regulations add the provinces of Alberta and Ontario, and their corresponding OBPS systems, to the existing integration mechanism that is already in place for Saskatchewan. As a result of these amending regulations, a person that is responsible for a facility subject to the Ontario OBPS or the Alberta OBPS would be eligible to register with the CRA as an emitter for the purpose of Part 1 of the GGPPA, subject to the rules and process described above for Saskatchewan. A registered distributor can then deliver fuel to such a person without paying the fuel charge if the fuel is for use in such a facility of the person, subject to the conditions of Part 1 of the GGPPA.

Participation in this integration mechanism, including the application to the Minister of the Environment and registration with the CRA as an emitter, is voluntary.

In relation to facilities in Alberta, these provisions are deemed to have come into force on December 6, 2019. In relation to facilities in Ontario, these provisions are deemed to have come into force on December 3, 2021.

Amendments to Schedule 2 of the GGPPA to specify fuel charge rates out to 2030

The rates of the fuel charge for each type of fuel are set out in tables contained in Schedule 2 to the GGPPA. The amending regulations add a new table to Schedule 2 to the GGPPA that specifies the fuel charge rates out to 2030. These rates reflect the annual increase in the price on carbon pollution of $15 per tonne from 2023 to 2030 (from $65 per tonne in 2023–2024 to $170 per tonne in 2030–2031). The amending regulations also include an incidental technical amendment to ensure that the fuel charge rates in the table being added to Schedule 2 are compatible with the definition of “rate” in Part 1 of the GGPPA.

Measures announced on August 9, 2022

Relief for bio-aviation fuel

The amending regulations create a definition, for purposes of the fuel charge system, of the term “bio-aviation fuel.” Because bio-aviation fuel may be blended with conventional fossil fuels prior to being used in an aircraft, the amending regulations set out rules that provide proportional relief to aviation gasoline and aviation turbo fuel that has been blended with a known proportion of bio-aviation fuel. These rules are similar to existing rules under the fuel charge system for determining quantities of fuels that have been blended with biologically derived fuels, such as biodiesel that is blended with light fuel oil or ethanol that is blended with gasoline.

Under the amending regulations, the term bio-aviation fuel generally means a substance that is derived entirely from biological matter available on a renewable or recurring basis and that is suitable for generating power by means of an aircraft engine. There are additional technical specifications in the definition to make allowances for certain contaminants and additions and to reflect practical considerations of the manner in which bio-aviation fuel is used when powering an aircraft. More specifically, bio-aviation fuel may contain water if the proportion of the water does not exceed 1% of the fuel. Bio-aviation fuel may also contain other substances, if the combined proportion of those other substances not exceed 6% of the fuel. This measure is deemed to come into force retroactively on August 10, 2022.

Relief for hydrogen that is blended with natural gas

The amending regulations provide proportional relief to hydrogen that has been blended with marketable natural gas or non-marketable natural gas. The amending regulations also provide similar relief if both hydrogen and bio-methane that have been blended with either marketable natural gas or non-marketable natural gas. These rules are similar to existing rules under the GGPPA for determining quantities of marketable natural gas and non-marketable natural gas that is blended with only bio-methane. This measure is deemed to come into force retroactively on August 10, 2022.

Refinement to the definition of marketable natural gas

The terms “natural gas,” “marketable natural gas” and “non-marketable natural gas” are all defined terms in Part 1 of the GGPPA. These defined terms categorize natural gas into different fuel type classifications (with different corresponding fuel charge rates) based on their physical and chemical characteristics. The amending regulations would modify the definition of marketable natural gas to remove the requirement that it contain at least 90% methane. This modified definition better reflects the chemical composition of natural gas in Canada and the commercial reality of the natural gas distribution and transportation system throughout Canada. Under this modified definition, marketable natural gas means natural gas that meets the specifications for pipeline transport and sale for general distribution to the public. This measure is deemed to come into force retroactively on January 1, 2020.

