TORONTO, Ont. — Federal carbon taxes were tacked onto fuel prices in four provinces April 1 – and they came with the threat of a $2,000 fine for affected carriers who failed to register with the Canada Revenue Agency.
As the prices roll forward, however, many questions remain about the reporting structure, an underlying rebate program, and even whether the tax will apply to reefer fuel.
“It’s an absolute nightmare,” said Terry Shaw, executive director of the Manitoba Trucking Association. “How do we utilize that carbon tax so we can actually become more efficient as opposed to it being a revenue distribution scheme?”
The federal tax is now applied in Manitoba, Saskatchewan, Ontario and New Brunswick, all of which have failed to meet federal benchmarks for carbon pricing. Other provinces have introduced programs of their own, while Nunavut and Yukon have opted for the federal pricing mechanism that takes effect July 1.
Ontario estimates the carbon tax will increase diesel prices in its jurisdiction by 5.37 cents per liter this year and 13.41 cents by 2022.
During a recent briefing at Challenger Motor Freight, Ontario Premier Doug Ford said the carbon tax will add $750 million to the price of his province’s longhaul trucking operations between 2019 and 2022. A tractor-trailer consuming 88,000 liters of fuel per year could see $3,500 in extra fuel costs in 2019, and as much as $11,200 by 2022.
The provinces that have had the tax forced upon them are mounting a legal challenge against the related Greenhouse Gas Pollution Pricing Act, arguing it’s unconstitutional. In a clear sign that the carbon tax will be an election issue, the Conservative party was texting the jurisdictions’ cell phones in the days leading up to the tax.
“A carbon tax will make no difference to the environment,” said Ford, a Conservative premier. “A carbon tax will also chase jobs out of Ontario – manufacturing jobs, small business jobs, and trucking jobs.”
Ontario faces the federally imposed tax because the Ford government followed up on an election promise to scrap a pre-existing cap and trade system.
with the carbon tax
Motor carriers were left to register with the CRA and must now submit related quarterly reports about their fuel use.
“Generally, a road carrier is required to register if it has business activities that are interjurisdictional, for fuel that is gasoline, light fuel oil, marketable natural gas, or propane,” the Canada Revenue Agency (CRA) says on its website. “A road carrier that delivers goods only within the boundaries of a proposed listed province will not have to register.”
“They’ve created this amazingly complex IFTA-esque system,” Shaw said, referring to the established International Fuel Tax Agreement.
While IFTA applies everywhere, the carbon tax leaves “black holes” between the four provinces and neighboring jurisdictions. “This provides an opportunity for creative folks,” he said, referring to one challenge that emerges. A carrier could purchase diesel in a province with the federal carbon tax, and collect a related rebate, but run most of their kilometers in a jurisdiction with a provincial program.
To compound matters, the carbon tax is hidden at fuel pumps. It’s charged to distributors, Shaw said, adding that passing along fuel surcharges can be challenging enough when taxes are transparent and universal.
He isn’t a fan of the related reporting structure, either, noting that the new paperwork is “awash in red tape” and requires individual schedules to be completed for each province. Neither is there an answer on how rules will be enforced on American carriers that cross back and forth into provinces with the federal pricing.
Some New Brunswick carriers have already taken “the lead” by posting notices about fuel surcharges to cover the added costs, said Jean-Marc Picard, executive director of the Atlantic Provinces Trucking Association (APTA).
But others operations continue to call the association with questions about how it will all work, as the Canada Revenue Agency continues to schedule webinars on how the tax will be administered. “There were some last week. They were totally booked,” Picard said, referring to the webinars. “Some have the resources to get all the information, others may not … It’s certainly creating a lot of anxiety in the industry.”
Ontario Trucking Association president Stephen Laskowski, who stood behind Ford during the event at Challenger Motor Freight, said the rising fuel costs will be a “major point of discussion” between carriers and their customers.
“You can be for jobs, or you can be for a carbon tax, but you can’t be for both,” Ford said. “The risk of a carbon tax recession is real. Just think about it for a second. Every single time a trucker fills up a tank, the carbon tax will take a bite out of their employer’s pockets. That’s money that could be used to hire new workers or upgrade your fleets, or it’s a cost that will be passed on to the customers through higher prices on the shelf because that’s what a carbon tax does.”
The federal government has promoted the tax as a tool to encourage environmentally friendly practices. “The effects of climate change are everywhere, and they are a constant reminder of the need to act now,” Prime Minister Justin Trudeau said when details of the tax were unveiled. “While climate change is the biggest challenge of this generation, it also provides the opportunity to do better while growing the economy.”
The federal benchmark for carbon pricing begins at a minimum of $10 per tonne and rises $10 each year until reaching $50 per tonne in 2022. One federal estimate suggests the pricing would slash greenhouse gas emissions by up to 60 million tonnes by 2020 – 8.3% of the emissions recorded in 2015.
Ontario Environment, Conservation and Parks Minister Rod Phillips referred to Challenger as an example of fleets that have been reducing emissions without a tax-related penalty. “They’ve improved fuel economy, reduced harmful emissions, and are doing their part to work toward a clean environment,” he said, citing the use of automated transmissions, auxiliary power units to combat idling, and targeted driver training.
Shaw agrees that trucking industry needs to take steps to reduce its carbon footprint. But what if a household simply uses their federal carbon tax rebate to buy a new TV, he asked. That will still need to be delivered by a truck.
- An original version of this article has been updated to include comments from the Atlantic Provinces Trucking Association.
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