How carbon pricing has our family laughing all the way to the bank
Edited version published Friday, July 19, 2019 in the New Brunswick Telegraph Journal, the Moncton Times & Transcript and the Fredericton Daily Gleaner.
Enter If you believed only Conservative politicians, special-interest groups and certain media outlets, you might be inclined to think that the new carbon tax imposed on Saskatchewan, Manitoba, Ontario and New Brunswick by the federal government will put us all in the poorhouse.
Well, I’ve done some basic math, and, three months into carbon pricing here in New Brunswick, the truth is that our family is coming out way ahead. That’s right: we’re financially better off, thanks to the carbon tax.
Gaining from a tax?
It seems illogical, but it’s true.
That’s because the carbon ‘tax’ isn’t really a tax; it’s more accurately a fee-and-rebate incentive.
The ‘fee’ is the extra money we are now paying for gas or diesel (4.4 cents/litre), heating oil (5.4 cents/litre), natural gas (3.9 cents/M3) and propane (3.1 cents/litre), to encourage us to use less.
The ‘rebate’ is the amount every NB family received on their recent income tax return (see Climate Action Incentive, line 449).
We don’t have any control over the rebate we get because it’s a set amount and is about the same for every family. But we do have control over how much we pay in fees, because that’s directly proportional to how much fossil fuel we choose to burn.
Here’s another way to understand it. Say that, in an effort to reduce consumption of sugary drinks, the price of a case of pop was increased $5 – but at the same time every shopper received a $5 rebate to apply to anything in the store. Devoted pop lovers could use their rebate to offset the increased price of pop, so they’d be no worse off than before. Frugal shoppers, however, would probably turn down pop and use their rebate on something else, so they’d come out ahead. And the desired objective – reducing the consumption of sugary drinks – would be achieved.
Economists – including conservative economists – widely agree that putting a price on carbon is the fairest way to tackle climate change, because it makes polluters pay in accordance with how much they pollute. (I believe most ordinary people agree with that principle too.) It’s also a far cheaper program for governments to administer than complicated alternatives like regulating industries.
But two key conditions must be met for carbon pricing to be successful: the price should start low and increase gradually, to allow time for people and businesses to adapt; and all revenue should be rebated equally back to taxpayers. Our new carbon price meets both conditions.
Our family’s numbers
Since April 1, the three drivers in our family have collectively driven about 15,000 kilometres. That’s probably more than the average Canadian family, I’m sorry to acknowledge.
But our two vehicles are very efficient: a hybrid and a plug-in hybrid (both were purchased used; neither was break-the-bank expensive). In total, they’ve burned 460 litres of gas since April 1. Multiplied by 4.4 cents/litre, this means our family has paid $20.25 in carbon fees over three months. Estimating forward, that will equal $81 after 12 months. (We don’t use heating oil or natural gas, and use just a negligible amount of propane.)
On the other hand, the rebate I received on my recent income tax return was $246.40. So I’m paying $81, but getting $246.40. Three dollars in my pocket for every one I spend.
My rebate would be even higher if I lived in one of the other three provinces affected by the new carbon fee: about $300 if I lived in Ontario or Manitoba; and a windfall of nearly $600 if I lived in Saskatchewan.
Our family’s vehicles and home are very efficient, and we heat with wood. So maybe our high margin of return isn’t attainable for everyone.
But a decent margin of return is. Canada’s non-partisan Parliamentary Budget Officer has concluded that 80 per cent of Canadians will receive more in rebates than we pay in fees. And most of us can increase our margin by making wise choices about our personal transportation and home energy usage – which is the goal of carbon pricing in the first place.
So why not ignore the naysayers, look at your fossil fuel consumption and contemplate the changes you can start making today. Then you too can laugh all the way to the bank.