Household Energy Costs

Household Energy Costs Laser Talk

Question: How will the Energy Innovation and Carbon Dividend Act affect household energy costs?

Answer:  The carbon fee revenue from fossil fuel corporations will be recycled to American families in such a way that around 61 percent of households and 68 percent of individuals will get back more money in carbon cash back payments than they pay in increased energy costs.

Many people are surprised to learn that more than half of their fossil carbon costs are hidden in purchases like food, clothing, and other products. Nonetheless, families pay more attention to direct energy costs like gasoline and utility bills. With a steadily rising carbon fee, these costs will go up depending on how much fossil carbon is in the fuel, or how much was burned in its production.

Based on government data, [1,2,3] we calculate that a first-year carbon fee of $15 per metric ton of CO2 equivalent will:

  • Raise gasoline by 16¢ per gallon
  • Raise natural gas by 9¢ per therm
  • Raise heating oil by 18¢ per gallon, and
  • Raise electricity by 0.6¢ to 1.4¢ per kilowatt-hour, depending on whether it’s generated by natural gas or coal. Electricity from renewables or nuclear plants will not increase. [4]

The carbon cash back payment is the key to offsetting these cost increases. As reported in the 2020 Household Impact Study, [5] 61 percent of American families will either break even or come out ahead, and a 2017 Treasury Department study of a similar approach [6] reported 70 percent of families come out ahead. It all depends on what kind of energy you use, and how much. [7] Anyone who wants an estimate of how their finances will shake out can find out with our online Personal Carbon Dividend Calculator.

In a Nutshell: The Energy Innovation and Carbon Dividend Act will recycle carbon fee revenue to American consumers in such a way that more than two-thirds will actually get carbon cash back payments that are bigger than their increased energy costs.

Related: Low-Income Households, Household Impact Study.

  1. “Emissions Factors for Greenhouse Gas Inventories.” U.S. Environmental Protection Agency. 4 April 2014.
  2. Bradbury, J., Z. Clement, and A. Down. “Greenhouse Gas Emissions and Fuel Use Within the Natural Gas Supply Chain: Sankey Diagram Methodology.” Jul 2015.
  3. Greenhouse Gases, Regulated Emissions, and Energy Use in Transportation (GREET).
  4. Gasoline is regular 87 octane with 10% corn ethanol. For natural gas, 1 therm = 100,000 Btu. For electricity, 1 kWh = 1 kilowatt-hour. Power plant efficiency = 34.0% for coal, 44.6% for natural gas (NGCC). Pass-through of fee to consumers = 95%.
  5. Ummel, K. “Household Impact Study II (HIS2): The impact of a carbon fee and dividend policy on the finances of U.S. households.” Working Paper v1.1 (Aug 2020).
  6. Horowitz, J., et al. “Methodology for Analyzing a Carbon Tax.” Office of Tax Analysis Working Paper 115 (Jan 2017).
  7. “Financial Impact on Households of Carbon Fee and Dividend.” Citizens’ Climate Lobby (Aug 2020).

This page was last updated on 05/01/21 at 17:40 CDT.