Federal fuel charge rates to 2030

Summary#

These final regulations — 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) — update the federal fuel-charge system. They set fuel charge rates through 2030, add rules on renewable blends and hydrogen, and extend an integration process so some provincial output‑based systems can coordinate with the federal system.

What it does#

• Updates Schedule 2 of the Greenhouse Gas Pollution Pricing Act to list fuel‑charge rates through 2030 that follow the federal carbon price path (an increase of $15 per tonne each year from 2023, rising from $65 per tonne in 2023–2024 to $170 per tonne in 2030–2031). The new rates take effect on April 1, 2023.
• Adds and clarifies rules in the Fuel Charge Regulations, including:
  • A new definition and rules for how to treat fuel that contains bio‑derived aviation fuel (allows proportional relief when aviation fuel contains up to 1% water and up to 6% other material).
  • Proportional relief when hydrogen, or hydrogen plus biomethane, is blended into marketable or non‑marketable natural gas.
  • A revised definition of marketable natural gas (now based on meeting specifications for pipeline transport and sale, rather than a fixed methane percentage).
  • A rebate for registered distributors when fuel they delivered in a listed province is later removed from that province by someone who is not a registered distributor, subject to conditions and exclusions (not payable for fuel taken in a vehicle supply tank or, for some fuels, when the amount is 1 000 L or less).
  • An exemption so no fuel charge applies to combustible waste that is burned at a covered facility by a person who is a registered emitter.
• Integrates provincial output‑based pricing systems with Part 1 of the federal regime by adding the Alberta OBPS and the Ontario OBPS to the existing integration mechanism (previously in place for the Saskatchewan OBPS). This lets facilities subject to those provincial systems optionally register with the federal system so registered distributors can deliver fuel to them without paying the fuel charge.
• Repeals the separate Part 1 of the Greenhouse Gas Pollution Pricing Act Regulations (Alberta) and consolidates those rules into the Fuel Charge Regulations.

Who's affected#

• Fuel producers and fuel distributors. They are the main parties who pay or account for the fuel charge, and who will use the new rules and rates.
• Facilities and companies that operate under provincial output‑based pricing systems in Alberta, Ontario, and Saskatchewan. They can choose to register with the federal system to coordinate fuel treatment.
• Aviation fuel suppliers and blenders who use or blend bio‑aviation fuel.
• Natural gas suppliers and users where hydrogen or biomethane blends are present.
• Registered emitters (companies that have registered with the federal system), who may get relief for combustible waste burned at covered facilities.
• Consumers and households indirectly. The government says proceeds are recycled through programs such as Climate Action Incentive payments in provinces that do not meet the federal benchmark.
• The Canada Revenue Agency (CRA) administers and enforces the fuel charge under Part 1 and already administers some of these changes on a provisional basis.

If it is unclear who is affected by a specific technical rule in these regulations, the CRA or the Department of Finance guidance should be consulted.

Why it matters#

• It raises the price signal on carbon over the rest of the decade (the fuel‑charge schedule follows the federal plan to increase by $15 per tonne per year to $170 per tonne by 2030). That is likely to raise fuel costs over time and encourage fuel switching and energy efficiency.
• It gives clearer, updated rules for how renewable aviation fuels, hydrogen blends, and biomethane are treated for fuel‑charge purposes. This reduces uncertainty for businesses investing in lower‑carbon fuels.
• The integration with provincial OBPS systems avoids duplicate coverage for large facilities and allows coordinated treatment of fuel used at those facilities.
• Some measures are retroactive or apply to past periods. Parts of the regulations are deemed to have come into force on earlier dates such as December 6, 2019, December 3, 2021, January 1, 2020, and August 9/10, 2022. That may affect past accounting or rebate eligibility for some businesses.