Household Energy Costs Laser Talk

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

Answer:  The revenue will be returned to American families in such a way that around 60 percent will get back more money in carbon dividends 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 19¢ per gallon, and
  • Raise electricity by 0.7¢ to 1.5¢ 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 dividend is the key to offsetting these cost increases. As reported in the Household Impact Study, 58 percent of Americans will either break even or come out ahead, and a 2017 Treasury Department study of a similar approach [5] reported 70 percent of families come out ahead. It all depends on what kind of energy you use, and how much. [6]

  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).
  5. Horowitz, J., et al. “Methodology for Analyzing a Carbon Tax.” Office of Tax Analysis Working Paper 115 (Jan 2017).
  6. “Financial Impact on Households of Carbon Fee and Dividend.” Citizens’ Climate Lobby (Feb 2016).

This page was last updated on 01/02/19 at 21:50 CST.

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