To sign up to receive the latest Canadian Energy Centre research to your inbox email: research@canadianenergycentre.ca

Download the PDF here

Download the charts here

Executive Summary

In December 2020, the federal government announced that the carbon tax would be increased to $170 per tonne by 2030, an increase of $130 per tonne from $40 in 2021, or 325 per cent higher. The 325 per cent increase in the federal carbon price between now and 2030 will have a significant impact on the gasoline prices that Canadians will pay at the pump.

This is important because in 2019 there were over 25.4 million automobile registrations. Depending on the province and type of vehicle, the increase in the carbon tax on a fill-up will be between 297 and 350 per cent. Between 2021 and 2030, gasoline costs associated with the carbon tax are expected to rise from 8.8 cents per litre to 39.6 cents per litre, an increase of 350 per cent over those nine years.¹

The impact of the carbon tax on fill-up costs: 7 per cent of the fill-up in 2021; 24 per cent in 2030

In 2021, the carbon tax is estimated to comprise nearly 7 per cent of annual fuel costs. Estimates indicate that in 2030, the carbon tax will comprise nearly one-quarter (24 per cent) of fuel costs, assuming remaining components of the gasoline cost structure stay the same.

Carbon tax fuel costs for Canada’s top five vehicles in 2021 and 2030

The top five vehicles sold in Canada in 2019 were the Ford F-Series, Dodge Ram, Toyota RAV4, Honda Civic, and Honda CR-V.

Below are the estimated annual gasoline fuel costs for these vehicles in 2021. The carbon tax portion is between $161 and $257, or about 7 per cent of the fill-up costs:

• Ford F-150: $3,931 in annual fuel costs, with the federal carbon tax comprising $257 of that cost.
• Dodge Ram 1500: $3,931 in annual fuel costs, with the federal carbon tax comprising $257 of that cost.
• Toyota RAV4: $2,654 in annual fuel costs, with the federal carbon tax comprising $174 of that cost.
• Honda Civic: $2,453 in annual fuel costs, with the federal carbon tax comprising $161 of that cost.
• Honda CR-V: $2,587 in annual fuel costs, with the federal carbon tax comprising $169 of that cost.

Below are the estimated annual fuel costs for these vehicles in 2030. The carbon tax portion is between $723 and $1,158, or about 24 per cent of the fill-up costs, assuming that the remaining components of the gasoline cost structure stay the same:

• Ford 150: $4,832 in annual fuel costs, with the federal carbon tax comprising $1,158 of that cost, an increase of $901, or 350 per cent, from 2021.
• Dodge Ram 1500: $4,832 in annual fuel costs, with the federal carbon tax comprising $1,158 of that cost, an increase of $901, or 350 per cent, from 2021.
• Toyota RAV4: $3,263 in annual fuel costs, with the federal carbon tax comprising $782 of that cost, an increase of $608, or 350 per cent, from 2021.
• Honda Civic: $3,015 in annual fuel costs, with the federal carbon tax comprising $723 of that cost, an increase of $562, or 350 per cent, from 2021.
• Honda CR-V: $3,180 in annual fuel costs, with the federal carbon tax comprising $762 of that cost, an increase of $593, or 350 per cent, from 2021.

1. In this review of the effect of carbon taxes on gasoline price, we avoid speculating on possible carbon tax rebates to consumers. Such developments are dependent on the whim of government policymakers and such policy may or may not be implemented nine years in the future.

Source: Authors’ calculations from Canada Revenue Agency, 2021.

Introduction

In December 2020, the federal government announced that the carbon tax would be increased to $170 per tonne by 2030, an increase of $130 per tonne from $40 in 2021, or 325 per cent higher. The carbon tax applies to 21 types of fuel and combustible waste that emit CO2, including gasoline that Canadians purchase at the retail level (Canada Revenue Agency, 2021).

The 325 per cent increase in the federal carbon price between now and 2030 will have a significant impact on the gasoline prices that Canadians will pay at the pump.

