What was the federal Carbon Pricing Backstop of 2018?

The federal Carbon Pricing Backstop was a federal carbon-pricing system implemented under the Greenhouse Gas Pollution Pricing Act, S.C. 2018, c. 12 (passed June 21, 2018, in force October 23, 2018). The Backstop imposed federal carbon pricing on provinces that did not have their own equivalent system. Justin Trudeau's federal Liberal government justified the policy as essential to meeting Canada's commitments under the 2015 Paris Climate Agreement. The Act survived a constitutional challenge before the Supreme Court of Canada in 2021. The consumer fuel charge component was repealed by the Carney federal Liberal government in March 2025, while the Output-Based Pricing System (OBPS) for industrial emitters continues.

The Backstop had two components. First, the consumer fuel charge applied a per-tonne carbon price to fossil fuels at the point of distribution. The price began at 20 dollars per tonne of CO2-equivalent in 2019 and rose by 10 dollars per year to 50 dollars in 2022, then by 15 dollars per year to 80 dollars in 2024. The price was scheduled to reach 170 dollars per tonne by 2030 before the 2025 repeal of the consumer charge. Second, the Output-Based Pricing System (OBPS) applied to large industrial emitters (facilities emitting more than 50,000 tonnes of CO2-equivalent per year), with a per-tonne price on emissions above a facility-specific output-based standard.

Provincial responses varied. Several provinces adopted their own carbon-pricing systems (British Columbia's revenue-neutral carbon tax of 2008, Quebec's cap-and-trade system linked with California, Alberta's Specified Gas Emitters Regulation later Carbon Levy and TIER for industry, and others). The federal Backstop applied directly in Ontario (after the 2018 Ford government repealed the previous cap-and-trade system), Saskatchewan, Manitoba, New Brunswick (initially), Yukon, and Nunavut. Saskatchewan, Ontario, and Alberta challenged the Act's constitutionality in their courts of appeal in 2019 and 2020.

The Supreme Court of Canada upheld the Act in References re Greenhouse Gas Pollution Pricing Act on March 25, 2021 by a 6 to 3 majority. Chief Justice Richard Wagner wrote the majority decision, finding that the Act was a valid exercise of the federal national-concern power under section 91 of the Constitution Act, 1867. The intergovernmental constitutional fight over carbon pricing remained politically heated. The federal Climate Action Incentive (later the Canada Carbon Rebate) returned about 90 per cent of consumer fuel charge revenues directly to households as quarterly cheques in Backstop-applicable provinces. After Justin Trudeau's resignation announcement of January 2025 and the subsequent Liberal leadership of Mark Carney, the federal consumer fuel charge was repealed effective April 2025 (with the final increase paused). The OBPS for industrial emitters has been retained, with Carney announcing additional industrial decarbonisation measures in 2025.