On June 27, 2018, the Department of Finance released new GST/HST
rules for carbon emission allowances (the New Rules). The
definition of "emission allowance" in the rules is broad
and should cover most carbon emission allowances, including those
traded in cap-and-trade systems.
The initial supply of emission allowances by a Canadian
government entity, such as the Province of Québec or
Ontario, was generally, and will generally remain exempt from
GST/HST. However, supplies of emission allowances in
secondary markets were generally considered taxable. Under
the New Rules, supplies of carbon emission allowances are still
generally taxable, however these supplies will now be treated
similar to the rules for commercial real property. Specifically,
effective June 27, 2018, vendors do not have to collect and remit
GST/HST on supplies of carbon emission allowances regardless of
whether the purchaser is resident in Canada or registered for
GST/HST. Rather, Canadian resident
