Here's how Alberta's carbon tax increase will affect you in 2018

Alberta's carbon tax is going up by 50 per cent in the new year, an increase some economists say sounds bigger than it will feel.

At the beginning of 2017, Alberta's NDP government implemented a $20 per tonne tax on carbon dioxide emissions from burning fossil fuels used for transportation and heating. On Jan. 1, that tax will rise to $30 a tonne.

The carbon tax on gasoline will increase from 4.49 cents per litre to 6.73 cents per litre. On a litre of diesel, the tax will increase from 5.35 cents to 8.03 cents.

On natural gas, the most common home heating fuel in Alberta, the tax will increase by about 50 cents per gigajoule (GJ). On propane it will increase from 3.08 cents per litre to 4.62.

The tax doesn't apply to electricity, and farm fuels are exempt. But the tax is in effect on other fuels, everything from jet fuel and kerosene to locomotive diesel and the coal that some rural Albertans use to heat their homes.

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Because the 2018 increase is half of what Albertans faced when the tax was introduced last year, it might not be obvious — especially when it comes to the extra couple of cents per litre to fill up vehicles, said University of Calgary economist Trevor Tombe.

"That's difficult to notice," Tombe said. "A daily swing in gasoline prices is often much more than that. Two cents per litre is not a dramatic change in the price of gasoline."

The increased tax on natural gas might be more obvious to a homeowner, Tombe said. An added 50 cents per GJ of natural gas adds up to five dollars per month for the average household that uses 10 GJ.

Indirect costs associated with the tax will appear in the form of higher prices for other goods and services, though imported commodities are not affected. Indirect costs will be up to $105 per household in 2018, the government estimates.

Wondering how the increase will affect your household? Try our carbon tax calculator below.

It stings. That's the point, economist says

Andrew Leach, an associate professor of economics at the University of Alberta, said gas prices won't necessarily jump overnight on Dec. 31, since the day-to-day swing in gasoline prices depends on more than just the carbon tax.

The Jan. 1 increase will have a smaller impact than the introductory tax in 2017, but Leach, who helped create the province's climate change plan, said that doesn't mean people won't notice.

And that's the point.

"Part of why you want a carbon price is you want people to notice that more emissions-intensive things are more expensive," he said.

"[You want people] to make those decisions on their own as to how to reduce their own emissions as opposed to having the government decide for them by regulating their vehicle choices or regulating how their houses are built ... which tend to be more expensive ways to see overall emissions reductions."

Offsetting the tax increase is the carbon tax rebate, which is also increasing by 50 per cent on Jan. 1. Rebates provided to lower- and middle-income Albertans are designed to cover the average cost of the carbon tax.

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A lower- or middle-income couple with two children could have received a maximum rebate of $360 in 2017. Next year, that family could receive $540. About one-third of households will receive a rebate larger than their carbon tax costs. Another one-third will will receive one that offsets most of the extra costs, and one-third of Albertans will not qualify for rebates. 

Rebates are paid out once, twice or quarterly, and are automatically deposited into recipients' bank accounts. 

Premier Rachel Notley has said the carbon tax can help diversify industry, reduce pollution and help Alberta win approval for pipelines. She said she will respect the federal mandate to boost the carbon tax to $50 per tonne by 2022.

In its 2017-18 budget, the government said the carbon tax will generate $3.9 billion in revenue by the end of the 2019-20 fiscal year.

More than half of the money will go back into the economy through household rebates and a small-business tax cut, the province said. The rest will be invested in programs designed to reduce emissions and diversify the economy, such as green energy projects and public transit.

The government claims the policy will see Alberta's emissions decline by 50 megatonnes by 2030.

Albertans concerned about costs can do several things to limit their carbon footprint, Leach suggests: carpooling, biking, or taking public transit all offset carbon consumption, as does installing a better thermostat and turning down the temperature in your home.

Still, both economists expect a certain level of grumbling each year the tax goes up.

Visible taxes that people face every day have never been popular, Tombe said. Albertans have been paying GST since 1991 — and no one cheers when that tax shows up on a bill.

"These type of taxes that are visible and salient to households ... may never become popular," he said.

"Whether people accept that they achieve a valid public policy objective is an open question."