The end of carbon tax rebates, following the elimination of federal, provincial and territorial carbon taxes in the spring of 2025, was a significant financial hit for low-income households, new research shows.
The rebates were tax-free payments that compensated consumers for the cost of carbon taxes imposed by either provincial and territorial governments or by Ottawa. But those transfers ended early last year, when Prime Minister Mark Carney removed the federal fuel charge, a move that was mirrored by jurisdictions that had their own carbon pricing programs.
Carbon tax rebates, which amounted to hundreds of dollars per year, were never meant to be a form of welfare. But those payments became an important income support for some of Canada’s poorest households at a time when many social assistance benefits, already very modest, failed to keep up with inflation, according to a new report by Maytree, a Toronto-based human-rights organization.
The substantial financial hole left by the removal of the rebates highlights the inadequacy of Canada’s income assistance system, according to Jennefer Laidley, a Maytree fellow and lead author of the report.
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Almost all household types the study looked at were living in poverty, with roughly three-quarters of them in deep poverty, defined as having an income that is below 75 per cent of Canada’s Official Poverty Line. The poverty threshold was between roughly $45,000 and $60,000 a year for a family of four in most regions, according to Statistics Canada.
“When you’re living at an income level that’s that low, a payment of $500 from the Canada Carbon Rebate makes a huge difference,” Ms. Laidley said.
The Canada Carbon Rebate was the federal rebate, which was available in provinces that requested it or that didn’t set up their own carbon pricing system in line with federal requirements. As of the start of 2025, it was available in eight provinces, with B.C. running its own carbon tax and rebate. Quebec operates a cap-and-trade system and never had a rebate program.
The territories also ran their own rebate programs. In all jurisdictions that had rebates, the payments were funded by the proceeds collected through the carbon tax.
In the case of the Canada Carbon Rebate, most households received more through those transfers than they paid in fuel charges, with major polluters largely bearing the cost of the fuel charge, according to the Department of Finance. Lower-income families, which generally consume less fuel, netted the greatest benefit.
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In 2024, the last time for which Canadians received the rebate over the full year, a family of four could receive up to $1,800 a year in base payments, excluding a supplement for those living in rural areas.
While Canadians still received some rebate payments in early 2025, the end of those programs resulted in households getting hundreds of dollars less that year compared with 2024, the Maytree report shows. In Alberta, for example, a couple with two children received $830 less a year, according to the study.
At the same time, welfare payments fell behind inflation for a variety of household types in most jurisdictions, the Maytree analysis shows. In Ontario, for example, payments from Ontario Works, the province’s main social assistance program, haven’t changed in more than seven years.
Maytree looked at income supports, including provincial, territorial and federal benefits, tax credit and rent supplements, for a variety of low-income household types, from single individuals out of work through those living with disabilities to couples with children.
While many federal supports are indexed to inflation, only five jurisdictions among the provinces and territories have pegged their basic social assistance benefits to the cost of living, Ms. Laidley said.
Even when governments have committed to adjusting payments based on inflation, the amount of the benefits is often so low that they still leave recipients living far below the poverty line, advocates say.
“We can say pretty clearly that social assistance across the country is failing Canadians,” Ms. Laidley said.