This is important because in 2019, there were over 25.4 million automobile registrations (Statistics Canada, 2021b). Canadians are likely to notice the effects of the carbon tax increase most acutely in the summer, when their family vacation often takes the form of a driving holiday.

This CEC Research Brief examines the impact that the 325 per cent increase in the carbon tax will have on the annual fuel bill for the five most popular vehicles that Canadian motorists own. Depending on the province and type of vehicle, the increase in the carbon tax on a fill-up will be between 298 per cent and 350 per cent. The estimated fuel cost arising from the carbon tax are for gasoline-only vehicles.

Impact of the Carbon Tax on Retail Gasoline Prices

As of April 1, 2021, the carbon tax on gasoline is 8.8 cents per litre, based on the application of the $40 per tonne carbon tax, and is estimated to reach 39.6 cents per litre by 2030, based on the application of the $170 per tonne carbon tax (see Figure 1a) (Global News, 2020). Between 2021 and 2030, the gasoline cost associated with the carbon tax is expected to rise from 8.8 cents per litre to 39.6 cents per litre, an increase of 350 per cent over the next nine years (see Figure 1b).²

2. The discrepancy in the percentage increase in the carbon tax between 2021 and 2030 (up by 325 per cent nationally and 298 per cent in B.C.) and the gasoline fuel costs associated with the carbon tax (up 350 per cent nationally and in Ontario, and up 297 per cent in B.C.) are due to differences in the effective carbon tax rates and gasoline fuel charges affected by the carbon tax for those provinces that fall under the federal regime (Ontario) and those that have their own provincial regime (B.C.). There will also be disparities in effective gasoline fuel costs among provinces that fall under the federal carbon tax regime and provinces that have unique provincial cap-and-trade regimes, such as Quebec and Nova Scotia.

Source: Authors’ calculations from Canada Revenue Agency, 2021.

Source: Authors’ calculations from Canada Revenue Agency, 2021.

The effect on retail gasoline prices in Canada

As of May 2021, the retail price for regular unleaded gasoline in the 18 metropolitan areas surveyed by Statistics Canada averaged 134.4 cents per litre (see Figure 1c). This price includes 8.8 cents per litre to cover the $40 per tonne carbon tax in 2021.

Assuming that there will be no change in the remaining cost structure for regular unleaded gasoline to 2030 (which is highly unlikely given expected increases in crude oil prices, costs to refine, transport, and sell gasoline at retail outlets, and fuel and excise taxes), the cost for a litre of regular unleaded gasoline at the retail level in Canada is expected to rise to an average of 165.2 cents by 2030 (see Figure 1c) (Statistics Canada, 2021a). Approximately 39.6 cents per litre (about one quarter, or 24 per cent) of this overall cost will be due to the application of the $170 per tonne carbon tax on gasoline by 2030.

Source: Authors’ calculations from Canada Revenue Agency, 2021.

The Impact of the Carbon Tax on Fill-up Costs for the Five Most Popular Vehicles in Canada: Comparing 2021 with 2030

Below is a list of the top five vehicles in Canada based on new vehicle sales figures for 2019, obtained from Auto Trader (2020). They are:

1. Ford F-Series (145,064 new vehicle sales)
2. Dodge Ram (96,673 new vehicle sales)
3. Toyota RAV4 (65,248 new vehicle sales)
4. Honda Civic (60,139 new vehicle sales)
5. Honda CR-V (55,859 new vehicle sales)

2021 carbon tax costs: 7 per cent of a fill-up

For the five most popular vehicles that Canadians drive based on 2019 sales figures, the carbon tax is estimated to comprise nearly 7 per cent of annual fuel costs in 2021, assuming that drivers use regular unleaded gasoline³ (see Figures 2a and 2b).

• Ford F-150:

° Annual fuel costs in 2021 are estimated at $3,931, with the federal carbon tax comprising $257 of that total.
° A single fill-up of the Ford F-150 gas tank in 2021 costs an estimated $149, with the carbon tax comprising $10 of that total

• Dodge Ram 1500:

° Annual fuel costs in 2021 are estimated at $3,931, with the federal carbon tax comprising $257 of that total.
° A single fill-up of the Ram 1500 gas tank in 2021 costs an estimated $134, with the carbon tax comprising $9 of that total.

