Targeted gas tax relief for less wealthy households, a windfall profit tax on fossil fuel companies, and a shift to cheaper-to-operate electric vehicles emerged as alternatives after Prime Minister Mark Carney announced Tuesday that his government will pause across-the-board collection of the fuel excise tax on gasoline and diesel until Labour Day.
The federal government says suspending some taxes on fuel is a “responsible” way to tame skyrocketing prices at the pumps, brought on by the American/Israeli war on Iran and the ensuing energy price shock, The Canadian Press reports. The Conservatives accused the government of taking half-measures while energy costs surge.
Carney said the tax break will start April 20 and is expected to save Canadians 10 cents per litre on regular gasoline and four cents on a litre of diesel.
Speaking to reporters on Parliament Hill, Carney said suspending the excise tax is a “responsible, temporary measure” that offers “real relief” to Canadian families.
Carney said the war in the Middle East has caused an “enormous shock in the global economy” and his government has to “assess what’s the best approach, given our core plan and what can we do in the short term.”
A Scalpel, Not a Chainsaw
In the days leading up to the announcement, some analysts said that best approach would be to temporarily increase the quarterly GST Groceries and Essentials Benefit, a move that would have supported households least able to cope with higher pump prices and mirrored similar measures in countries like South Korea, New Zealand, and Ireland. “It’s important to acknowledge that not all Canadians are experiencing the same degree of hardship, and an across the board axing of the excise fuel tax or GST on gasoline is the proverbial chainsaw approach, when a scalpel will do,” wrote Polaris Strategy + Insight principal Dan Woynillowicz.
“There are some calls for cutting gas taxes with several European countries temporarily suspending fuel levies,” wrote analysts Rebekah Young and Oliver Gervais, in a Scotiabank brief cited by Woynillowicz. “While such measures are broad‑based and highly visible—and would offer some near‑term relief to low‑ and middle‑income households, who spend a larger share of their income on transportation—they are also regressive, delivering the largest benefits to higher‑income households with greater fuel consumption.”
Clean Energy Canada Executive Director Rachel Doran added that, while the gas tax cut will save the average drive $17 per month over five months, electric vehicles generate savings of $250 per month into the indefinite future. While Tuesday’s announcement “may be an understandable move,” she said in a release, “it will ultimately provide only temporary and minor relief when compared to the savings of going electric. It also comes just as consumers globally are rediscovering the benefits of leaving volatile gas prices behind,” with interest in EVs multiplying across the European Union and in many other countries.
Author and climate campaigner Seth Klein is calling for a windfall profit tax on fossil companies that are “destined to make a killing” on a war that is dragging on a lot longer than Donald Trump and his crackerjack brain trust imagined it would. “While the mayhem in global energy markets will no doubt be a boon to Canada’s oilpatch and a saving grace for the Alberta budget, for the rest of us, the oil price spike will ripple through the economy and make life even more unaffordable,” Klein writes. “That’s why these excess profits need to be captured for the public good.”
In an exclusive report Wednesday, the Guardian put the value of that windfall at US$30 million per hour for the world’s top oil companies, for a total of $234 billion by the end of this year.
Climate Caucus said the Canadian industry is on track to bring home $90 billion in profits if today’s oil prices hold firm over the next 12 months, adding that a 33% windfall tax on profits above 120% of pre-crisis levels would generate $18 billion “to support struggling Canadians—and local governments.” Instead, the grouping of municipal elected officials said Carney’s announcement will cost the federal government $2.4 billion in revenue.
“When the federal government forgoes revenue from fossil fuel taxes, they prevent municipalities from accessing resources to further shield their community members from fossil fuel-related price hikes,” Climate Caucus said [pdf] in a release. “These funds could have been used to ensure that municipal infrastructure, buildings, and vehicles are electrified; to support reliable, renewable energy generation; to provide long-term relief for low-income households struggling to choose between groceries and transportation; and to generate real cost savings that protect communities from future volatility.”
“Canadians deserve relief, but a band-aid is not a cure,” agreed Nichole Dusyk, senior policy advisor with the Winnipeg-based International Institute for Sustainable Development. “Further tying Canada to volatile fossil fuels when cleaner, cheaper alternatives exist is not a long-term solution.”
