Carbon Crunch

You think there’s already too much tax built into the price of fuel? Well, truckers — those of you in B.C., anyway — you ain’t seen nothin’ yet.

It’s not unusual for a little under-the-breath muttering when a government budget is released — especially if the budget calls for new tax measures.

When B.C.’s Finance Minister released the 2008-2009 provincial budget this year, however, some mutterings became a bit more audible and still show no signs of quieting down.

The province has become the first jurisdiction in North America to introduce a carbon tax directed at consumers. It will apply to pretty much all fossil fuels, including gasoline, natural gas, coal, propane, home heating fuel, and of course — diesel. If the budget passes, beginning this year, gasoline will increase by 2.5 cents per liter and diesel by 2.7 cents per liter this year. After the five-year phase-in period in 2012, the prices will be 7.3 cents more per liter and 8.3 cents per liter, respectively.

Designed to encourage consumers to make more environmentally friendly buying decisions, B.C.’s carbon tax is being billed as revenue-neutral and will supposedly be given back to citizens in the form of tax cuts.

« We were able to put $1 billion towards environmental initiatives and we didn’t need to take money to fund those initiatives, » said Carole Taylor, B.C.’s Finance Minister. « The money will be in the peoples’ hands and if they decide to make small changes they can keep some money in their pockets. »

Initially, both the provincial corporate and small business tax will be reduced by one percent, while personal income tax will be reduced by two percent. Further reductions in all three taxes are planned for the future and will depend on how much money is collected from the tax.

The $1.85-billion carbon tax plan may be revenue neutral for taxpayers overall, but trucking is sure to be a net loser, says B.C. Trucking Association (BCTA) CEO Paul Landry, who wasted no time voicing his displeasure.

« 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 since fuel is our second highest expense after labor. »

While the average citizen can choose to drive less by taking public transit or carpooling, trucks have no choice but to travel the miles they do. That, says Landry, puts truckers at a severe disadvantage.

« Yes, some of that will be returned in the form of reductions in other tax rates … but the trucking industry will still be a big net taxpayer in this ‘revenue-neutral’ endeavor, » says Landry, who estimates the cost to the industry will be $1,000 per truck today and $6,000 in 2012.

The tax will be implemented at the point of supply so rail companies and carriers who operate bulk tanks will not have an advantage over truckers who fill up at retail pumps.

Not everyone is going full throttle on the offensive, however. « I don’t see this as an issue; it’s an increase in the cost of doing business that I’ll pass on to the customer, » said Jim Mickey, co-owner of Coastal Pacific Xpress. « I think other guys and their comments are just being alarmists. I’m treating it the same as if Saudi Arabia raised the price of their oil, it’s just a cost of doing business. »

The Surrey, B.C.-based carrier is not worried about staying competitive in the market either.

« If it truly is revenue-neutral it’s really not an issue, » added Mickey. « I’ll collect more when I charge a customer and you’ll pay more when you go buy some bananas. »

Obviously, Mickey is one fleet owner who’s confident the tax isn’t going to stick his company out on an island, competitively. But according to Landry, many other truckers aren’t so sure. « Our members have clearly told us that a tax like this won’t be easy to pass on. Some of them are bound by contracts. Other companies are price takers because some industries we serve, such as forestry, are under extreme pressure. »

And what about the rest of Canada? Truckers who think that the carbon tax is just a typical, tree-hugging Left Coast scheme shouldn’t get too comfortable. No other premier will admit it yet, but once they see all that extra revenue rolling in — at a time when environmental pressures intensify — well, carbon taxes just might be too hard to ignore elsewhere.

Time For Change:

As truckers attempt even harder to pass costs up the ladder, the one bright spot is that the carbon tax might actually bring the true cost of trucking to the public’s attention, guesses the Western Transportation Advisory Council’s (WESTAC) President Ruth Sol.

« Maybe it’s something the public will be ready for and accept the fact they’ll have to pay for these offsets, » says Sol. « If the government is prepared to give money back, maybe we’ll pay a higher premium for products. »

But the increase in fuel costs carries the risk of diverting more freight to competing modes, admits Sol.

« There are not a lot of items that could move to rail now, but it may move to water, » added Sol. « Instead of cramming more onto our highways, freight could move off roads and onto water — short-sea shipping, maybe that’s where it will go. Many companies today operate as transportation companies and not just trucking companies; they realize the interconnectedness of the modes. »

Despite the ongoing criticism, the Finance Minister insists the government kept trucking in mind when drafting the plan. « We really thought a lot about it and the trucking industry, » explained Taylor. « We realize a bigger problem is all the time they spend idling, so when you move into our climate-change initiatives, many are geared towards trucking. It’s important to save truckers fuel and their time. »

The province is investing money in green ports, providing tax exemptions for aerodynamic devices, providing other funding for smog-reducing technology on older trucks, electrifying major truck stops so truckers can plug into a power source instead of idling, and finally, the Gateway Strategy is designed to improve traffic flow along the province’s highway network.

Even though the carbon tax could put the price of fuel in B.C. at nearly three times what it will cost in neighboring provinces, Taylor is confident the new measure will not make B.C. uncompetitive.

« We hope by giving tax breaks it will help the economy grow and bring people here, » added Taylor.

There may be benefits for the average citizen, admits Landry. But for truckers who already voluntarily invest in fuel saving technologies, the tax plan provides very little return. « What’s missing in this budget for the trucking industry is the balance. We see the stick, but where’s the carrot? »