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Partners for Climate Protection

Fuel tax transfers

Both provincial and federal governments collect fuel taxes and, in the case of the federal government, share a portion of those taxes with all municipalities across Canada. Some provinces, such as Ontario and Alberta, also share a portion of fuel taxes with municipal governments.

The Federal Gas Tax fund assists municipalities in addressing their sustainable municipal capital infrastructure needs.

Applications

Transit, water, wastewater, solid waste, community energy, capacity building, etc.

Benefits

  • A stable and predictable funding source with many different municipal applications through an existing tax stream, i.e. no double taxation.
  • Revenue is directed towards infrastructure use.
  • Increases in fuel taxes discourage automobile use; leading to lower emissions, lower road-related costs, etc.

Barriers and challenges

  • Federal gas tax funding is not tied exclusively to transit. 
  • For large municipalities (over 500,000), federal gas tax monies may only be directed towards two of the six infrastructure categories — a barrier to some communities as capital priorities change over time.
  • In Ontario, provincial gas tax funding is limited to transit only; making the federal gas tax fund the only government funding available to non-transit capital works.
  • If existing fuel taxes are used, automobile use is not necessarily discouraged.

Resources and notes

Municipal examples

  • Markham, ON, has used 50% of its gas tax shares to help finance its district energy system, an annual investment of about $8 million.
  • In 2000, Alberta established the City Transportation Fund to help the province's major urban centres cover capital costs. Edmonton's south light rail transit system was secured in part using the CTF fuel tax revenue.
  • Hamilton, ON, used a portion of its federal gas taxes to fund solid waste projects such as its residential organics program, construction of its central composting facility, and upgrades to its materials recycling facility. 


Page Updated: 18/09/2015