Canada's Suspension of Carbon Tax on Heating Oil Reignites Debate

On October 26, 2023, the Canadian federal government announced that it will be pausing the federal carbon tax on home heating oil for three years. This announcement applies to deliveries of heating oil in all jurisdictions where the federal carbon tax is in effect, which is currently every province except British Columbia and Québec. Nationally, this will affect a limited number of households as Statistics Canada notes that in 2021 only 3% of primary heating systems in Canada use heating oil, whereas 87% of heating systems use natural gas or electricity.

Key Highlights:
-- Canada's federal government suspended the federal carbon tax on heating oil for three years.
-- This could erode political support for the federal carbon tax framework.
-- We expect limited to no fiscal impact on federal and provincial governments and Canadian regulated utilities and power companies.

“The biggest household beneficiaries of this change are located in Canada’s Atlantic provinces—Newfoundland and Labrador, Nova Scotia, Prince Edward Island, and New Brunswick,” said Adam Provencher, Vice President, Energy, Utilities, and Natural Resources. “Heating oil represents a significant share of primary heating systems in these provinces.”