The Rising Carbon Tax – Impacts and Efficiency Strategies for Utilities

Understanding the Federal Carbon Tax and the increasing cost of carbon

The federal carbon tax was passed into law in 2018 as part of the Greenhouse Gas Pollution Pricing Act and came into effect April 2019. The Canadian Government website indicates that “Carbon pricing is about recognizing the cost of pollution and accounting for those costs in daily decisions. Putting a price on carbon pollution is widely recognized
as the most efficient means to reduce greenhouse gas emissions while also driving innovation.”

Impact of Carbon Tax on Utility Costs

The tax is based on a per tonne of CO2 emissions. The initial tax in April 2019 was $20/tonne and will increase until 2030 when it reaches $170/tonne. The cost impacts of the carbon tax:
With respect to utility costs, the price of carbon is charged directly to the electricity generators who in turn include that as cost of generation and pass it along to end consumers through the price of the power.
With respect to natural gas consumption, there is more transparency to the actual financial burden as the tax is levied as a direct cost per GJ (gigajoule) of natural gas consumed and appears on the end customer’s utility bill.

Carbon Tax Increase Schedule and Financial Implications

Here is the schedule of carbon tax increases up until 2030 along with the actual financial burden for various levels of consumption. Note: the cost indicated below only represents the carbon tax itself and does not include the price of natural gas. By 2030, the carbon tax will increase to a whopping $8.93 per GJ of natural gas.

Carbon Tax - Impacts and Efficiency Strategies for Utilities

Strategies for Carbon Tax Cost Mitigation

What can you do to avoid this cost? This is where energy efficiency comes into play. Energy efficiency is about eliminating energy waste and using
less energy to complete a given task. The less energy you consume the more you save with respect to the commodity cost itself PLUS the carbon tax, in the case of natural gas. Based on the chart above, these savings can be substantial.

Energy efficiency pyramid helps outline the priorities

The energy efficiency pyramid helps outline the priorities based on a cost-benefit approach to the different kinds of activities and investments that can be made in an effort to reduce consumption. From low-cost/no-cost behavioral changes, to upgrades in things such as lighting, HVAC, and other control systems, to the introduction of alternative renewable energy sources, there are many things that can be done depending on time, budget and desire for change.

How do you get started with implementing an energy efficiency plan?

Our energy efficiency roadmap will help you determine where opportunities exist to optimize your energy consumption and the various steps needed for a successful journey towards greater efficiency. We use data driven analysis to design a plan that will help you achieve your goals. Calculated, well-executed and quantifiable decisions – these are the outputs that you can expect from our approach.

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