The carbon tax is a policy designed to reduce greenhouse gas emissions by putting a price on carbon-based fuels. In Alberta, this tax impacts both electricity and natural gas rates, which means homeowners and businesses see its effects on their monthly utility bills. But how exactly does the carbon tax work, and what can you do to manage your costs? Let’s break it down.
What is the Carbon Tax?
The carbon tax is part of the federal government’s climate plan and applies to fuels that emit carbon dioxide when burned, including natural gas, gasoline, and diesel. The tax is intended to encourage individuals and businesses to use energy more efficiently and reduce their carbon footprint.
How the Carbon Tax Affects Your Utility Bills
1. Higher Natural Gas Costs
The carbon tax directly increases the cost of natural gas because it is a fuel that produces emissions when used for home heating, cooking, and hot water. This means your natural gas bill will include a carbon levy based on your consumption.
2. Indirect Impact on Electricity Prices
While electricity itself is not taxed, Alberta still relies on natural gas-fired power plants, which means generation costs can rise when fuel prices increase due to the carbon tax. This can lead to higher electricity prices for both fixed and variable rate customers. Check our electricity rates to compare your options.
3. Increased Costs for Businesses
Commercial operations that depend on high energy usage—such as restaurants, manufacturing facilities, and office buildings—see a greater impact. If your business relies on natural gas or electricity-intensive operations, the carbon tax can significantly increase operational expenses.
Understanding the Rate of Last Resort (ROLR) and the RRO
As of January 1, 2025, Alberta’s Regulated Rate Option (RRO) for electricity is now called the Rate of Last Resort (ROLR). While the name has changed, many Albertans are still familiar with the term RRO, so you may continue to see it used interchangeably. For natural gas customers, the default regulated rate is still called the RRO. If you’re currently on a default rate, switching to a fixed-rate plan can help protect you from increasing costs caused by market fluctuations and carbon tax adjustments.
How Much is the Carbon Tax in Alberta?
The federal carbon tax increases annually. As of 2024, the tax rate is $80 per tonne of CO₂ emissions, which adds approximately $0.157 per cubic meter of natural gas. This rate is set to rise to $170 per tonne by 2030, meaning Albertans should expect further increases in energy costs.
How to Reduce the Impact of the Carbon Tax
While the carbon tax is here to stay, there are ways to lower your utility bills and reduce your carbon footprint:
✔ Switch to a Fixed-Rate Plan: Locking in your natural gas and electricity rates can protect you from rising costs.
✔ Improve Home Energy Efficiency: Seal drafts, upgrade insulation, and install smart thermostats to reduce natural gas consumption.
✔ Use Energy-Efficient Appliances: ENERGY STAR-rated appliances use less power and gas, reducing your overall carbon tax impact.
✔ Take Advantage of Government Rebates: Check for Alberta or federal energy efficiency incentives that help offset costs for home and business upgrades.
✔ Monitor Your Usage: Review your monthly utility rates and adjust consumption habits where possible.
Final Thoughts
The carbon tax is a growing part of Alberta’s energy landscape, and its impact on electricity and natural gas rates will continue to increase. However, by choosing cost-effective energy plans, making energy-efficient upgrades, and staying informed, you can minimize the impact on your household or business.
At Peace Power, we help Albertans save on electricity and natural gas with competitive pricing and transparent billing. Ready to take control of your energy costs? Get a live quote today!