By Mark Milke
and Lennie Kaplan
Canadian Energy Centre
Except for a few blessed spots in southern Ontario and southern British Columbia, Canada is a cold northern country.
That means that for six months of the year or more, snow can pile up on streets, highways, your driveway, and condominium and apartment exit ramps.
And if you take a trip beyond urban Canada any time of the year, it sometimes helps to have a sturdy vehicle that manoeuvres well in case of a late or early snowfall.
That might explain, along with work necessities for many Canadians – such as hauling tools and equipment – why four of the five most popular vehicles in Canada are trucks or SUVs. Many people need a vehicle that beats back winter and can haul their kids to hockey and much else.
But owners of the most popular vehicles in Canada will be paying much more in carbon taxes in coming years compared to now. And that will be on top of existing federal, provincial and local gasoline taxes.
The five most popular vehicles in Canada in 2019 (we’re skipping 2020 data since it was the pandemic year) were the: Ford F-150 pickup (145,064 were bought by Canadians that year); Dodge Ram 1500 pickup (96,673); Toyota RAV4 SUV (65,248), Honda Civic sedan (60,139), and Honda CR-V SUV (55,859).
In 2019, almost 433,000 of those five vehicles were sold in Canada.
As with most vehicles, except a few e-versions, those five top sellers and all others need gasoline or diesel. That means Canadians pay federal and provincial gasoline taxes at the pump. In some cities, local taxes are also piled on.
More recently, the federal carbon tax has also been applied at the pumps, at 8.8 cents a litre in all provinces where a provincial carbon tax isn’t in play. (In British Columbia, the rate is slightly higher at 9.96 cents per litre under that province’s carbon tax regime.)
As announced in 2020, the federal carbon tax at the pump will more than quadruple over the next nine years from 8.8 cents per litre to 39.6 cents.
What does that mean for the five most popular vehicles in Canada and their carbon tax cost at the pump?
Here’s the rundown of annual average fuel costs for all five vehicles and the current carbon tax costs compared to what the owner of these vehicles will pay in the future. These are national, annual averages. The carbon tax rise (from 8.8 cents per litre to 39.6 cents) amounts to a 350 per cent increase.
Ford F-150 and Dodge Ram 1500 drivers pay $3,931 in fuel costs annually, with $257 of that due to the carbon tax. When the carbon tax is nearly 40 cents a litre, those drivers will pay $4,832 with $1,158 in carbon taxes. That’s a $901 increase.
The numbers are similar if you drive a Honda CR-V: $2,587 in annual costs now, including $169 in carbon tax. When the carbon tax rises to nearly 40 cents per litre, you’ll pay $3,180 annually or $593 more.
The increase in the carbon tax from 8.8 cents to almost 40 cents per litre will affect the Honda Civic the least, but it will still be substantial. Honda Civic drivers pay $2,453 annually in fuel costs, with $161 in carbon tax. By 2030, gasoline costs will be $3,015, with $723 due to the increased carbon tax. That’s $562 higher.
All this assumes a steady price in base fuel costs. That’s unlikely. As oil companies are pressured to exit the business over the next decade, per barrel costs will likely rise. (Similar demand chasing fewer barrels leads to higher prices.)
Also, while the increase in carbon tax costs might be partly offset by increased government rebates, that’s yet to be determined. Increasing rebates would be counter to the justification offered by governments for carbon taxes: that hiking carbon taxes discourages driving and other carbon-intensive activities.
None of the above includes the effect of the federal government’s Clean Fuel Standard. It will add 15 cents a litre for gasoline, according to calculations from Canadians For Affordable Energy.
Our estimates of higher fuel costs assume a 2021-to-2030 comparison. The rise in carbon taxes could start before then, so annual costs would start to rise sooner. It’s also possible the full 350 per cent increase in carbon taxes at the pump could be enacted earlier than 2030.
Mark Milke and Lennie Kaplan are with the Canadian Energy Centre, an Alberta government corporation funded in part by carbon taxes. They are authors of the report Up to 350 Per cent Higher at the Pump by 2030: The Impact of Higher Carbon Taxes on Gasoline Prices.
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