Putting a tax on gas is sensitive political territory in Canada -- remember Joe Clark's 18-cents-a-gallon gas tax that helped bring down his minority government in 1979? Politicians eschew this environmental and economic public policy imperative despite signs that Canadians are miles ahead of them on the issue.
A quarter century ago, when the Clark government fell, Canadians had never heard of global warming. Today, public anxiety has meant that a majority of Canadians are now receptive to pollution taxes, including a tax on fossil fuel. By reversing their aversion to an environmental gas tax, our political leaders will not only usher in substantial environmental benefits, they'll send a powerful message to consumers and the auto industry by fixing the disconnect between today's vehicle purchases and tomorrow's uncertain gas prices.
Consumers are often caught in an awkward position by fluctuating gas prices. When gas prices go up, fuel-efficient vehicle sales go up. But even after four or five years of escalating fuel prices, a brief drop in prices, such as Canada experienced last fall, sends many buyers out into the larger vehicle market.
These purchases have long-term implications for both the environment and consumers. Many vehicles remain in operation for more than 15 years. Over the next decade and a half, fuel prices are going to go higher, taking a bigger bite out of the pocketbook of drivers who find themselves in larger vehicles. And these large vehicles also drive up greenhouse gas emissions, leaving our environmental record trailing much of the developed world.
Higher gas prices will immediately influence the biggest group of drivers -- the 19 million who drive older vehicles. (Ottawa's new "feebate" scheme to reward people who purchase more fuel-efficient cars does not affect those who already own one.) With a gas tax, owners of older vehicles will drive less and better maintain their cars.
Germany, with an economy closely tied to vehicle manufacturing, already is using increased gas taxes to lower greenhouse gas emissions. Starting in 1999, it increased the gas tax by three cents a year for the next five years. Significantly, during the same half-decade, greenhouse gas emissions in Germany's transportation sector declined by 9 per cent. In Canada, greenhouse gas emissions in the transportation sector increased 4 per cent over the same period.
If the government announces a phased-in and sustained gas price hike, market demand will prompt manufacturers to use more of the fuel-efficient engines now found only in Europe and Asia. North American vehicle manufacturers actually sell very fuel-efficient fleets to Europeans who want efficient cars that will soften the blow of high gas taxes that push the price of fuel to over $1.50 per litre.
At the hint of a gas tax, Canadian buyers will scramble for more fuel-efficient vehicles too.
But, as we have seen with the government's poorly designed vehicle feebate, (which amounts to an inordinately high $5,600 per tonne of greenhouse gas emissions reduced,) the devil is in the details.
In implementing an environmental gas tax careful consideration must be given to three key issues: how fast it should be implemented; how much it should be; and where should the revenue go.
The tax should be phased-in gradually, with considerable lead-time to give both manufacturers and consumers ample opportunity to plan and adjust. And, based on observations of behaviour in other jurisdictions, as well as during times of gasoline price hikes, it will take a minimum increase of 15 cents per litre to send the right price signal to drivers.
There are plenty of intelligent ways to use the money generated. Germany utilized the revenue to reduce the level of employer payroll contributions and thereby promote employment growth. In Canada, we could recycle the money to public transit, or to those business sectors that suffer a disproportionate impact by the tax, perhaps in exchange for capital investment in energy efficiency.
Regardless of how you feel about cars, you have to recognize that the auto industry plays an important part in our economy and that vehicles cannot be replaced with something better overnight. If you really want to "green up" the automotive sector, then one of the best policies is higher gas prices. All consumers understand that message.
David Suzuki is a scientist, broadcaster and founder
of the David Suzuki Foundation. Analyst Dennis DesRosiers is founder and president of DesRosiers Automotive Consultants.
