Toronto Star Referrer

For electric vehicle owners, the buzz may not last

As we switch from gas engines, question remains where government tax revenue will come from

ROB FERGUSON

As Ontario’s gas tax drops 5.7 cents a litre on Canada Day to blunt the pain of soaring fuel prices, a small but growing number of electric vehicle owners are in a sweeter spot.

They can charge up at home for as little as $5 instead of $100 or more.

But the cheap ride won’t last forever.

Gas taxes are an important source of government revenue and as federal rules push more people into electric vehicles (EVs), that lost cash — which helps to pay for road upkeep, public transit and other programs — will need to be found somewhere, transportation and taxation experts say.

Possibilities include road user charges based on distance travelled or vehicle weight given that EVs are heavier than internal combustion vehicles — thanks to their heavy battery packs — and cause more wear and tear on streets and highways.

“It’s all going to be part of a very interesting debate that probably needs to be had sooner rather than later,” said Teresa Di Felice of the Canadian Automobile Association, noting Ontario’s heavily subsidized household electricity rates — to the tune of $6.9 billion a year — could well be in the mix.

While any such charges and changes are likely years away, governments will have to be mindful of moving too soon and discouraging sales of EVs, and of losing a significant source of income as gas tax revenues dwindle.

“It’s a bit of a cash cow,” Prof. Opher Baron, an operations management specialist at the University of Toronto’s Rotman School of Management, said of the gas tax that brought in $2.3 billion in the last fiscal year. Other fuel taxes totalled $781 million. Municipalities with public transit systems get two cents per litre of gas tax revenue collected.

“Government needs its money.” With the federal government requiring that 50 per cent of passenger vehicles sold by 2030 be zeroemission and 100 per cent by 2035, change seems inevitable.

But Brown and others cautioned governments against moving too quickly on road user fees or similar charges for EVs.

“We’re still in the transition phase where governments are trying to encourage more purchasing of electric vehicles, which have higher up-front costs and are helping to deliver more benefits for the environment,” Joanna Kyriazis of Clean Energy Canada said in an interview from Ottawa.

“I really don’t think governments should be penalizing EV owners.”

In Brampton to tout the gas tax cut in place until the end of the year, Premier Doug Ford — who this spring announced millions in aid for EV production — confirmed no such fees for EV drivers are on the government’s radar as it begins a second four-year term.

“I’ve always said we don’t need more taxes. We need more taxpayers,” he told reporters Thursday, pushing the federal government to allow more immigrants to fill an estimated 340,000 jobs in skilled trades and other fields.

The 5.7 cents is the second half of a 10-cent-a-litre cut Ford promised in his 2018 campaign and will save motorists about $3 on a full tank.

“The impact is relatively small,” said interim NDP Leader Peter Tabuns.

Coupled with the end of vehicle licence renewal fees announced before the June 2 election, the measure will save the average motorist about $465 this year as inflation, growing at an annual rate of about eight per cent, takes a bigger bite out of household incomes, Ford said.

“Whether you are planning a summer getaway, or have a business transporting goods across the province or just need a little help with your day-to-day expenses, this will put more money back in your pocket where it belongs,” Ford said.

Green Leader Mike Schreiner said it was a “mistake” for the government to axe licence renewal fees given the need for many more charging stations and other infrastructure to convince motorists to go electric.

“Somebody’s going to have to do an economic analysis of when the shift in revenue is going to be big enough that it significantly affects the budget revenue coming in for road maintenance,” added Schreiner, who drives a Chevrolet Bolt.

The car costs $5 to charge overnight at Schreiner’s home or $15 to $20 at a commercial charging station, unless he lucks out with a free top-up at his favourite grocery store.

“I’m laughing now. I don’t pay a gas tax. I don’t pay a vehicle registration fee. It will be interesting to see what the Conservatives come up with moving forward.”

Last year, Saskatchewan introduced an annual $150 fee for electric vehicles to make up for lost gas tax revenues, but there has been pushback from EV drivers. In the U.S., Oregon has a distance charge but the way it is calculated has raised privacy concerns.

Kyriazas said she does not predict any separate charges for EVs in Ontario until “at least” 2030 in part because it would be hard to bring in fees when there is little in the way of infrastructure.

“I have friends who live in Quebec and they just can’t believe the difference in the number of charging stations there compared to just across the border in Ontario.”

Other provinces such as B.C. with higher levels of EV sales — about 17 per cent versus seven per cent in Ontario — are more likely to lead the way on any road user charges, she added.

“We’ve still got a long way to go and the government’s still going to be able to collect a lot of money in gas taxes,” said Di Felice, noting it will take many years to get piston-powered cars off the road.

“Of course, we don’t know how high gas prices are going to get.”

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2022-07-01T07:00:00.0000000Z

2022-07-01T07:00:00.0000000Z

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