• Toyota RAV4:

° Annual fuel costs in 2021 are estimated at $2,654, with the federal carbon tax comprising $174 of that total.
° A single fill-up of the RAV4 gas tank in 2021 costs an estimated $74, with the carbon tax comprising $5 of that total.

• Honda Civic:

° Annual fuel costs in 2021 are estimated at $2,453, with the federal carbon tax comprising $161 of that total.
° A single fill-up of the Civic gas tank in 2021 costs an estimated $63, with the carbon tax comprising $4 of that total.

• Honda CR-V:

° Annual fuel costs in 2021 are estimated at $2,587, with the federal carbon tax comprising $169 of that total.
° A single fill-up of the Honda CR-V gas tank in 2021 costs an estimated $71, with the carbon tax comprising $5 of that total.

3. Natural Resources Canada’s (NRCan’s) annual Fuel Consumption Guide provides information on fuel consumption (litres per 100 kilometres and annual litres of gasoline consumed) based on an annual driving distance of 25,000 kilometres for a variety of light duty vehicles, including cars, trucks, and SUVs. For the five most popular vehicles sold in Canada in 2019 and key fuel consumption statistics and assumptions, see Appendix A.

Source: Authors’ calculations from Canada Revenue Agency, 2021.

2030 carbon tax costs: 24 per cent of a fill-up

With the federal price of carbon set to increase to $170 per tonne by 2030, the impact on gasoline prices that year is expected to be quite dramatic. For the five most popular vehicles that Canadians drive, based on 2019 sales figures, the carbon tax is estimated to comprise nearly one-quarter (24 per cent) of one-time and annual fuel costs in 2030, assuming that drivers use regular unleaded gasoline. This is compared to a carbon tax cost of nearly 7 per cent in 2021 and assumes that the remaining components of the gasoline cost structure stay the same (see Figures 2a and 2b).

• Ford F-150:

° Annual fuel costs in 2030 are estimated at $4,832, with the federal carbon tax comprising $1,158 of that total, an increase of $901, or 350 per cent, from 2021.
° A single fill-up of the Ford F-150 gas tank in 2030 will cost an estimated $183, with the carbon tax comprising $44 of that total, an increase of $34, or 350 per cent, from 2021.

• Dodge Ram 1500:

° Annual fuel costs in 2030 are estimated at $4,832, with the federal carbon tax comprising $1,158 of that total, an increase of $901, or 350 per cent, from 2021.
° A single fill-up of the Ram 1500 gas tank in 2030 will cost an estimated $165, with the carbon tax comprising $40 of that total, an increase of $31, or 350 per cent, from 2021.

• Toyota RAV4:

° Annual fuel costs in 2030 are estimated at $3,263, with the federal carbon tax comprising $782 of that total, an increase of $608, or 350 per cent, from 2021.
° A single fill-up of the RAV4 gas tank in 2030 will cost an estimated $91, with the carbon tax comprising $22 of that total, an increase of $17, or 350 per cent, from 2021.

• Honda Civic:

° Annual fuel costs in 2030 are estimated at $3,015, with the federal carbon tax comprising $723 of that total, an increase of $562, or 350 per cent, from 2021.
° A single fill-up of the Civic gas tank in 2030 will cost an estimated $78, with the carbon tax comprising $19 of that total, an increase of $15, or 350 per cent, from 2021.

• Honda CR-V:

° Annual fuel costs in 2030 are estimated at $3,180, with the federal carbon tax comprising $762 of that total, an increase of $593, or 350 per cent, from 2021.
° A single fill-up of the Honda CR-V gas tank in 2030 will cost an estimated $88, with the carbon tax comprising $21 of that total, an increase of $16, or 350 per cent, from 2021.

Source: Authors’ calculations from Natural Resources Canada, 2021.

