Gasoline prices across Canada dropped significantly following the government’s decision to repeal the consumer carbon tax that had been in place since 2019.
On his first day in office, newly elected Prime Minister Mark Carney signed an order eliminating the tax, a move he said would provide financial relief to Canadians struggling with high costs. The repeal marked a major victory for Conservatives, who had long opposed the levy.
According to fuel market tracker GasBuddy, fuel prices in eight provinces fell by more than six cents per litre on Tuesday, the day the tax was officially removed. Nationally, the average price for gasoline dropped from nearly 155 cents per litre on Sunday to 143.6 cents per litre by Wednesday. The steepest decline was recorded in New Brunswick, where prices fell by 15 cents per litre, while British Columbia and Ontario saw reductions exceeding 10 cents per litre.
“The price cuts continue to expand,” GasBuddy analyst Patrick De Haan noted in an email on Tuesday.
Economic Impact of the Tax Repea
Prior to its removal, the carbon tax on gasoline for the 2024-2025 period was set at 17.6 cents per litre. As a result, fuel prices are expected to decline by a similar amount, said Susan Bell, an executive at energy consultancy Rystad Energy.
The Canadian Fuels Association estimated that the repeal could lead to a 20-cent-per-litre reduction in gasoline prices, potentially saving consumers more than C$500 per year.
Meanwhile, Quebec, now the only province still enforcing a carbon tax through its cap-and-trade system, experienced a modest 1.9-cent-per-litre increase in fuel prices, according to GasBuddy data.
Potential Effects on Consumer Behavior and the Economy
The lower gas prices may encourage Canadians to opt for road trips over air travel, Bell suggested. However, she cautioned that the ongoing trade tensions with the U.S. could drive up unemployment rates, which could dampen fuel consumption.
U.S. President Donald Trump is expected to announce a series of retaliatory tariffs against key trading partners, including Canada, later on Wednesday. The Canadian Fuels Association warned that the overall impact of the carbon tax repeal on fuel demand remains uncertain, given the broader economic challenges.
“There are simply too many external factors influencing demand, particularly with the global economy on edge following the U.S. tariffs of April 2,” a spokesperson for the association said.
While Canadians enjoy a break at the pump, the long-term implications of the policy shift remain to be seen.