Heat Pump Chronicles Vol. 6 Is “Axing the Tax” really a good idea?

This is the sixth in a series of posts on our journey to navigate government grants and loans available for home energy retrofits and to replace our natural gas furnace with a cold-climate heat pump. Click here to see all articles in the series.

I realize I’m about to wade into the political swamp by arguing that taxing carbon is a good thing for Canada and for most Canadians. Mr. Pierre Poilievre, leader of his majesty’s loyal opposition, has made carbon taxation the key plank in his Conservative party’s unofficial election platform. And, if the polls are correct, he has successfully convinced the majority of Canadians that this villainous initiative of the Liberal government’s environmental strategy is the root cause of virtually all of this country’s economic woes.

While the Conservative attack on the carbon tax makes for great political theatre it ignores the negative impact that climate change is already having on the Canadian economy and the threat it poses for future economic growth. According to the Canadian Climate Institute, the costs associated with climate change are already shaving about $2.5B off Canada’s GDP each year. That number is forecasted to grow to $8-10B per year by 2055. All households will lose income as a result of this GDP haircut. And it’s expected that low income families will experience the brunt of that income loss.

The science is pretty clear that dramatic reductions in fossil fuel use are key to human survival beyond the next century. For resource rich countries like Canada, that means shifting the economy. The carbon tax provides an incentive that will help transition our economy towards lower carbon and lower cost alternatives. This will provide many opportunities for economic growth, including reaping the rewards of low cost renewable energy generation that will encourage industrial and commercial growth.

While the Federal implementation of carbon pricing has its flaws, it follows what many industry leaders and economists have indicated is the recipe for creating an efficient economic transition with minimal short-term economic damage. Canada’s own EcoFiscal Commission, consisting of a group of economists, looked at global environment issues. They determined that climate change is the most important issue facing our collective economies. The Commission studied various alternatives for government policy and determined that putting a price on carbon is the most efficient and lowest-cost alternative.

The increased levels of carbon in our atmosphere are the result of human activities resulting from the production and consumption of goods and services. There is an economic cost associated with these emissions that is significant and growing. The carbon tax ensures that those costs are borne proportionately based on carbon production. This is a fair approach. And while some industries like farming have limited lower cost alternatives today, the carbon tax incentivizes those industries to innovate to lower their carbon footprint over time.

The carbon tax was a factor for Dayle and me as we considered heat pump options. The math here is a bit convoluted so bear with me. A cubic meter of natural gas generates the equivalent to about 10.5 kilowatt hours of electrical energy. Currently, the cost of natural gas is about $0.60 a cubic meter including delivery charge. While the cost of electricity varies with time of use differences, from our latest Alectra bill, the cost averaged to about $1.50 for every 10.5 kilowatt hours we consumed. On the surface that doesn’t compare very favourably to the $0.60 for the same amount of energy from natural gas.

The good news, however, is that a heat pump is three times more efficient than a high efficiency gas furnace. So, over the course of a year our heat pump will consume about 60% less energy than our old natural gas furnace and air conditioner. Take 60% off the $1.50 and that makes the energy cost for both types of units almost identical. Until that is, you factor in the escalating cost of natural gas due to the carbon tax. For me this is the best part.

The Enbridge website indicates that, as of April 2023, the carbon tax adds about 12.4 cents to the cost of each cubic meter of natural gas. Because I now have an all electric heat pump, however, I don’t pay that tax. But I do get the tax rebated to me every quarter by the Federal government just the same as my next door neighbour who pays the tax because he still has a natural gas furnace. I’ve always liked my next door neighbour. I like him even more now because, in effect, he is paying me to not burn carbon. Kind of a nice feeling. And, if the carbon tax stays, beyond the next election, that 12.4 cents will more than triple by 2030.

I’ll leave to you to decide if axing the tax is a good idea or not. From my perspective the carbon tax is doing its intended job . It’s helping Canada transition to a low carbon economy which promises a bright economic future for our country. It motivated me to replace my furnace with a heat pump. I have the opportunity to save money over time and feel more comfortable while doing it. The best part, the carbon tax is helping to leave a livable planet for my great nephews and great nieces!

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