At the end of June, federal Liberal and Opposition leader, Stephane Dion unveiled his plan for a national carbon tax -the centerpiece of what he calls his party's Green Shift Plan. Dion has clearly pu...
At the end of June, federal Liberal and Opposition leader, Stephane Dion unveiled his plan for a national carbon tax -the centerpiece of what he calls his party’s Green Shift Plan. Dion has clearly put his political career on the line with this one. My assessment: While the devil is always in the details, the last thing the trucking industry needs is more tax on diesel fuel. With diesel fuel prices at record highs and fuel overtaking labour as the number one component of operating cost, the trucking industry does not need further price signals from government to know that improving fuel efficiency and thereby reducing GHG emissions is a good thing.
Reflecting the economic theory that by putting a price on carbon emissions, individuals and businesses will make decisions to reduce polluting activities, the initial price for carbon will be set at $10 per tonne of greenhouse gas emissions and will rise by an additional $10 per tonne each year to $40 per tonne within four years. The carbon tax will apply to home heating oil, jet fuel, kerosene, natural gas, propane, coal and diesel fuel. Gasoline oddly enough would not be subject to a carbon tax supposedly because the current federal excise tax on gasoline of 10 cents per litre is equivalent to $42 per tonne of GHG.
In addition, since diesel and aviation fuel are already taxed at four cents per litre, the carbon tax on these fuels would see no increase in the first year of the plan. In the examples provided in the plan, the federal tax on diesel fuel would rise by an additional seven cents per litre by the fourth year -or 4.9% compared to current prices.
As someone who is trained in and once practiced the dismal science of economics, I appreciate the theoretical underpinning of a carbon tax, of pricing externalities. I could probably even design a carbon tax that the trucking industry would find palatable and that would actually help the industry improve its fuel efficiency, but the Green Shift Plan will simply make freight transportation in Canada more expensive, impairing Canada’s competitiveness and impeding investment in fuel efficiency -all things which Mr. Dion says his plan promotes.
We already have the four cent a litre federal excise tax on diesel fuel, which serves no policy purpose whatsoever, other than to raise cash for the federal government. While last month I argued that this tax should be repealed or at least brought under the GST umbrella, I suppose if Mr. Dion really wants a carbon tax, he could have proposed to make the excise tax a carbon tax, and earmark the revenues generated by it to assisting the industry in its efforts to accelerate the penetration of the new generation of smog-free trucks and fuel efficiency technologies into the marketplace. Taxing diesel fuel is not going to help that process; it will only make it more difficult for carriers.
The Green Shift Plan also professes to be revenue-neutral. It proposes to shift part of the burden of taxation away from income (by modestly lowering personal and corporate income tax rates) and towards pollution. Under the plan a Liberal government would put into law that every dollar that is raised from taxing carbon pollution be returned to Canadians in tax cuts or through increased spending for certain social programs. However, truckers likely have a very different view of what tax revenue-neutrality means compared to what is espoused in Green Shift. There is no tax neutrality for truckers in this plan, which clearly states that at the end of the fourth year “the average freight trucker’s total annual operating expenses (will be increased by) approximately $1,700 per year.”
Moreover, the proposed modest reductions in corporate income tax rates will do little to offset the impact of a carbon tax in a low margin business like trucking. In addition, the plan proposes to accelerate CCA write-offs for “green technologies,” investments that would help the trucking industry to conserve fuel -APUs, aerodynamic fairings, wide-base single tires, and the other components of an enviroTruck -are not currently eligible for faster CCA treatment. The tax system is geared to providing incentives to other industries, like manufacturing.
The Green Shift Plan is silent on how or if it intends to collect the carbon tax from US carriers. It is possible that US trucks will be exempt which will exacerbate the tough competitive position that Canadian truckers are already in, given the high dollar and shrinking trade surplus. On any given day, about 30% of the transport trucks on Canada’s major trade routes are from the US; a carbon tax that applies only to Canadian trucks would have a profound impact on our industry’s competitiveness and would do nothing for the environment. On the other hand, CTA’s enviroTruck initiative – which is all about getting those vehicles and other technologies into the marketplace more quickly -could have a profound impact on lowering smog and GHG emissions now. •
-David Bradley is president of the Ontario Trucking Association and CEO of the Canadian Trucking Alliance.