A transportation revolution is in the making and bets worth hundreds of billions of dollars are being placed. Who might the winner be? Will it be the Tesla-style electric car, the Toyota-style hybrid or the hydrogen car? Will personal transportation of the Uber ilk, possibly in self-driving form, replace public transportation as we know it? Might the gasoline engine surprise us all and endure for another 20 years, or even a century?
It’s impossible to know, but we do know the game changed more than a little this week when the United Nations published a frightening report that said the planet is warming at a far faster rate than the climate-change scientists had suspected. We’re on course for a 1.5-degree average warming, over preindustrial levels, by 2040, and even that increase might be optimistically low. Wholesale environmental damage – horrendous floods, droughts, starvation, mass migration, biodiversity die-offs and other nightmares – might soon not be the preserve of Hollywood horror flicks.
In the same week, William Nordhaus became the co-winner of the Nobel Prize for economics. He’s a pioneer in the interaction between the environment and the economy, and has argued forever that putting a price on carbon is the most effective way to reduce the output of planet-warming greenhouse gases.
The message: The UN and Mr. Nordhaus are telling us that carbon taxes are the way to go, and should be launched with alacrity. Such taxes can be an efficient way for the users of fossils fuels pay for the “externalities costs” – the damage they impose on the environment and society.
Which brings us to transportation – typically the first- or second-biggest source of greenhouse gas emissions in the developed world (in the United States, transportation was tied with electricity generation, at 28 per cent of total emissions output in 2016, according to the Environmental Protection Agency).
Carbon taxes exist, or are being enacted, in several countries, including Britain, Sweden and Ireland. British Columbia’s 10-year-old carbon tax, now set at $35 a tonne of carbon-dioxide-equivalent emissions, has been hailed as the “standard bearer” for such taxes in the Western world. It is seen as fair, transparent and effective. Between 2007 and 2015, real provincial gross domestic product grew more than 17 per cent while net emissions declined by 4.7 per cent, putting the lie to arguments that carbon taxes are automatic growth and job killers.
Carbon taxes, however, are still relatively rare worldwide or often priced at such a low level that they are next to useless. The federal government wants to launch a pan-Canadian carbon tax. If it ever gets off the ground – a big if given that Doug Ford’s new Ontario government and Manitoba’s want out, and that Alberta could join the exodus – it would be initially priced at $10 a tonne, low enough to barely move the needle.
But given the UN report and publicity generated by Mr. Nordhaus’s Nobel, a big rethink on carbon taxes is probably already under way. Political pressure for their introduction can only increase. The transportation industries are trying to figure out who the winners and losers will be.
What is absolutely certain is that carbon taxes will raise the cost of driving any vehicle that burns fossil fuels, or riding in any vehicle that does. That little reality might clobber the taxi services and Uber because their business model is built on frequent, cheap trips with low profit margins. How long will they last if carbon taxes raise the price of a fare by 20 per cent or more? Carbon taxes are designed to be Pigovian, that is, they are designed to change behaviour that creates undesirable effects. In this case, the Pigovian response is to avoid a form of transportation made too costly by the carbon tax.
But won’t electric cars save the day? Possibly not. First of all, e-cars are still rare because they are highly expensive compared with cars powered by internal combustion engines, have relatively short ranges and are reliant on charging networks that are inadequate in most countries. That’s one big problem. The other is that e-cars would get swept into the carbon tax net if the electricity used to charge their batteries comes from dirty sources, such as coal-powered generating plants.
Those higher costs mean it might make no sense to buy an e-car in, for instance, Kentucky, West Virginia, Wyoming, Ohio, Indiana and Utah, where burning coal supplies 70 per cent or more of electricity. In states with scads of clean energy, such as Washington and Oregon, where hydro power is prevalent, e-cars make a lot of sense. Ditto in Quebec, where almost all the power comes from hydro and other renewable sources, such as wind vanes. But in some regions of North America, e-cars might be even dirtier than cars equipped with the newest gasoline engines.
As carbon taxes are rolled out, the safest bet is public transportation – the most efficient form of transportation of all. Too bad not enough people talk about it. The technology and the investment is gushing like mad into electric cars and their offspring, self-driving cars. Imagine if all that talent, technology and money were put into public transportation – buses, trains, subways – powered by electricity from low- or zero-carbon sources? We’d have a cleaner, more livable cities whose residents wouldn’t get crushed by carbon taxes.
Eric Reguly