The true cost of carbon pricing is $75 per month. Is that really going to break your family budget?
How much does the carbon tax cost you?
Most of us, whether we like the policy or not, don’t actually know the answer to that question. We may hear politicians claim that carbon pricing is making life unaffordable. We may read stories about rising gasoline and home heating prices. But what does it actually add up to?
Here are some numbers. The average household in a province covered by the federal system will pay about $900 due to carbon pricing in 2024. That ranges from a low of $536 in New Brunswick, with its clean electricity grid, to a high of $1,156 in Saskatchewan, which depends more on fossil fuels. These totals include both direct and indirect costs, such as grocers raising food prices to offset their own carbon costs.
Is $75 per month going to make or break many family budgets? Probably not, but it’s fair to say that the carbon pricing system does have a real impact on consumers. And if you were to listen to many critics, the story would end there.
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But the story doesn’t end there because the carbon pricing system is revenue-neutral. All the money it raises is paid back to tax filers and communities in the province where it was generated. The federal government is not pocketing any of the money it raises through carbon pricing.
This raises another very important question: do people receive more or less carbon rebates than they pay in carbon pricing? And here, the answer may surprise you.
In 2024, the average Canadian household will receive about $1,200 in rebates, which is $300 more than they are paying due to carbon pricing. In other words, the average household in Canada is richer because of the carbon pricing and rebate system. That’s true in every province, but especially in Alberta, Manitoba and Saskatchewan, which see the most significant net benefits.
On the face of it, this doesn’t make a lot of sense. Why would the federal government take our money just to give it back to us?
Here’s an example. Imagine a family with a large, poorly insulated house and two gas-guzzling SUVs that they drive every day. They might pay $1,500 in carbon pricing this year and only get $1,200 back. Imagine a second family in a mid-rise apartment. They have one small car, which they only use to carpool to work, and they bike or take transit the rest of the time. They might only pay $700 in the carbon price this year but still get the full $1,200 rebate.
In other words, the carbon pricing and rebate system redistributes money from the highest emitters to the lowest emitters. It’s both a carrot and a stick that encourages individuals, households and businesses to make greener choices. In our example, the first family could reduce their carbon costs by upgrading their insulation, downsizing their vehicles, or simply driving less, and they’ll still receive the same carbon rebate.
The fairest criticism of carbon pricing is not that it makes life for most people unaffordable. It actually does the opposite, which means pausing the scheduled increase on Apr. 1, as many conservatives are proposing, would make most people worse off.
The fairest criticism is that not everyone has access to alternatives. The up-front cost of an electric car or heat pump is often prohibitive, especially for lower-income households. And in communities without good green infrastructure, such as public transit, people may feel there are no options to reduce emissions.
That’s why we need our governments to invest in green alternatives for the people and communities that need them most. Carbon pricing is a fine policy, but it’s not enough.
Hadrian Mertins-Kirkwood is a senior researcher with the Canadian Centre for Policy Alternatives.
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