Relief for fuel removed from a listed province

Under the fuel charge system, a registered distributor generally pays the fuel charge upon delivery to another person that is not a registered distributor. To facilitate fuel charge relief to a registered distributor on fuel that is removed from a listed province by non-registered persons, the amending regulations provide a rebate of the fuel charge if certain conditions are satisfied. Specifically, a rebate in respect of fuel removed from a listed province would be provided to a registered distributor that delivered a quantity of fuel in a listed province to a non-registered person if the following conditions are met:

The rebate does not apply to fuel that is removed in the supply tank of a vehicle. The rebate also does not apply to fuel that is removed otherwise than in the supply tank of a vehicle if the fuel is gasoline, kerosene, light fuel oil (e.g. diesel) or propane, and the quantity of the fuel does not exceed 1 000 litres.

This rebate applies in respect of fuel that is removed from a listed province after August 9, 2022, if the fuel was delivered by a registered distributor after that date.

Relief for combustible waste burned at a covered facility

Under the fuel charge system, the fuel charge generally applies to combustible waste that is burned in a listed province. The amending regulations provide that no fuel charge is payable in respect of combustible waste that is burned in a listed province by a person if the person is a registered emitter and the combustible waste is burned at a covered facility. This section applies in respect of combustible waste that is burned after August 9, 2022.

Other technical amendments

The amending regulations contain incidental technical amendments to ensure the proper functioning of the fuel charge system by consolidating the rules contained in the Part 1 of the Greenhouse Gas Pollution Pricing Act Regulations (Alberta) with the rules contained in the Fuel Charge Regulations. The provisions contained in the Part 1 of the Greenhouse Gas Pollution Pricing Act Regulations (Alberta) are repealed from that regulation and added to the Fuel Charge Regulations.

Regulatory development

Consultation

A draft of the amendments related to the integration of the Alberta OBPS was posted online for public consultation from December 6, 2019, until January 10, 2020. On December 3, 2021, a draft of the amendments related to the integration of the Ontario OBPS was posted online, in addition to a backgrounder announcing the proposed fuel charge rates for the 2023–2030 period. Finally, a draft of the amendments related to the technical measures was released for public consultation on August 9, 2022, until September 30, 2022.

During the consultation periods, the Government did not receive any submissions directly related to the integration of the Alberta OBPS or the Ontario OBPS with the fuel charge. Likewise, there have been no comments on the new fuel charge rates. With respect to the measures released for public consultation on August 9, 2022, the Government received feedback from the Department of Natural Resources, the Department of Transportation and from two fuel industry organizations. The comments did not result in changes to the measures included in the amending regulations but may inform future policy developments.

Modern treaty obligations and Indigenous engagement and consultation

For the measures contained in the amending regulations, no impacts have been identified in respect of the Government’s obligations in relation to Indigenous rights protected by section 35 of the Constitution Act, 1982, modern treaties or international human rights obligations.

Instrument choice

Under the GGPPA, the Governor in Council has the authority to determine rules relevant to the application of the fuel charge under Part 1 of the GGPPA. In order to provide certainty to stakeholders, the measures contained in the amending regulations must be made into law and regulatory amendments are an appropriate mechanism by which to implement such rules.

Regulatory analysis

Benefits and costs

The Government of Canada has enacted a carbon pollution pricing system where, over time, it becomes increasingly expensive to pollute. By implementing the new fuel charge rates in the amending regulations, the Government is increasing the carbon price by $15 per year, starting in 2023–2024, rising to $170 per tonne of carbon pollution in 2030–2031. The increasing cost of using fuel will make cleaner options more affordable and discourage pollution-intensive investments. A longer-term price trajectory will allow businesses and individuals to plan ahead, providing predictability for longer-term investments and growing the market for clean solutions in Canada. It will help spur the development of new technologies and services that can help reduce emissions cost-effectively. This increase is expected to play an important role in Canada’s objectives to achieve reductions within the range of 40% to 45% below 2005 levels in 2030.

