Carbon tax is a pricing system implemented in Canada to recognize the cost of pollution and account for those costs in daily decisions. It is a regulatory fee or tax levied on the carbon content of fuels at the Canadian provincial, territorial, or federal level. The carbon tax is a part of Canadas approach to reducing greenhouse gas emissions and driving innovation. Since 2019, every jurisdiction in Canada has had a price on carbon pollution, and the federal government sets minimum national stringency standards that all systems must meet to ensure they are comparable and contribute their fair share to reducing greenhouse gas emissions.

The carbon pricing system is flexible, and any province or territory can design its own pricing system tailored to local needs or choose the federal pricing system. The federal pricing system applies in Manitoba, Nunavut, Prince Edward Island, and Yukon, while the federal fuel charge applies alongside provincial carbon pricing systems for industry in Alberta, New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, and Saskatchewan. Carbon pollution pricing systems in British Columbia, the Northwest Territories, and Quebec currently continue to meet the federal benchmark stringency requirements, and neither part of the federal pricing system applies in those jurisdictions.

The carbon tax is revenue-neutral, and the government of Canada remains committed to ensuring that the federal price on pollution remains affordable and to helping households to make the transition to a low-carbon economy. Provinces and territories that have their own carbon pricing systems use the proceeds as they see fit, including by supporting families to take further action to cut pollution in a practical and affordable way. When the Government of Canada implemented its backstop carbon pricing system in 2019, it committed to returning all direct proceeds from the federal backstop system to the jurisdiction of origin. In the remaining provinces where the federal price on carbon pollution is in effect, the Government of Canada uses approximately 90% of fuel charge proceeds to directly support families through Climate Action Incentive payments, delivered through annual tax returns.