Tuesday, January 16, 2007

Hybrid cars and the GST: taking the giant step
How can Canada reduce emissions from transportation vehicles? These emissions account for twenty-five percent of the country’s greenhouse gases (GHGs), most of the carbon monoxide, and big proportions of volatile organic compounds and nitrogen oxides. The latter, combined with warm air and sunlight, are a big source of smog.

The answer is actually very simple: we have to use less gasoline and diesel to move us around. One of the most important ways of doing this, without giving up cars, is by buying and driving more hybrid electric vehicles.

Some governments both recognize this and are prepared to do something about it. Ontario is one. The province offers a sales tax rebate of up to $2,000 for the purchase of a hybrid.

Is the rebate spurring greater interest in hybrids? The Ontario Ministry of Finance says the province issued about 4,100 rebates for hybrid cars from 2004 to 2006. The rebates were valued at more than $4 million.

What effect have the rebates had so far? According to the federal government’s Fuel Consumption Ratings, if you were to drive a 2007 Toyota Camry Hybrid instead of the non-hybrid 4-cylinder Camry, you would save 1,200 kilograms of CO2 per year. For the sake of illustration, let’s say the 4,100 hybrid rebates in Ontario were for Camry Hybrids. Compared with the non-hybrid Camry, these 4,100 vehicles are offsetting roughly 4,920 tonnes of CO2 every year—not to mention significant carbon monoxide, nitrogen oxides, and volatile organic compounds.

How many more hybrids would join Canada’s fleet of passenger vehicles if the federal government were to match Ontario’s move by offering a GST rebate? Is it worth finding out? I think it is.

The former Liberal federal government didn’t agree. Its position was that (1) it would be too difficult to administer such a rebate, because the GST is applied in different ways depending on whether you buy or lease a vehicle; (2) it would narrow the tax base, making it difficult to apply a low sales tax rate equitably to all consumers; and (3) it’s too technology-specific—the Liberals thought that purchase incentives should be based on fuel efficiency, not a particular technology.

The first and second of these reasons are a bit weak. Ontario obviously found a way to administer a sales tax rebate, and no one is complaining about how unfair it is.

The third reason has some merit, though the former government contradicted itself by giving a direct subsidy to wind power, via the Wind Power Production Incentive—proving it actually had no problem with betting on particular technologies.

I would argue that hybrids are worth similarly favouring, because they are the only mass-produced vehicles whose manufacturers have shifted any percentage of their motive fuel from gasoline or diesel to electricity. Forget about hydrogen for mass transportation. Compared with grid electricity (which will top up the batteries of plug-in hybrids, the next generation of electric vehicles) hydrogen is far too expensive.

We’re at a critical point with transportation emissions. They account for roughly a quarter of Canada’s total greenhouse gas (GHG) inventory. Running vehicles on electricity more than gasoline and diesel is the most likely and most practical way to reduce transportation GHGs.

Will the Harper Conservatives read the writing on the wall and match Ontario’s forward-thinking sales tax rebate for hybrid vehicles? I can’t see it would do them any harm.


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