Putting a price on carbon pollution is widely recognized as the most efficient means to drive innovation and energy efficiency in order to reduce greenhouse gas (GHG) emissions. To the extent that the amending regulations help reduce these emissions, the amending regulations have the benefit of mitigating the long-term costs associated with climate change using the least cost means. The costs associated with a changing climate are real — Canadians feel its impacts when extreme weather threatens their safety, their health, their homes and communities, and their livelihoods. For example, according to the Canadian Institute of Climate Choices, in the last decade, the average cost of weather-related disasters and catastrophic losses each year has risen to the equivalent of 5% to 6% of annual GDP growth. Insured losses for catastrophic weather events totalled over $18 billion between 2010 and 2019, and the number of catastrophic events was over three times higher than in the 1980s. Environment and Climate Change Canada have recently provided updated interim estimates for the social cost of GHG that values climate change damages at $261 per tonne in 2023 rising to $294 in 2030 (Can$ at 2021 price levels).

The federal price on pollution is revenue neutral for the federal government; the direct proceeds from the federal carbon pricing system remain in the province or territory where they are collected. For those provinces that do not meet the federal stringency requirements in 2023–2024 — Alberta, Saskatchewan, Manitoba, Ontario, Nova Scotia, Prince Edward Island and Newfoundland and Labrador —, 90% of direct proceeds from the federal fuel charge will be returned to households through Climate Action Incentive payments. Under this approach, 8 out of 10 households get more money back than they pay (i.e. generally all of those but the highest energy consumers and those with higher incomes). Please refer to the gender-based analysis plus section below for more details on how fuel charge proceeds are being recycled to individuals.

The technical measures in the amending regulations are generally relieving in nature and would not impose new compliance costs on individuals or businesses. To access relief from the fuel charge under the amending regulations, certain conditions (as outlined above in the description section) must be fulfilled; however, it does not change the manner in which stakeholders account for their fuel charge obligations under Part 1 of the GGPPA.

This proposal does not add any costs to Government, as any costs for the administration and enforcement of the fuel charge are attributable to the GGPPA itself.

Small business lens

The fuel charge requirements under Part 1 of the GGPPA, the Fuel Charge Regulations, and the amending regulations generally apply to fuel producers and fuel distributors upstream in the distribution chain, which are generally medium or large-sized businesses. To the extent that small businesses may be impacted by the amending regulations, they would not be subject to new compliance costs, and only minimal administrative costs if they chose to access relief under the amending regulations. It is possible that some small businesses may benefit from the expanded relief from the fuel charge as provided for under certain measures in the amending regulations.

One-for-one rule

The one-for-one rule does not apply in respect of the new fuel charge rates that are being added to the Schedule 2 of the GGPPA. The Amendments to Schedule 2 introduce new fuel charge rates for the 2023–2030 period, but these new rates will not change the manner in which stakeholders account for their fuel charge obligations under Part 1 of the GGPPA.

Similarly, the one-for-one rule does not apply in respect of the measures that were announced on August 9, 2022. These measures in the amending regulations generally provide relief from payment of the fuel charge in certain circumstances. To access relief from the fuel charge under the amending regulations, certain conditions must be fulfilled (as outlined above in the description section); however, it does not change the manner in which stakeholders account for their fuel charge obligations under Part 1 of the GGPPA.

There are no incremental administrative costs to be counted under the one-for-one rule in respect of the measure that will expand to Alberta and Ontario the existing integration mechanism that is already in place for the Saskatchewan OBPS. If a business meets the eligibility criteria, it would complete a one-time application to the Minister of the Environment under the integration mechanism.

Application costs for eligible facilities in Alberta were incurred in respect of the initial implementation of the fuel charge on January 1, 2020. Similarly, application costs for eligible facilities in Ontario were incurred in respect of the transition from the federal OBPS to the Ontario OBPS on January 1, 2022. Since these application costs were incurred before the publication of the amending regulations, this amendment reflects a process that is already complete and does not represent an incremental change in administrative burden on business.

