WHERE'S THE CARROT?: B. C. has become the first province to adopt a carbon tax, which will add over eight cents a litre to the cost of diesel fuel. The trucking industry, however, will receive little in return for its contribution.
VICTORIA, B. C. –The new B. C. carbon tax is creating a great deal of controversy in this province, especially amongst the trucking industry, which is faced with the greatest cost increase.
Yet, one B. C. trucking company is taking the added cost in stride. The general manager and partner of Coastal Pacific Xpress, considers the new carbon tax to be just another expense.
“This is just business as usual for us,” says Jim Mickey. “We consider the increase (in fuel) a cost of doing business.”
CPX is based in Cloverdale, located just a few kilometres from the Washington border crossing, and is considered to be one of the fastest growing truckload carriers in B. C., with 250 trucks and 700 trailers. While CPX is well established, and adjusts its costs according to provincial, national or international economic fluctuations, the general manager realizes that smaller operators are un- able to manage their business quite so efficiently, since many in the trucking industry deal with fixed-term constrains.
“Those guys pay a price for it,” says Mickey. “We adjust our price monthly, so we pass on any increased cost of business, related to the cost of fuel.”
While the CPX general manager is philosophical about the increased cost created by B. C.’s new carbon tax, he is likewise skeptical about the environmental benefits of the promoted “revenue-neutral” purpose of the tax, which offers individual and corporate tax relief to some industries, but has not been shown to offer substantial environmental benefits, in Mickey’s opinion.
“I personally find it a bit of a stretch, that this is having a positive effect on environmental issues,” he says. “It won’t be environmentally efficient at all. If society wants to improve the environment by collecting money, they should spend it on improving the environment. It strikes me as just moving money from one pocket to another.”
Staffing is already one of the greatest challenges faced by the trucking industry, but the operations manager for Berry & Smith Trucking in Delta, is concerned that this problem could become even greater with a new carbon tax, on top of an existing fuel tax. As a result, Tim McGee believes that drivers who suffer from monthly payments for their rigs, of approximately $2,000, and fuel expenses that range between $500 and $3,000, depending on how far they travel, may seek a higher fuel subsidy from their fleet managers.
“It causes them to look elsewhere, even outside the industry,” says Tim McGee. “It’s a vicious circle.”
Competition of another nature is a concern for a smaller Prince George trucking operation. Brett Gundersen is competing with Alberta trucking companies, which don’t have to contend with either a provincial sales tax or the new B. C. carbon tax on fuel, unless forced to fill-up on the return trip.
“It’s put us at a real disadvantage,” says Gundersen, who travels between Alberta and B. C., and estimates that he burns between 14,000 to 16,000 litres of fuel a month, delivering propane, mainly in the north, where the terrain is anything but flat -another drain on fuel. Even with a monthly price adjustment, Gunderson is always up against steep competition, mainly from the other side of the provincial line.
“It’s pretty tough,” he says, adding that he fears the new carbon tax may impede provincial investment, which would consequently hinder Gunderson’s business.
A Vancouver sustainability organization has been working with the trucking industry, promoting various cost-effective technologies to reduce fuel use and emissions. As a result, Green Fleets B. C., a program of the Fraser Basin Council, has become intimate with the complexities of the freight hauling business, including the financial constraints of a new fuel tax.
“Certainly, there is a concern for smaller operations,” says Jim Vanderwal, who has a particular issue with fleets that are restricted to fixed rates, such as those working in the economically volatile forestry industry. “That puts them in a difficult position,” he adds.
While sympathetic to the challenges faced by the trucking industry, Vanderwal believes the industry needs more capital investment for new fuel saving technologies, and “to be supported in these efforts.”
Barring that plan, Vanderwal can only encourage the trucking industry to take advantage of some of the low-cost measures that can save fuel costs, such as limiting speeds to 105 km/h, training drivers and reducing idling times.
The B. C. Trucking Association (BCTA) estimates the new carbon tax will be an onerous cost to the trucking industry, totaling $1,000 per long-haul truck this year, about $3,000 in 2009 and $6,000 in 2012. The total cost to the industry will be in the tens of millions of dollars this year, potentially rising to hundreds of millions over the next five years, according to the president of the BCTA, Paul Landry.
