Understanding Carbon Pricing For the Average Homeowner
October 27, 2016
By any description, the concept of carbon pricing is difficult to grasp, particularly for an average homeowner or driver. Essentially, carbon pricing is the approach most favoured by economists worldwide for reducing the negative effects of global warming. Simply put, whoever discharges carbon dioxide (CO2) will be charged monetarily for their level of emission. The charge, referred to currently as a carbon price, must be paid for emitting one tonne (one metric ton) of CO2. In Canada, the federal government will be requiring each of the provinces to price emissions. The pricing will start at $10 per metric ton (2018) and advance to $50 per metric ton (2022). And while not all the details have been fully defined, different interest groups (and some provinces) are extrapolating their own estimates for future costs and impacts. The problem for the average homeowner is to understand how carbon pricing will affect day-to-day-life and economics. Leaving aside the various financial projections that each interest group advocates, there are some real-life basics to consider. By any measure, a carbon tax is bound to increase the cost of gasoline, home heating fuel, and electricity (in some cases). For this, the average person will be spending more on gasoline and more on home energy. Once again, throwing around numbers does more to confuse than clarify - everyone has different consumption habits depending on lifestyle. Across Canada, from British Columbia to New Brunswick, every province has their own unique variables when it comes to energy consumption and CO2 emissions. It means that every province is going to be affected differently with respect to carbon pricing - hence, the wide variety of policy positions taken buy each Premier. But for all provinces, the fundamental idea of carbon pricing is the same: to significantly abate CO2 emissions, and adopt new technologies and approaches. For most everyone, the bottom line with carbon pricing is higher prices for virtually everything. This is because higher fuel costs will affect every business, and with higher operating costs come higher costs for the consumer. These so-called "indirect costs" to the homeowner are difficult to calculate. Here again, different interest groups will crunch numbers differently, although the non-partisan groups estimate that negative price impacts (amortized annually) will not be severe. The important thing to remember about carbon pricing (carbon taxes) is that governments will have to choose responsible ways in which to use the incoming tax revenue, without creating the impression that this is a "tax-grab". Needless to say, there is much divergence about how best to make use of carbon tax revenue. But again, to focus exclusively on the economic costs of carbon pricing can sideline the essence of the conversation: addressing greenhouse gas emissions. For the average citizen, personal responsibility and individual action are integral in addressing the negative effects of CO2 emission. Indeed, every homeowner across the nation can make a demonstrable difference, even with the simplest of lifestyle choices - from domestic recycling, to modifying driving habits, to enhancing home energy efficiency.