Budgeting for Canada’s Federal Carbon Tax

What is the Federal Carbon Tax?

The carbon tax is applied to your natural gas bill as a tax on the greenhouse gas emissions associated with burning the fuel. The federal carbon tax is applied to provinces that do not already have their own carbon tax system in place, which includes Ontario, New Brunswick, Saskatchewan and Manitoba. Funds collected from the carbon tax will be used to fund energy savings measures in each province that pays the tax.

It is also important to note that electricity generated for the grid that is provided by fossil fuels like coal and natural gas plants may also pay the carbon tax. This could lead to increased electricity prices depending on the efficiency of the fossil-fuel based generation in the province and what percentage of the province’s overall electricity generation is derived from fossil fuels.

How Much Will it Cost?

The federal carbon tax will apply to businesses starting April 1, 2019, with the following 4-year projection on costs outlined in the graphic provided by Manitoba Hydro:

Example Building

Below is a 4-yr projected cost increase for a sample facility (225,000 sq.ft. apartment building), simply assuming the same amount of gas is consumed each year.

The above scenario gets more interesting once local weather aspects are considered, as a colder winter will result in a higher amount of gas consumption, increasing the carbon tax even more. Weather is also becoming more volatile, which could cause further financial risks as total gas costs are forced up and/or harder to budget for.

The far right column in the above table also shows the percent increase to your overall natural gas bill if we were to assume a facility is already paying $0.25/m3. You can see that in 4-years time, a facility’s natural gas bill could increase by 40%, a substantial cost if not strategically planned for. It is highly recommended to start analyzing your gas consumption patterns and equipment immediately (see below section) to start reducing your consumption before the major 40% cost increase occurs. If you plan now, your gas bill may remain nearly unchanged in 4-years if you are able to improve your efficiency by 30-40% (a challenging yet achievable goal).

How to Manage the Additional Cost?

The carbon tax is directly related to the amount of natural gas you consume, so in order to reduce the additional cost on your gas bill, your best bet is to become more energy efficient! How to accomplish this? There are many areas to explore, which include some options listed below:

  • Create an in-house energy champion team, hire a full time energy manager, and/or work with a professional energy consultant to create and implement your very own energy efficiency plan.
  • Have a deep understanding of the natural gas consuming equipment in your facility to identify energy reduction opportunities.
  • Analyze how your facility consumes natural gas throughout a typical year, and identify how your natural gas is utilized (space heating, process heating, on-site generation, etc.)
  • Explore energy efficient technologies for gas consuming equipment that are relevant to your facility, including heat recovery equipment, controls upgrades, building envelope improvements, and more.
  • Understand local natural gas incentive programs offered by your utility, in conjunction with the new Climate Action Incentive Fund (CAIF) which uses this carbon tax to fund projects that reduce greenhouse gas emissions, to help fund your projects.

Contact us to explore how we can work together to utilize our REA platform to help you fully understand your facility’s energy consumption patterns, identify all equipment energy efficiency improvements, forecast for carbon tax over the next 4-years, identify grants you qualify for, and implement projects to reduce your greenhouse gas emissions and save on energy related costs.

Manager of Engineering
E: greg.young@coengadvisors.com
C: 705-716-4315

205-3365 Harvester Road
Burlington, ON, L7N 3M8

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