Sunita Somvanshi
Govind Tekale
Canada’s Clean Fuel Regulations are generating political debate about economic effects on Canadians. In a press conference, Opposition Leader Pierre Poilievre labeled the CFR “Carbon Tax 2.0,” claiming additional costs for households already facing inflation pressures.
The Numbers Behind Fuel Costs
The Parliamentary Budget Officer confirms CFR will increase gasoline prices by up to 17¢/L and diesel by up to 16¢/L by 2030 in an upper-bound scenario. These costs affect households differently based on income and location.
“According to the parliamentary budget officer, it will add 17 cents a liter to your gas,” Poilievre said at a press conference. “What did the last carbon tax add to your gas? 17 cents a liter. The new tax is starting to look a lot like the old tax.”
PBO data reveals that in 2030, under an upper-bound scenario, lower-income households will pay 0.62% of disposable income (about $231 annually) while higher-income households will pay 0.35% (approximately $1,008).
Regional impacts vary significantly, with Saskatchewan, Alberta, and Newfoundland & Labrador facing the highest relative burdens, while British Columbia has the lowest impact according to the PBO analysis.
How The Regulation Works
The CFR replaces the Renewable Fuels Regulation with a lifecycle carbon intensity standard for liquid fuels, mandating a 15% reduction in carbon intensity by 2030. Implementation began July 2023.
The federal consumer fuel charge was removed effective April 1, 2025. The Clean Fuel Regulations, by contrast, operate at the supplier/importer level, requiring reductions in lifecycle carbon intensity or the purchase of compliance credits.
Economic Assessments
Environment and Climate Change Canada projects CFR could reduce real GDP by up to 0.3% ($9 billion) by 2030.
Industry studies have suggested potential compliance costs for reducing carbon emissions, with estimates varying widely depending on assumptions and methodologies.
Nova Scotia and Newfoundland regulators set clean-fuel adjustors (about 3.74¢/L for gasoline and 4.17¢/L for diesel in Nova Scotia). New Brunswick adopted a different methodology; industry groups have estimated that, under certain assumptions, this could translate to materially higher pass-through costs.
Atlantic provinces without established provincial clean fuel programs may face higher initial adjustments than regions like British Columbia with existing standards.
Rural and Urban Differences
Poilievre connected CFR to broader affordability concerns:
“I met a mother at a workshop yesterday who was in tears because she says every time she goes to the grocery store, she’s shocked at how much the prices have gone up and she cannot afford groceries anymore, even though she works hard every day,” he stated.
For rural households, particularly in Atlantic Canada, fuel regulations raise practical concerns.
“Atlantic Canada is largely a rural region. The Carney ban on gas, trucks, and vehicles would effectively shut down most of Atlantic Canada,” Poilievre said. Canada’s Zero-Emission Vehicle (ZEV) standard sets sales targets (20% by 2026, ramping to 100% by 2035) with compliance credits/penalties; it is not a blanket ban on gas vehicles.
Consumer Adaptation Options
Households may adjust to CFR-related costs through:
- More fuel-efficient or electric vehicles
- Public transit where available
- Carpooling and reducing discretionary driving
- Provincial rebate programs
These options vary in accessibility depending on location and income level.
Policy Implementation Timeline
The CFR took effect in July 2023, with requirements increasing gradually through 2030.
The federal consumer fuel charge was removed effective April 1, 2025, while the CFR — which works at the supplier level — remains in force.
The PBO continues monitoring climate policy impacts, with a recent report on oil-and-gas emissions caps projecting a 0.39% GDP reduction, $20.5 billion decrease in nominal GDP, and about 54,400 job losses by 2032 if fully implemented.
Industry analyses suggest CFR-driven demand for renewable fuels could raise demand for oilseed-based feedstocks; some scenario work and industry commentary point to additional demand measured in the low-millions of tonnes, and certain studies have estimated price effects (for example, roughly $1.10/bu in some scenarios). These are industry/academic estimates rather than official government forecasts.
The transition to cleaner fuels also brings opportunities for innovation in areas like hydrogen fuel cells and carbon capture technologies, which may help offset some economic impacts while addressing carbon risks.
