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Mark Carney’s first act as Prime Minister was to axe the consumer carbon tax, as cost of living concerns continue to remain front and centre for Canadians.
Since the RBC Climate Action Institute launched our annual report Climate Action 2025: a year for rewiring in January, we’ve been asked repeatedly: “How will axing the carbon tax affect the building sector?”
A fair question, as half of homes in Canada are heated using natural gas or home heating oil. The burning of these fuels accounts for 75 to 80% of building emissions. Ergo, the biggest opportunity to reduce these operating emissions is to electrify home heating.
The consumer carbon tax, until last Friday, applied to fossil fuels used to heat buildings. But even after factoring in the carbon tax, the cost of natural gas is about two times cheaper than electricity. The economics are still heavily tilted in favour of using natural gas for home heating at this stage of the energy transition.
Provincial and federal governments, aware of the unfavourable economics, have intervened by providing consumers with incentives to move away from fossil fuel powered furnaces. As we found in our analysis of the building sector, consumer adoption of heat pumps and their knock-on effects on capital mobilization and emissions are driving decarbonization efforts in the sector. All to say, axing the tax won’t slow down building decarbonization in the short-term, if other government policies, and spending by consumers and businesses stay the course.
Read our building sectoral analysis in Climate Action 2025: A year for rewiring for a deeper dive on the policies, people, and trends that helped move the dial on building decarbonization.
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