As with most other provinces and territories, Nova Scotia is now subject to the federal government’s price on carbon, more commonly known as the carbon tax.
The carbon tax started in the province on July 1, 2023.
Canada’s carbon pricing system taxes the three most widely used carbon-emitting energy sources in Nova Scotia: gasoline, heating oil, and electricity.
By raising the cost of energy, the carbon tax is intended to change the energy-consumption habits of Canadians because “carbon pricing is about recognizing the cost of pollution and accounting for those costs in daily decisions.”
This means for the tax to work, Nova Scotians must recognize that (carbon) pollution has a price.
A good place to start would be when we purchase energy products such as gasoline, electricity, and home heating fuel.
The problem is, if you look at a receipt from the purchase of gasoline or a bill for your electricity or home heating fuel consumption, you will not see the carbon tax listed.
If the tax was shown, what would we see?
It all depends on the emissions intensity of the energy source.
Gasoline is a hydrocarbon, meaning it is a mixture of carbon and hydrogen atoms bound together.
A litre of gasoline weighs about 0.75 kilograms, depending on factors such as the octane rating and temperature.
When burned, the carbon and hydrogen in the gasoline separate and combine with the oxygen and nitrogen in the air to produce a variety of compounds including the greenhouse gases carbon dioxide (CO2), methane (CH4), and nitrous oxide (N2O).
Together these gases, often referred to as CO2e or carbon dioxide equivalent, weigh about 2.31 kilograms.
This means gasoline has an emissions intensity of about 2.31 kilograms of CO2e per litre.
At this year’s carbon price of $65 per tonne, gasoline should have a carbon tax of about $0.15 per litre; however, the federal government’s Fuel Charge Rates webpage lists it as $0.1431 per litre.
The cost of a litre of gasoline in Nova Scotia is a combination of three fixed costs (the federal Excise Tax, the provincial Motive Fuel Tax, and the Carbon tax); the cost of the refined product, which fluctuates over time; and the Harmonized Sales Tax (HST), a 15% value-added tax which is applied to the fixed charges and the product cost.
A typical receipt from the purchase of gasoline lists the fuel cost and the HST. Receipts can also show the federal Excise Tax ($0.10 per litre) and provincial Motive Fuel Tax ($0.155 per litre).
Despite the price of the carbon tax being known, the gasoline receipts from Wilson’s, Shell, and Petro-Canada do not list it.
Instead, tax (often along with other taxes) is hidden in the price of gasoline.
If gasoline receipts were required to list all the costs, we would have seen the following for a purchase of 40 litres of regular gasoline at $1.741 per litre in Halifax on 5 October 2023:
|Product cost @ $1.116 per litre:||$44.64||(64.1%)|
|Excise @ $0.100 per litre:||$4.00||(5.7%)|
|Motive fuel @ $0.155 per litre:||$6.20||(8.9%)|
|Carbon tax @ $0.143 per litre:||$5.72||(8.2%)|
|HST @ $0.227 per litre:||$9.08||(13.0%)|
This would allow the consumer to recognize the cost of [carbon] pollution as $5.72 for 40 litres of regular or 8.2% of the total bill.
However, since the cost of gasoline’s carbon emissions is not shown on existing receipts, the purpose of the carbon tax is lost.
Home heating fuel
Home heating oil (or light fuel oil) is a hydrocarbon like gasoline and is subject to the carbon tax.
The emissions intensity of home heating oil is 2.754 kilograms of carbon dioxide per litre.
The carbon tax on home heating oil is $0.1738 per litre.
If someone had a delivery of five hundred litres of heating oil to their home in Halifax during the week ending on 3 October 2023, the cost per litre would have been $1.867. If the bill had included the carbon tax, they would have seen (the 5% federal portion of the HST is applied to the product cost and the carbon tax):
|Product cost @ $1.604 per litre:||$802.00||(85.9%)|
|Carbon tax @ $0.174 per litre:||$86.90||(9.3%)|
|HST (5% Federal) @ $0.089 per litre:||$44.45||(4.8%)|
The customer would recognize that [carbon] pollution has a cost, in this case $86.90 for five hundred litres of home heating fuel.