Regulatory cooperation and alignment

The existing rules of the fuel charge system, both under Part 1 of the GGPPA and the Fuel Charge Regulations, integrate the fuel charge with Saskatchewan’s provincial output-based pricing. The amending regulations expand to Alberta and Ontario the existing integration mechanism that is already in place for the Saskatchewan OBPS.

Strategic environmental assessment

The amending regulations make modifications to the existing rules contained in the fuel charge system under Part 1 of the GGPPA and are generally technical or incremental in nature to ensure that the fuel charge applies as intended and reflect the federal government’s confirmed carbon price trajectory to 2030. A Strategic Environmental Assessment was undertaken to assess the impacts in listed provinces as summarized below.

In combination with other measures outlined in the Pan-Canadian Framework on Clean Growth and Climate Change, the federal carbon pollution pricing system (including the fuel charge) provides incentives to reduce energy use through conservation and efficiency measures, while also serving to drive fuel switching and technology advances, and thus ultimately leads to reductions in greenhouse gas emissions and air pollution. These outcomes will directly and indirectly contribute to all the 2022–2026 Federal Sustainable Development Strategy goals, but specifically the goals of effective action on climate change, clean growth, and clean energy.

Gender-based analysis plus

The amending regulations make modifications to the existing rules contained in the fuel charge system under Part 1 of the GGPPA and are generally technical or incremental in nature to ensure that the fuel charge applies as intended. A gender-based analysis plus (GBA+) was undertaken to assess the impacts of the GGPPA on diverse groups in listed provinces, as summarized below.

The GBA+ concluded that the application of the carbon pollution price can have disproportionate impacts on low-income and vulnerable populations. These impacts are neutralized or mitigated in the Pan-Canadian Approach to Pricing Carbon Pollution through the recycling of the direct proceeds to individuals. Carbon pollution pricing, with a well-designed proceeds return as a core element, minimizes the impacts of climate change on Canadians and the Canadian economy. It contributes to the overall resilience of the country and benefits all, including potentially vulnerable groups, while maintaining the overall incentives of the price signal to incentivize behavioural change to reduce greenhouse gas emissions and help contribute to the Government’s climate change objectives. Proceeds recycling can also be directed to further mitigate climate change impacts, which can particularly benefit groups that are more vulnerable to the impacts of changing weather patterns. In Ontario, Manitoba, Saskatchewan, and Alberta, the federal government returns the bulk of the direct proceeds from the fuel charge directly to individuals and families, through Climate Action Incentive payments, with a top-up of 10% for those living in small and rural communities. In Yukon and Nunavut, the federal government returns all direct proceeds from the fuel charge to the territorial governments. All potential impacts would also have been covered by the previous GBA+ on the broader federal carbon pollution pricing system.

Implementation, compliance and enforcement, and service standards

The amending regulations will be implemented and enforced by the CRA as part of the fuel charge under Part 1 of the GGPPA. The measures contained in the amending regulations come into force and apply as outlined above in the description section. The changes to the fuel charge rates in Schedule 2 to the GGPPA come into force on April 1, 2023, and the CRA is prepared for implementation. In preparing for the implementation of these new rates, the CRA is updating certain forms and public notices. The other measures in the amending regulations have retroactive coming-into-force dates and are already being administered on a provisional basis by the CRA and, in the case of the measure that integrates the fuel charge with the Alberta and Ontario OBPS, the Minister of the Environment.

Contacts

Gervais Coulombe
Sales Tax Division
Tax Policy Branch
Department of Finance Canada
90 Elgin Street
Ottawa, Ontario
K1A 0G5

Ron Hagmann
Excise and Specialty Tax Directorate
Canada Revenue Agency
9th Floor, Place de Ville, Tower A
320 Queen Street
Ottawa, Ontario
K1A 0L5