Opinion: Carbon Tax Limits Trucking’s Green Choices

By Paul R. Landry
President
British Columbia Trucking Association

This Opinion piece appears in the March 24 print edition of Transport Topics. Click here to subscribe today.

The trucking industry is part of a grand environmental experiment being conducted in British Columbia — the first North American jurisdiction to introduce a carbon tax on all fossil fuels, including diesel, at the retail level. Last year, our provincial government set a greenhouse-gas emission reduction target of 33% by 2020.

With the carbon tax in this year’s budget, they’ve made a stab towards achieving that goal by promoting voluntary reduction in fuel usage. The irony is that this carbon tax actually reduces the choices of British Columbia’s trucking industry by charging us for behavior we can’t avoid — driving trucks — without offering much to help us quit producing smog and greenhouse gas emissions.

The carbon tax will be implemented July 1 at 2.76 Canadian cents per liter and rise to 8.2 Canadian cents per liter by 2012. By then, the tax will cost the trucking industry at least C$270 million per year.

That’s on top of up to 25 Canadian cents per liter that federal, provincial and local authorities already collect in much of British Columbia. [There are approximately 3.8 liters in a gallon.]

This hit makes the diesel tax in British Columbia three times more expensive than in neighboring Alberta and twice as high as any other province in Canada.

The provincial government is touting this new tax as “revenue neutral,” meaning that funds generated will be returned to individuals and businesses in reduced personal, small business and corporate taxes.

In other words, burning fossil fuels will be “punished,” while working and investing will be rewarded. A nifty idea, but sifting through British Columbia’s 2008-09 budget reveals that the trucking industry isn’t getting much for our share of the carbon tax.

Yes, some of the carbon tax collected shows up in the form of reductions in other tax rates. And there will be a sales tax exemption for aerodynamic fittings for trucks and trailers. But the trucking industry will still be a big net tax payer.

While the logic of trying to tax “bad” behavior is understandable, its effect on the trucking industry is counter-productive in a number of ways.

• First, trucking companies rely on diesel fuel to provide their services. Unlike many other carbon emitters, they don’t have an alternative mode of transportation. When was the last time you saw your local grocery store receiving deliveries by bus?

Adding insult to injury, the tax on diesel is also 15% higher than the tax on gasoline. The trucking industry, which has no choice but to use roads, will be taxed more than light-vehicle drivers, many of whom — especially in urban areas — could use public transit and car pooling.

• Second, the trucking industry doesn’t need a tax to know that it should be fuel-efficient. Common and business sense told us that a long time ago, particularly because fuel is our second-highest expense after labor. For most trucking companies, that means 15% to 30% of operating costs.

For individuals who own and operate their own trucks, it could be up to 50%. If they’re already trying to reduce fuel consumption, how does it help to charge them for the fuel they can’t avoid using?

• Third, the provincial government is in danger of losing an important opportunity to encourage the kind of behavior the tax is intended to produce. What the provincial government should have done — and still could do — is to use some of that tax revenue to help the industry adopt new technologies that will further reduce smog emissions, improve fuel efficiency and cut greenhouse gases.

BCTA has encouraged the government to sponsor a provincial EnviroTruck program that would provide grants, rebates or sales tax exemptions for new trucks that meet the U.S. Environmental Protection Agency’s 2007 engine standard. EnviroTruck also would include grants, tax exemptions and guaranteed low-cost — or no-cost — loans to purchase alternative power units, low-rolling-resistance tires and aerodynamic devices.

Ideally, part of the program would be a major industry-oriented communications initiative to provide a “one-stop-shopping” source of validated and credible information about energy-saving technologies and practices that would allow our industry to make smart decisions and avoid “snake oil” solutions.

The U.S. EPA’s SmartWay program, with its focus on actively setting environmental goals for fleets and measuring performance, is worth emulating in British Columbia. Education and support are particularly important because about 85% of the trucking companies here are “Ma and Pa” operations with fewer than five trucks. Money is tight, competition is stiff and they work hard just to stay in business. Keeping up with new technologies is tough. They’re not sure how they can or should be upgrading their trucks and can’t afford to make mistakes.

The British Columbia carbon tax is all stick, no carrot. Overtaxing our industry simply will increase the cost of doing business in the province without providing choices that really will let us cut smog and greenhouse gases and go “green.”

The British Columbia Trucking Association represents about 800 truck and bus fleets and 250 suppliers. BCTA’s headquarters are in Langley, British Columbia, Canada.