2021 carbon tax costs in British Columbia: 6 per cent of a fill-up

For the five most popular vehicles that Canadians drive, based on 2019 sales figures, British Columbia’s provincial carbon tax is estimated to comprise over 6 per cent of one-time and annual fuel costs in that province in 2021, assuming that drivers choose regular unleaded gasoline.⁴

• Ford F-150:

° Annual fuel costs in 2021 in B.C. are estimated at $4,548, with the provincial carbon tax comprising $291 of that total.
° A single fill-up of the Ford F-150 gas tank in 2021 in B.C. costs an estimated $172 with the carbon tax comprising $11 of that total.

• Dodge Ram 1500:

° Annual fuel costs in 2021 are estimated at $4,548, with the provincial carbon tax comprising $291 of that total.
° A single fill-up of Ram 1500 gas tank in 2021 in B.C. costs an estimated $155, with the carbon tax comprising $10 of that total.

• Toyota RAV4:

° Annual fuel costs in 2021 in B.C. are estimated at $3,071, with the provincial carbon tax comprising $197 of that total.
° A single fill-up of the RAV4 gas tank in 2021 in B.C. costs an estimated $86, with the carbon tax comprising $5 of that total.

• Honda Civic:

° Annual fuel costs in 2021 in B.C. are estimated at $2,838, with the provincial carbon tax comprising $182 of that total.
° A single fill-up of the Civic gas tank in 2021 in B.C. costs an estimated $73, with the carbon tax comprising $5 of that total.

• Honda CR-V:

° Annual fuel costs in 2021 in B.C. are estimated at $2,993, with the provincial carbon tax comprising $192 of that total.
° A single fill-up of the Honda CR-V gas tank in 2021 in B.C. costs an estimated $82, with the carbon tax comprising $5 of that total.

4. The discrepancy in the percentage of one-time and annual fuel costs associated with the carbon tax (7 per cent nationally and in Ontario, and 6 per cent in B.C.) are due to a number of factors, including (1) differences in the effective carbon tax rates; (2) differences in the gasoline fuel charge applied to the carbon tax for those provinces that fall under the federal regime (Ontario) and those that have their own provincial regimes (B.C.); and (3) differences in the remaining cost structure for regular unleaded gasoline, such as provincial fuel taxes. The federal carbon tax is not levied in addition to a provincial carbon tax where it exists, as in British Columbia, but to avoid the imposition of a federal carbon tax, provinces must mimic, to some degree, the federal carbon tax.

Source: Authors’ calculations from Canada Revenue Agency, 2021.

2030 carbon tax costs in British Columbia: 21 per cent of a fill-up

With the price of carbon set to increase to $170 per tonne by 2030, the impact on gasoline prices in B.C. by 2030 is expected to be quite dramatic. For the five most popular vehicles that Canadians drive, based on 2019 sales figures, the carbon tax is estimated to comprise over 21 per cent of one-time and annual fuel costs in B.C. by 2030, assuming that drivers choose regular unleaded gasoline. That compares to a carbon tax cost of just over 6 per cent in 2021, and assumes that the remaining components of the gasoline cost structure stay the same.

• Ford F-150:

° Annual fuel costs in 2030 are estimated at $5,414 in B.C., with the provincial carbon tax comprising $1,158 of that total, an increase of $867, or 297 per cent from 2021.
° A single fill-up of the Ford F-150 gas tank in B.C. in 2030 will cost an estimated $205, with the carbon tax comprising $44 of that total, an increase of $33, or 297 per cent from 2021.

• Dodge Ram 1500:

° Annual fuel costs in 2030 are estimated at $5,414 in B.C., with the provincial carbon tax comprising $1,158 of that total, an increase of $867, or 297 per cent from 2021.
° A single fill-up of the Ram 1500 gas tank in B.C. in 2030 will cost an estimated $185, with the carbon tax comprising $40 of that total, an increase of $30, or 297 per cent from 2021.

• Toyota RAV4:

° Annual fuel costs in 2030 are estimated at $3,656 in B.C., with the provincial carbon tax comprising $782 of that total, an increase of $585, or 297 per cent, from 2021.
° A single fill-up of the RAV4 gas tank in 2030 in B.C. will cost an estimated $102, with the carbon tax comprising $22 of that total, an increase of $16, or 297 per cent, from 2021.

