Government policies may soon plunge millions of Canadians into ‘energy poverty’

The term “energy poverty” is not yet part of day-to-day political debate in Canada, but that’s likely to change in the next few years. In Europe, the high and rising cost of energy has become a political lightning rod in several countries including Britain and France. Something similar may be in store for Canada.

The Trudeau government and some of the provinces are aggressively pursuing the holy grail of decarbonization. To achieve this, they’re engineering dramatic increases in carbon and other taxes on fossil fuels and promising to pour vast sums of money into building new electricity generation and transmission infrastructure to help reduce reliance on oil, refined petroleum products, natural gas and coal. Both strategies point to higher energy costs.

The Trudeau government has legislated a national minimum carbon tax set to reach $170 per tonne of emissions by 2030, up from $50 in 2022 and $65 currently. Ottawa has also imposed a “clean fuel standard” that will further raise the cost of fuels. These policies are driven by concerns over climate change, which is a risk, to be sure, but so is the prospect of rapidly escalating energy prices for Canadian households and businesses.

Energy poverty arises when households and families must devote a significant fraction of their after-tax income to cover the cost of energy used for transportation, home heating and cooking, and the provision of electricity. In 2022, the United Kingdom government estimated that 13.4 per cent of households were in energy poverty, which it defined as needing to spend more than 10 per cent of income to cover the cost of directly consumed energy.

There’s no single agreed methodology for assessing the prevalence of energy poverty. A recent Canadian study reports that in 2017, between 6 per cent and 19 per cent of Canadian households experienced some form of energy poverty, with an above-average incidence in rural areas, Atlantic Canada and among people living in older single-family homes. If accurate, this finding suggests that many more Canadians will soon become acquainted with the term as taxes on fossil fuels climb and governments impose new regulations affecting the energy efficiency of buildings, vehicles, industrial equipment, appliances and agricultural operations.

Canada is blessed with plentiful and diverse supplies of energy. Over time, we have become an important global producer and exporter of energy, with oil, natural gas and electricity together expected to account for one-quarter of Canada’s merchandise exports in 2023. Canada is also an intensive consumer of energy, in part because of our cold climate, dispersed population and relatively high living standards.

End-use energy demand in Canada is around 13,000 petajoules. Of this, industry is responsible for about half, followed by transportation, residential buildings, commercial buildings and agriculture. Refined petroleum products—all based on oil—are the largest fuel type consumed in Canada (around 40 per cent of the total), followed by natural gas (36 per cent) and electricity (16 per cent). Biofuels and other smaller sources comprise the rest. These data underscore Canadians’ overwhelming dependence on fossil fuels to meet their energy needs.

Politicians in a hurry to slash greenhouse gas emissions via higher taxes and more regulations must be alert to the risk that millions of Canadians could find themselves in energy poverty by the end of the decade.