Climate Action Incentive: Use It as Seed Money to Grow Your Wealth

Climate change is upon us, and you can literally see it out your window. At least where I’m living. Here in Ontario, we continue to see smoke in the south from forest fires in the north of Ontario and in Québec. So anything Canadians can do to help combat climate change can certainly create benefits down the line.

But still, if you needed another reason to get involved with climate action, how about a literal benefit?

What is the Climate Action Incentive?

The Canadian government introduced the Climate Action Incentive in 2019 as a tax-free amount paid to individuals and families. It aims to help offset the cost of federal pollution pricing in the provinces of Alberta, Saskatchewan, Manitoba and Ontario. The credit provides residents a basic amount, plus a supplement for residents in small and rural communities.

The credit used to be a refundable credit claimed in income tax returns. However, as of July 2022, it’s now a quarterly tax-free payment made through the benefits system. However, those living in Newfoundland and Labrador, Nova Scotia, and Prince Edward Island will receive a federal fuel charge. These will be provided in three quarterly payments in 2023, and four following that. New Brunswick will receive a backstop fuel charge starting July 1, 2023, along with double payments in October, and a single payment in January 2024.

What’s great is you don’t really have to figure out any type of eligibility. You simply have to live in these areas, and make sure to submit your tax return. So, how much can you get?

How much can you receive from the incentive?

The incentive varies pretty widely depending on where you live, with Alberta receiving the most, and New Brunswick receiving the least. Here is how it breaks down in the chart below, not including the potential for a supplement for small and rural community residents, which is an additional 10% on the base amount.

So if you’re living in Alberta and married with two kids, that could be a total incentive of $1,544 each quarter! That can add up to $6,176 each year!

Don’t need it? Invest it!

A windfall like this should be used wisely, and of course if you have debt payments or could really use the cash, go for it. However, if you can, put it aside and save it in an investment account to help you create an emergency fund, or work towards your goals.

An excellent option that remains undervalued at this point is Hydro One (TSX:H). This exposes you to the growing utilities sector, with Hydro One stock continuing to see growth both organically and through acquisitions.

The company is up about 8% in the last year, as of writing, offering a 3.81% dividend yield to investors as well. So you’re turning that money into more money. In fact, here is how much you could create in passive income from investing that $6,176 in passive income alone.

No matter what you do with your climate incentive, enjoy it! Whether that’s using it to soak up some summer fun, or putting it towards your future financial freedom.