Three smokestacks emit white clouds, illustrating how the Canadian carbon tax works and how you can save money

Since 2019, every province and territory has introduced a price on carbon pollution. This pricing is based either on the federal pricing system or on a unique system that is designed to fit the needs of the region.  The goal of the carbon tax is to encourage consumers and businesses to change their habits and reduce their use of CO2-emitting fuel and energy sources, ultimately reducing the amount of greenhouse gases released into our atmosphere. Let’s take a look at how carbon tax works and a few ways you can save.

How does carbon tax work?

To put it simply, carbon tax puts a price on each tonne of emissions from fossil fuel sources, including coal, natural gas, and gasoline. At this point, the federal carbon tax won’t be charged directly to consumers in the form of a standalone bill (like property taxes, for example), but it will directly affect large industrial emitters and fuel production and distribution companies. As a result, there are a few changes you’ll likely see as a consumer, including an increase in the price of gas at the pump and higher energy bills.

How much carbon tax does the average household have to pay?

As of 2024, the federal carbon tax is $80 per tonne, or about 14.3 cents per litre of gasoline. For the average household, this will work out to about $400 to $900 per year, depending on where you live and your habits.

The good news is carbon tax may not end up costing your household as much as you think it will. The carbon tax also includes the Canada Carbon Rebate program, which returns approximately 90% of collected proceeds to families on a quarterly basis. After that, any remaining proceeds are returned to businesses, farmers, and indigenous groups in the province or territory where funds were collected. Rebate amounts vary based on your household and where you live but work out to an annual average of $500 to $1,500.

How can you reduce your carbon footprint and pay less carbon tax?

Since the main purpose of introducing a carbon tax is to encourage people to reduce their CO2 emissions, you can reduce the amount you spend on carbon tax if you do just that. Here are a few ways you can reduce your household’s carbon dioxide emissions:

  1. Change your driving habits. Instead of driving every day, consider carpooling, taking public transit, or biking to work instead — even once a week will help. You can also learn how to drive for fuel efficiency to save on gas and reduce your carbon emissions when you do get behind the wheel.
  2. Switch to hybrid or electric. If you’re thinking of buying a new vehicle, consider going for a hybrid or electric model, both of which reduce your carbon footprint. Learn the pros and cons of hybrid and pure electric vehicles before you start taking test drives.
  3. Use less heat in the winter. From layering up to installing a smart thermostat in your home, there are plenty of ways to save energy and lower your heating bills in the winter months.
  4. Cut down on the AC. Limit your air conditioning use in the summer months and consider these seven tips to beat the heat without AC.
  5. Use less energy for everyday household chores. Use cold water for your laundry and hang your clothes to dry instead of using the dryer. Consider these other green cleaning tips, too.

Making home upgrades for energy efficiency can not only help you save on carbon tax, but certain upgrades can help you save on home insurance, too. If you decide to make any upgrades to your home to make it more energy efficient, be sure to let your licensed insurance broker know so they can look into available discounts for you.

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