“Carbon taxes may have a role to play in encouraging the reduction of greenhouse gases in some sectors and amongst consumers, but the trucking industry has no choice but to rely on diesel fuel to keep the economy moving,” he says.
Landry emphasizes that not only does the trucking industry rely on diesel fuel, the province also relies on the trucking industry for the transportation of food, merchandise, parts and equipment each day.
“When you consider it, trucking is the lifeblood of B. C. Without trucking, the economy and our way of life would literally stop.”
Adding a carbon tax to diesel fuel won’t do much to change the industry’s behaviour, he adds, but it will certainly raise the cost of transportation, a cost that will be passed on to the consumer, as the general manager for CPX asserts – but not in all cases.
“Our members have clearly told us that a tax like this won’t be easy to pass on,” says the BCTA president. “Some of them are bound by contracts. Other trucking companies are price takers because some of the industries we serve, such as forestry, are under extreme pressure.”
B. C.’s carbon tax will be far from neutral for the trucking industry adds Landry, which he says is plagued by slim operating margins. The carbon tax may also impede
B. C.’s competitiveness, as Gundersen predicts, considering that diesel fuel taxes in B. C. will now be up to three times higher than in Alberta and almost twice as much as most other provinces, a gap predicted to increase according to the BCTA.
While the BCTA is not opposed to the provincial government investing in environmental programs, he says more could have been done to reduce the trucking industry’s carbon footprint.
One other issue the BCTA is mystified about: Landry can’t understand why the carbon tax on vehicles using gasoline is 2.4 cents per litre, which the BCTA believes causes greater congestion and pollution, while the tax on diesel fuel is 2.76 cents/litre, which will rise to 4.14 cents in 2009, and escalating as high as 8.28 cents by 2012.
“It’s ironic that people who don’t have a choice in using the road, (such as) the trucking industry, end up having to pay more per litre in carbon tax, than those who have other options,” Landry points out.
The B. C. Ministry of Finance has faced a great deal of media criticism since the carbon tax was announced in February, not only from the trucking industry. Finance Minister Carol Taylor has heard a litany of complaints, but she says there is one important feature about the 2008 budget that has been overlooked – especially from truck drivers who have grilled the minister when she appeared on various Vancouver radio talk shows, after the 2008 budget was announced.
“I find it interesting, that they didn’t realize the tax cuts,” says Taylor. “As soon as we talk about that, the whole tone changes.”
With the tax cuts, the finance minister rationalizes the “revenueneutral” designation given to the carbon tax, which is expected to earn approximately $1.8 million over three years.
“None of the money is staying in
government,” she adds. “It is all going to individuals or corporations, with tax cuts.”
Taylor heralds the environmental initiatives included in this year’s budget that relate to the trucking industry and port activities. That initiative includes $30 million to implement emission-reducing practices for short-haul commercial trucks serving B. C. ports, and to fund port “electrification” which allows ships to turn off their engines while in port. An additional $3 million will fund the “green lights transportation program,” which will utilize new technologies to assess commercial vehicles for compliance with trucking regulations while in transit, and potentially reduce the frequency of stoppages and idling.
That same funding will also provide plug-in electrical infrastructure at key B. C. truck stops, which is intended to reduce idling times. In addition, Taylor says the provincial budget offers a PST exemption for certain fuel-saving devices that offer increased aerodynamics for a commercial tractor-trailer unit, such as tractor-trailer gap faring devices, tractor roof farings, trailer side skirts, and aerodynamic bumpers and tail skirts.
Yet, despite the provincial government’s enthusiasm for the carbon tax, individual and corporate tax breaks, and the accompanying environmental initiatives, the opposition has a different take on this year’s budget. The B. C. NDP finance critic says he has heard from people who live in the outer regions of the province, who don’t have the same choices for transportation, or the financial wherewithal to change their lifestyle.
“They don’t like it,” says Bruce Ralston, who like the CPX general manager, questions the environmental incentive of the carbon tax. In particular Ralston can’t understand why large industrial polluters like the oil and gas industry, are getting tax relief at this time, considering that the 2008 budget is being promoted as a climate change plan, which he disagrees with.
“This new carbon tax is not a climate change plan,” says Ralston. “The tax will hit consumers and average families the hardest, as large industrial polluters get a pass and a handout. That’s unfair and even the government admits it will accomplish little in the way of reducing actual emissions.”