The impact of pollution on the environment is a major concern for governments across the world, and many have taken steps to control emissions and encourage greener alternatives.
Canada’s new extended Carbon Tax will be implemented on April 1st, 2019 and is a new initiative to help control Canada’s impact on the environment. It now covers all provinces in Canada, so here’s a look at this tax and its implications.
What Is A Carbon Tax? The Carbon Tax Explained
This tax is applied to activities that cause emissions, specifically greenhouse gasses like carbon dioxide. The tax makes it more expensive to carry out these activities, which means there’s a strong incentive for people to reduce these emissions where they can.
However, this is proposed to be a revenue-neutral tax, which would mean all of the money collected would be redistributed to Canadian taxpayers.
Around 90% of the tax will be returned to Canadians through household rebates, which, in many cases, will help people save money on the purchase and running of a new heating system.
The remaining 10% will go to:
- Small to mid-sized business
- Organizations that won’t be able to pass the tax to consumers directly
In all, the government discourages pollution through this tax, provides an incentive to help reduce emissions and doesn’t hold onto any of the money.
Carbon Tax Facts
People are naturally wary of taxes and parting with their cash. Some critics also raise concerns about a potential impact this tax could have on the economy. Economists however note that these concerns aren’t entirely founded.
Understanding the tax structure and its impact on regular citizens can help reduce some of their worries:
- The new Carbon Tax will be $20 per ton of emission. This will increase each year until it reaches $50 per ton in 2022.
- The impact of this tax depends on the intensity of emissions caused by electricity production in every province, and the fuel used for household heating, whether it be oil, electricity or natural gas.
- Provinces like Alberta, Nova Scotia and Saskatchewan, who use coal-fired plants to produce electricity, will see higher carbon pricing.
- Consumption rates will vary based on location and the weather conditions of the province. Colder provinces will have higher consumption and related costs.
- Homeowners may feel the pinch if they have older, inefficient heating systems and appliances in their homes. The money returned via rebates, however, will in theory make it more affordable to upgrade your system.
- British Columbia, Quebec, Alberta, Newfoundland, and Northwestern Territories already have pollution pricing that meets the new Federal standards.
- Ontario, Saskatchewan, New Brunswick, and Manitoba will have both the Federal Carbon Tax and Cap-and-Trade for large-scale industries in the provinces.
- Prince Edward Island will have its own Carbon Tax and will distribute the revenue as the local government sees fit. It will implement the Federal Cap-and-Trade system on large industrial polluters.
This is a brief look at the Carbon Tax system in Canada. The structure is straightforward but will vary by province so look out for more information from your provincial government.
Heating Types Across Canada
Around 47% of Canadians use natural gas to heat their household, and around 37% use electricity. Approximately 9% use oil and the rest use wood and propane.
Here’s a look at the annual natural gas consumption in Canada:
- 88.4 GJ per year on average in Canada
- 74.3 GJ per year on average in British Columbia
- 100.3 GJ per year on average in Alberta
- 88.7 GJ per year on average in Saskatchewan
- 81.7 GJ per year on average in Manitoba
- 90.8 GJ per year on average in Ontario
- 60 GJ per year on average in Quebec
Quebec, Newfoundland, and the maritime provinces of New Brunswick, Prince Edward Island, and Nova Scotia all use electricity most commonly. 91.50% of Quebec residents, 77.80% of Newfoundland residents, and 60% of New Brunswick heat their home using electricity.
Oil heating is more popular in Prince Edward Island and Nova Scotia with 63% and 47% of residents using it to heat their home.
What Is The Average Heating Cost of The Carbon Tax for Canadians?
Canadians use around 90 gigajoules of natural gas every year to heat their home, and each gigajoule produces around 50kg of carbon dioxide.
If you take the increase of $20 per ton into account, gas will be around $100 more expensive annually. By 2022, the additional $30 will increase the tax to $230 per year.
- Saskatchewan – $403
- Ontario – $244
- Manitoba – $232
- New Brunswick – $202
These will be the initial rates when the new tax is implemented. The cost will rise at the rate of $10 per ton per year until 2022. At that time, the average annual carbon tax rate will be:
- Saskatchewan – $946
- Ontario – $564
- Manitoba – $547
- New Brunswick – $470
This tax will have an impact on household budgets, which’s why it’s important to take measures to reduce consumption where possible.