• Honda Civic:

° Annual fuel costs in 2030 are estimated at $3,378, with the provincial carbon tax comprising $723 of that total, an increase of $541, or 297 per cent, from 2021.
° A single fill-up of the Civic gas tank in 2030 in B.C. will cost an estimated $87, with the carbon tax comprising $19 of that total, an increase of $14, or 297 per cent, from 2021.

• Honda CR-V

° Annual fuel costs in 2030 are estimated at $3,563 in B.C., with the provincial carbon tax comprising $762 of that total, an increase of $571, or 297 per cent, from 2021.
° A single fill-up of the Honda CR-V gas tank in 2030 in B.C. will cost an estimated $98, with the carbon tax comprising $21 of that total, an increase of $16, or 297 per cent, from 2021.

Source: Authors’ calculations from Natural Resources Canada, 2021.

2021 carbon tax costs in Ontario: 7 per cent of a fill-up

For the five most popular vehicles that Canadians drive, based on 2019 sales figures, the federal carbon tax is estimated to comprise nearly 7 per cent of one-time and annual costs in Ontario in 2021, assuming that drivers choose regular unleaded gasoline (see Figures 4a and 4b).

• Ford F-150:

° Annual fuel costs in 2021 in Ontario are estimated at $3,887, with the federal carbon tax comprising $257 of that total.
° A single fill-up of the Ford F-150 gas tank in 2021 in Ontario costs an estimated $148, with the carbon tax comprising $10 of that total.

• Dodge Ram 1500:

° Annual fuel costs in 2021 in Ontario are estimated at $3,887, with the federal carbon tax comprising $257 of that total.
° A single fill-up of the Ram 1500 gas tank in 2021 in Ontario costs an estimated $133, with the carbon tax comprising $9 of that total.

• Toyota RAV4:

° Annual fuel costs in 2021 in Ontario are estimated at $2,625, with the federal carbon tax comprising $174 of that total.
° A single fill-up of the RAV4 gas tank in 2021 in Ontario costs an estimated $73, with the carbon tax comprising $5 of that total.

• Honda Civic:

° Annual fuel costs in 2021 in Ontario are estimated at $2,425, with the federal carbon tax comprising $161 of that total.
° A single fill-up of the Civic gas tank in 2021 in Ontario costs an estimated $62, with the carbon tax comprising $4 of that total.

• Honda CR-V:

° Annual fuel costs in 2021 in Ontario are estimated at $2,558, with the federal carbon tax comprising $169 of that total.
° A single fill-up of the Honda CR-V gas tank in 2021 in Ontario costs an estimated $70, with the carbon tax comprising $5 of that total.

Source: Authors’ calculations from Canada Revenue Agency, 2021.

2030 carbon tax costs in Ontario: 24 per cent of a fill-up

With the price of carbon set to increase to $170 per tonne by 2030, the impact on gasoline prices in Ontario by 2030 is expected to be quite dramatic. For the five most popular vehicles that Canadians drive, based on 2019 sales figures, it is estimated that the carbon tax will comprise over 24 per cent of one-time and annual costs in Ontario by 2030, assuming that drivers choose regular unleaded gasoline. This compares to a carbon tax cost of about 7 per cent in 2021, and assumes that the remaining components of the gasoline cost structure stay the same (see Figures 4a and 4b).

• Ford F-150:

° Annual fuel costs in 2030 are estimated at $4,788 in Ontario, with the federal carbon tax comprising $1,158 of that cost, an increase of $901, or 350 per cent from 2021.
° A single fill-up of the Ford F-150 gas tank in Ontario in 2030 will cost an estimated $182, with the carbon tax comprising $44 of that cost, an increase of $34, or 350 per cent from 2021.

• Dodge Ram 1500:

° Annual fuel costs in 2030 are estimated at $4,788 in Ontario, with the federal carbon tax comprising $1,158 of that cost, an increase of $901, or 350 per cent from 2021.
° A single fill-up of the Ram 1500 gas tank in Ontario in 2030 will cost an estimated $164, with the carbon tax comprising $40 of that cost, an increase of $31, or 350 per cent from 2021.

