LASER TALK: Carbon Pricing and the Cost of Gas

Image Source: https://www.cbc.ca/news/business/gas-prices-carbon-tax-oil-1.5081757

Carbon pricing credibly regulates climate-unbalancing greenhouse gases by applying a gradually increasing fee on fossil fuels like oil and gas. In 2019, Canada’s federal backstop carbon price is equivalent to about 4.4 cents per litre of gas.^[1] This will increase by the equivalent of about 2.3 cents per litre of gas^[2] each year until 2022.

In provinces and territories where the backstop carbon price is in place, the revenues generated stay within the jurisdiction with 90% being returned to households. This way, at least eight out of ten households, especially those with the lowest income, get back more money than they pay in the carbon price.^[3]

For a family driving a car with a moderate mileage of 10 L/100 km (23 mpg), the increased cost of gas from carbon pricing is $3 for a single 60 L fill up, or less than $100 per year in 2019, assuming a typical 20,000 km (12,400 miles) of driving per year.^[4]

With incremental increases in the carbon price, fossil fuel consumption goes down.^[5] Knowledge of the carbon price also encourages people and businesses to invest in technologies, such as electric cars and solar panels, that decrease our dependence on fossil fuels. This investment in climate-friendly technologies makes them more quickly available and drives down their prices.

The price of gas is volatile and can change by more than 20 cents in a month.^[6] While carbon pricing makes the cost of polluting more clear, the increased costs are low and gradual, giving us time to adapt.

What’s more, 90% of the federal backstop carbon pricing revenues is returned to families to protect consumers, thus shielding most households from the rising cost of energy prices ^[7].

References:

^[1] “Gas prices could jump another 15 cents by summer — and … – CBC.ca.” 6 Apr. 2019, https://www.cbc.ca/news/business/gas-prices-carbon-tax-oil-1.5081757. Accessed 20 Jul. 2019.

^[2] “Pricing carbon pollution in Canada: how it will work – Canada.ca.” 21 Jun. 2017, https://www.canada.ca/en/environment-climate-change/news/2017/05/pricing_carbon_pollutionincanadahowitwillwork.html. Accessed 20 Jul. 2019.

^[3] “Fiscal and Distributional Analysis of the Federal Carbon Pricing System.” 25 Apr. 2019, https://www.pbo-dpb.gc.ca/web/default/files/Documents/Reports/2019/Federal%20Carbon/Federal_carbon_pricing_EN.pdf. Accessed 20 Jul. 2019.

^[4] “Gas prices could jump another 15 cents by summer — and … – CBC.ca.” 6 Apr. 2019, https://www.cbc.ca/news/business/gas-prices-carbon-tax-oil-1.5081757. Accessed 20 Jul. 2019.

^[5] “Estimated impacts of the Federal Carbon Pollution Pricing System ….” 20 Dec. 2018, https://www.canada.ca/en/services/environment/weather/climatechange/climate-action/pricing-carbon-pollution/estimated-impacts-federal-system.html. Accessed 20 Jul. 2019.

^[6] “Gas in Vancouver hovers above $1.70 a litre — is this … – Global News.” 27 Apr. 2019, https://globalnews.ca/news/5201572/gas-price-vancouver-canada/. Accessed 20 Jul. 2019.

^[7] “Fiscal and Distributional Analysis of the Federal Carbon Pricing System” https://www.pbo-dpb.gc.ca/web/default/files/Documents/Reports/2019/Federal%20Carbon/Federal_carbon_pricing_EN.pdf   Apr. 25 2019, /. Accessed 16 Oct. 2019.

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