Fortunately, most of the tax revenue is directed back towards the residents through rebates. However, the rebates aren’t calculated on an individual basis, so the money you receive may not exactly cover the additional costs imposed by the carbon tax. For this reason, the theory is that homeowners will still be incentivized to opt for more efficient appliances and home upgrades, and more conscious energy use where possible.
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What Are Carbon Tax Rebates and How Do They Work?
While the carbon price per ton might seem high, this tax scheme does offer rebates. These rebates encourage consumers to switch to greener solutions.
The rebate amount will depend on the number of people (adults and children), in the household. Citizens will get rebates through refund or tax deductions based on their preference or the local government policy. Here’s a look at the rebates in different regions:
- Saskatchewan – $598 with a net annual gain of $195 in 2019, $295 in 2020, $393 in 2021, and $473 in 2022. The average carbon tax rate is $405 in 2019, which is lower than the rebate.
- Ontario – $300 with a net annual gain of $56 in 2019, $82 in 2020, $108 in 2021, and $133 in 2022. The average carbon tax rate is around $244 in the first year, which means you gain more benefits through a rebate.
- Manitoba – $336 with a net annual gain of $104 in 2019, $153 in 2020, $202 in 2021, and $250 in 2022. The average carbon tax rate is $232 in 2019, and the rebate grows along with the tax increase.
- New Brunswick – $248 with a net annual gain of $46 in 2019, $69 in 2020, $90 in 2021, and $113 in 2022. The average carbon tax rate is $202.
Also, people living outside of census metropolitan areas get added benefits. This tax system takes into account that they might have fewer green alternatives to help reduce their fuel consumption, like being more dependent on a vehicle for transportation for instance. They’re eligible for 10% more in rebates than people in metropolitan areas.
All of these factors show that it is theoretically possible to regain the money you spend on the tax and on using green alternatives, but that will obviously vary from one person to the next. In any case, rebates are claimed to exceed the increased energy cost for more than 70% of Canadians.
What Are The Disadvantages of The Carbon Tax?
The higher cost load for households has caused some disapproval from the public. Here are some points to make a note of, so you know all the details when it comes to the carbon tax:
- Canada’s carbon price is high compared with other countries. Although carbon tax will be effective at preventing wasteful energy practices, it may also cause some financial strain to households with modest incomes.
- The most significant contributors to the emissions total are industrial establishments that cause 40% of the carbon pollution. They’re excluded from this latest tax and are covered under Output-Based Allocation Systems.
- The cost of natural gas in Canada will rise by around 8% over time. The tax will increase the cost of a gallon of gasoline by 16.6 cents in the first year and by 42 cents by the year 2022.
- The price of coal will double over time because it has a surcharge of $100 per ton. Fortunately, most of Canada’s electricity is produced through hydroelectric or nuclear systems, which causes fewer emissions.
The Bigger Picture
Climate change and excessive pollution results in considerable expenses for society and in some ways poses arguably a larger financial liability than the carbon tax.
According to research, health costs due to extreme weather will rise to around $1.6 billion a year, and many experts have mentioned that these additional expenses make taxation a better alternative.
One argument in favour of the carbon tax over increased regulation, is that despite the controversy caused by any new tax, it is viewed by economists as the most efficient way to discourage pollution, taking advantage of natural market forces to achieve its goal. In other words, if something is more expensive, people will generally do less of that thing.
So although taxes aren’t perfect, solutions that depend heavily on increased bureaucracy and complex regulations aren’t necessarily a preferable alternative.
As consumers will get a rebate, they’ll get most of the money they spent on the tax back, hopefully making the tax more manageable for Canadians, while still achieving its objective of lowering carbon emissions.
And as far as heating and cooling your home is concerned, a good place to start is upgrading your HVAC appliances to newer, high-efficiency systems. A new ENERGY STAR® furnace or A/C can help homeowners reduce costs and save money in the long run, regardless of the effect of the carbon tax.