High cost of cutting carbon

Consumers expected to feel the impact of plans to reduce carbon use

Consumers are going to be hit with hundreds of dollars of extra costs in the first year alone when Canada’s federally mandated carbon pricing schemes come into effect, says an economic think-tank.

“It will be about $250 in the first year,” said Alicia Macdonald, a principal economist with the Conference Board of Canada. “Those that are living paycheque to paycheque will feel the cost increase the most.”

In a report entitled The Cost of a Cleaner Future: Examining the Economic Impacts of Reducing GHG Emissions, the board’s economists break down the blow to consumers with the arrival of carbon tax in Canada’s bid to cut its greenhouse gas emissions.

The estimated final tally for each Canadian household is $2,500 annually in added costs to goods and services due to carbon pricing schemes by the year 2025.

Although the federal government is only requiring provinces to initially come up with schemes to add an extra $10 per tonne to the cost of carbon, Ottawa is also insisting that cost must go up to $50 per tonne by 2022. In their scenario, the board’s economists have projected it will rise to $80 per tonne by 2025 and drive up the costs of many things used by the average household.

Natural gas, electricity and other fuels are expected to jump by 14.8 per cent due to carbon pricing schemes alone by 2025, according to the board. Motor fuels and lubricants – think a fill-up at the pump – are forecast to go up by 9.7 per cent for the same reason.

And that extra cost to move goods combined with the phasing out of coal-generated electrical production is expected to have a ripple effect through the economy.

Carbon pricing schemes are expected to up the cost of dining in restaurants and staying in hotels and motels by 0.8 per cent, increase the cost of furnishings, household appliances, and clothing and footwear by 0.6 per cent, say the economists.

Buying insurance, getting financial services or using a lawyer is forecast to cost 0.7 per cent more by 2025 due to carbon pricing. Even government-provided services such as education and healthcare are expected to nudge up by 0.9 per cent.

The average Nova Scotian household’s grocery bill can expect to climb by 1.2 per cent – or about $97 – due to carbon pricing alone by 2025, according to the Conference Board’s forecast.

Not so, say others.

Dale Beugin, executive director at Canada’s Ecofiscal Commission, dismisses the Conference Board’s forecast on the impact of carbon pricing, saying it fails to account for the likely shift in consumer buying habits as a result of some things suddenly costing more and others relatively less.

“It’s a vast over-estimate of the cost to the economy and also to households,” said Beugin. “It doesn’t account for the carbon pricing plan to do what it is supposed to do.

“It’s assuming that people will just pay it and not change their behaviour,” he said. “You can buy different things and prefer things that take less carbon … Demand for things changes when you make them more expensive.”

“You can buy different things and prefer things that take less carbon … Demand for things changes when you make them more expensive.”