A Clear Policy Shift with Immediate Consumer Impact

On April 1, 2025, Canada will officially eliminate the federal carbon tax (formally known as the federal carbon charge) on fuels and home heating. This move significantly alters the cost landscape for both households and businesses.

For consumers, the impact is straightforward. Ontario drivers can expect gas prices to drop by roughly 20 cents per litre, and Enbridge Gas customers will see the carbon charge removed from natural gas bills (pending Ontario Energy Board approval), saving households approximately $300 annually.

To wrap up the program, eligible Canadians will also receive a final Canada Carbon Rebate beginning April 22, 2025, refunding the last of the federal fuel charge revenue.
(Government of Canada)

What This Means for Businesses

The carbon levy removal brings immediate operational cost relief—particularly for fuel-intensive industries like manufacturing, agriculture, logistics, and processing. With gasoline, diesel, propane, and natural gas no longer subject to the federal charge, these businesses are poised to benefit from improved margins and reduced input costs.

However, the change comes with important context:

• Short-Term Relief, Long-Term Uncertainty
  While the short-term benefit is clear, businesses should remain cautious. Government policy can shift. Future federal or provincial administrations may reintroduce some form of carbon regulation.
• Loss of Rebates for SMEs
  Programs like the Canada Carbon Rebate for Small Businesses, which returned a portion of fuel charge proceeds to SMEs, will end alongside the levy.
  (EY Canada)
• Sector-Specific Variability
  Industries with already slim margins—like agriculture—may experience greater proportional savings. Meanwhile, companies in more electrified or service-based sectors may notice only marginal changes.

Carbon Pricing Still Applies to Large Emitters

It’s important to note that the elimination of the federal carbon levy does not apply to all. Large industrial emitters will continue to face carbon pricing under:

• The federal Output-Based Pricing System (OBPS)
• Provincial programs like Ontario’s Emissions Performance Standards (EPS)

Provincial Carbon Pricing Updates

As of April 1, 2025, British Columbia has eliminated its provincial carbon tax, aligning with the federal government's repeal of the national carbon levy. Premier David Eby emphasized that this move aims to alleviate financial pressures on residents while maintaining commitments to climate action. ​

In contrast, Quebec continues to uphold its cap-and-trade system, established in 2013 and linked with California's program since 2014. This system imposes a carbon price of approximately 10 cents per litre on gasoline. Premier François Legault has indicated that Quebec will monitor the outcomes of the upcoming federal election on April 28 before making any decisions regarding the province's carbon pricing policies. ​

These developments highlight the evolving landscape of carbon pricing across Canadian provinces, with jurisdictions adopting varied approaches in response to federal policy changes.

Strategic Considerations for Energy Users

With the removal of the carbon levy, businesses have an opportunity to rethink their energy strategies—not just to capture savings, but to stay competitive and future-ready.

1. Reassess Energy Procurement Strategies - Without the carbon charge, indexed contracts and alternative supply options may offer better flexibility and lower exposure.

2. Optimize Natural Gas Use and Site Efficiency - Leverage the reduced cost of natural gas to justify efficiency upgrades—from controls to retrofits.

3. Evaluate On-Site Generation and Fuel Switching - Carbon policy may ease, but ESG pressure hasn’t. CHP systems, renewable natural gas (RNG), or solar integration can drive both savings and resilience.

4. Understand Your Carbon Risk Exposure - Even without a direct tax, you may be affected by supplier pass-through costs, policy changes, international trade rules, or ESG expectations.

5. Stay Ahead of Reporting and ESG Expectations - Carbon may no longer appear on utility bills, but it remains central to business strategy. Stakeholders expect transparency, metrics, and action.

Bottom Line

The end of the federal carbon levy is a pivotal shift—but not an endpoint. While many businesses will benefit from lower costs, long-term energy planning, compliance, and sustainability strategies remain essential.

Whether it's understanding the financial impact, navigating compliance obligations, or planning capital upgrades, this is the time to reassess and act.