Last month, IISD argued that Europe, as well, could have shield consumers from the price impacts of the war without subsidizing fossil fuels.
Tracking Gas Prices
Gas prices have surged in Canada and worldwide in recent months as the conflict in the Middle East has constrained global oil shipments, CP writes.
While average gasoline prices were down roughly 10 cents this week from the national peak of a week ago, the Canadian Automobile Association (CAA)’s gas price tracker showed an average cost of $1.73 per litre at pumps across the country on Tuesday—more than 40 cents higher than a year ago.
Patrick De Haan, head of petroleum analysis at GasBuddy, said “tax holidays” on fuel are becoming more common among U.S. states.
“As a motorist, I certainly wouldn’t really complain about a $4- to $8-a-tank drop in gas prices. Ten cents a litre is not nothing,” he said.
But he also warned that the situation in the Middle East is volatile, and if developments in the Strait of Hormuz lead to fuel prices ramping up into the weekend, Canadians might not see the full discount at the pumps on Monday morning.
De Haan added that lowering the sticker price on gas also stimulates demand, which could deepen market imbalances and push prices higher.
“Oil, gasoline, and diesel prices don’t just move because of one factor at a time,” he said. “Consumers may not necessarily see visibly a 10-cent drop if oil markets are actively climbing.”
Gut Federal Climate Programs, Poilievre Says
Conservative Leader Pierre Poilievre argued in the House of Commons on Tuesday that the Liberals would not have taken any action if they had not been pushed by the Official Opposition. His party called for the excise tax and GST on gas and diesel to be waived for the rest of the year, and for a permanent end to the federal Clean Fuel Standard and industrial carbon tax.
Poilievre accused the federal government of going only “half way” and for “only half the time,” adding that his proposal would cut the cost of a litre of gasoline by 25 cents.
Carney told reporters the tax waiver will cost the federal government roughly $2.4 billion, while the Conservatives put the price tag for their own proposal at around $5 billion.
The Liberals are largely paying for the excise tax cut by “recycling” the revenues from the boost Canada’s economy typically receives from higher gas prices, Carney added.
Poilievre argued Ottawa ought to go further and use the higher tax revenue to offer Canadians a steeper break at the pumps. “That money should go back into the pockets of consumers, not into the coffers of government,” he said Tuesday.
The prime minister defended the excise tax cut as a more responsible approach to managing federal finances while supporting Canadians and the broader economy.
“We didn’t just say, ‘Get rid of all taxes on gasoline and let’s spend $9 billion as if we’re not in government,’ which is actually what you do say when you’re not in government,” Carney said.
“But when you are in government, you have to choose, you have to balance, and this is the balance we’ve struck.”
A media statement about the federal plan said it will also reduce prices for truckers and other businesses with heavy transportation costs. Carney said the excise tax will be waived for jet fuel domestically as well, as airliners contend with ballooning energy costs.
‘A Drop in the Bucket’
Desjardins deputy chief economist Randall Bartlett said Tuesday he expects the suspended fuel tax will shave one or two ticks off the headline inflation rate starting in May. He called that a “drop in the bucket,” with inflation set to rise sharply in the wake of the energy price spike.
Many economists agree that lifting taxes on fuel is the most direct means governments have to deal with rising energy costs—something Canadians saw at the pump a year ago when Ottawa removed the consumer price on carbon, stripping roughly 18 cents from a litre of gasoline.
But Bartlett agreed with other analysts that stripping the excise tax on fuel will disproportionately benefit higher-income households that typically spend more on gas. He added that tax cuts on gas could be politically tough for the Liberals to unwind, particularly if oil prices remain high in September.
The $2.4 billion set aside for this measure is likely affordable in the short term, Bartlett said, but the longer the war drags on, the more the oil price shock will weigh on Canada’s economy.
Finance Minister François-Philippe Champagne announced Tuesday the Liberals will provide an update on the federal fiscal position in a spring economic statement on April 28.
The main body of this report was first published by The Canadian Press on April 14, 2026.