Without listing the cost of the carbon tax, the purpose of the tax is lost.
Nova Scotians are paying the carbon tax on the electricity they use.
Nova Scotia Power’s electricity bills, like receipts for the purchase of gasoline, do not list the carbon tax.
However, unlike gasoline or heating oil with known emissions intensities, the carbon tax on a kilowatt-hour of electricity depends on the mix of energy sources used by the electricity provider.
The sources can vary because of energy availability, energy prices, and the weather.
For example, if one month is particularly windy, an electricity supplier could use less natural gas and as a result produce fewer emissions. However, if the winds decline in the following month and the supplier meets demand with more natural gas, emissions will increase.
Calculating the carbon tax is more complex than simply using the electricity supplier’s total emissions for the year.
Instead, each type of energy used by Canada’s electricity providers, like Nova Scotia Power, has an annual emissions limit specified as part of the regulations in Canada’s Output-Based Pricing System or OBPS.
Consequently, electricity providers must estimate their emissions and production to obtain a cost for the carbon tax. For example, at the start of each year, SaskPower estimates its total emissions and production for the year for its customers in Saskatchewan. The difference between the actual emissions and the estimation is then factored into the next year’s estimation.
In the first six months of 2023, Nova Scotia Power produced 5,784 GWh from a variety of sources (shown in the following figure). Although the emissions for this period are not available, Nova Scotia Power’s second quarter Management’s Discussion & Analysis report estimates the cost of the OBPS to be about $25 million.
This means the carbon tax on electricity is about $0.0043 (less than half-a-cent) per kilowatt-hour.
Nova Scotia Power’s energy mix for the first six months of 2023
The cost of the estimated emissions is calculated and, in Nova Scotia Power’s case, included in the electricity bill’s energy charges.
If the estimated carbon tax was removed from the energy charges of $0.16254 per kilowatt-hour, the cost per kilowatt-hour would be $0.15924 and the estimated carbon tax would be listed as $0.0043. If the electricity bill showed this, a customer using 500 kilowatt-hours would see:
|Energy 500 kWh x $0.15924||$79.62||(97.4%)|
|Carbon tax 500 kWh x $0.0043||$2.15||(2.6%)|
By showing the carbon price, customers would recognize that the carbon tax, albeit estimated, on 500 kilowatt-hours of electricity amounts to about 2.6% of the total bill.
However, since the cost of the carbon emissions for electricity is not shown, the purpose of the carbon tax is lost.
It is important to note that at the end of year, Nova Scotia Power will use its actual emissions and production to determine the total carbon price and per-kilowatt-hour carbon tax using the OBPS.
The Fuel Adjustment Mechanism will then be used to either lower electricity costs in the following year (if emissions were lower than estimated) or increase the costs (if emissions were higher).
Given the growth of renewables in Nova Scotia Power’s energy mix due to the eastern part of the Atlantic Loop, the impact of the carbon tax should decline over the year.
Why the tax should be shown
The federal government wants Canadians to recognize that carbon emissions have a cost and account for the costs in their daily decisions.
But as we have seen, the carbon tax is hidden in the production cost of energy. This makes it difficult to determine if price increases are due to the carbon tax or to the cost of energy.
By displaying the carbon tax on energy bills and receipts, individuals and families could, for example, understand the purpose of the quarterly Climate Action Incentive payment.
If the federal government wants Canadians to recognize that carbon pollution has a price, they should put regulations in place requiring industry to show the carbon tax.
However, there are no such regulations.
Consequently, there is no reason for companies to show the carbon tax.
Would listing the carbon tax on energy bills and receipts change people’s opinions about the tax?
We will never know unless we try it.
Larry Hughes is a professor in the Department of Electrical and Computer Engineering at Dalhousie University.