• Toyota RAV4:

° Annual fuel costs in 2030 are estimated at $3,233 in Ontario, with the federal carbon tax comprising $782 of that cost, an increase of $608, or 350 per cent, from 2021.
° A single fill-up of the RAV4 gas tank in 2030 in Ontario will cost an estimated $90, with the carbon tax comprising $22 of that cost, an increase of $17, or 350 per cent, from 2021.

• Honda Civic:

° Annual fuel costs in 2030 are estimated at $2,988, with the federal carbon tax comprising $723 of that cost, an increase of $562, or 350 per cent, from 2021.
° A single fill-up of the Civic gas tank in 2030 in Ontario will cost an estimated $77, with the carbon tax comprising $19 of that cost, an increase of $15, or 350 per cent, from 2021.

• Honda CR-V:

° Annual fuel costs in 2030 are estimated at $3,151 in Ontario, with the federal carbon tax comprising $762 of that cost, an increase of $593, or 350 per cent, from 2021.
° A single fill-up of the Honda CR-V gas tank in 2030 in Ontario will cost an estimated $87, with the carbon tax comprising $21 of that cost, an increase of $16, or 350 per cent, from 2021.

Source: Authors’ calculations from Canada Revenue Agency, 2021.

Conclusion

The increase in the carbon tax from $40 per tonne ($45 per tonne in B.C.) in 2021 to $170 per tonne in 2030 is expected to have a dramatic impact across the country on the operating costs of the most popular vehicles that Canadians drive, as the specific cases of B.C. and Ontario illustrate.

In 2021, between 6 and 7 cents of every dollar of regular unleaded gasoline sold in Canada is associated with the application of the carbon tax. By 2030, between 21 and 24 cents of every dollar of regular unleaded gasoline sold in this country will be associated with the application of the carbon tax. This represents an increase of 297 to 350 per cent, depending on whether the vehicle is operated in Ontario, in B.C., or elsewhere in Canada.

Appendix

Source: Natural Resources Canada, 2021.

References

Auto Trader (2020). Top 10 Best Selling Cars in Canada in 2019. <https://bit.ly/3wGjm0g>.

Canada Revenue Agency (2021). Fuel Charge Rates. <https://bit.ly/36CXJDz>.

Connolly, Amanda (2020). The carbon tax is going up. Here’s how much more you could pay at the pumps. Global News. <https://bit.ly/3zbOSVZ>.

Natural Resources Canada (2021). 2021 Fuel Consumption Guide. <https://bit.ly/2T8JeEq>.

Statistics Canada (2021a). Table 18-10-0001-01: Monthly average retail prices for gasoline and fuel oil, by geography. <https://bit.ly/3B4ryLd>.

Statistics Canada (2021b). Vehicle registrations, by type of vehicle. <https://bit.ly/3i7pZnj>.

CEC Research Briefs

Canadian Energy Centre (CEC) Research Briefs are contextual explanations of data as they relate to Canadian energy. They are statistical analyses released periodically to provide context on energy issues for investors, policymakers, and the public. The source of profiled data depends on the specific issue.

About the authors

This CEC Research Brief was compiled by Lennie Kaplan, Chief Research Analyst, and Mark Milke, Executive Director of Research, Canadian Energy Centre.

Acknowledgments

The authors and the Canadian Energy Centre would like to thank and acknowledge the assistance of Dennis Sundgaard and an anonymous reviewer for their reviews of this study.

Creative Commons Copyright

Research and data from the Canadian Energy Centre (CEC) is available for public usage under creative commons copyright terms with attribution to the Canadian Energy Centre. Attribution and specific restrictions on usage including non-commercial use only and no changes to material should follow guidelines enunciated by Creative Commons here: Attribution-NonCommercial-NoDerivs CC BY-NC-ND.

Photo Credits

Luca Nardone, Tim Samuel, Gabriel Hohol, One Shot, Je Shoots, and Peter Fazekas.