Nfld. & Labrador·Opinion

Fuel taxes pay for highways. EV drivers shouldn't get a subsidized ride

There may be some bumps on the road to a future with electric cars and trucks. Larry Hughes, a professor at Dalhousie University, says there needs to be a fair approach for fuel taxes, and who pays them.
Electric vehicles circumvent the fuel tax system because they run on a fuel — electricity — that is not subject to the fuel tax, writes Larry Hughes. (Toby Melville/Reuters)

This column is an opinion by Larry Hughes, a professor at Dalhousie University in Halifax. For more information about CBC's Opinion section, please see the FAQ.

Anyone driving on a provincial or territorial roadway knows that over time the roads deteriorate and need periodic maintenance and eventual replacement. To cover the cost of keeping up our roads, drivers pay a fee in the form of a fuel tax whenever they refuel their vehicle.

Fuel taxes vary by province and territory, from a low of 6.2 cents per litre in the Yukon to 19.2 cents per litre in Quebec.

In British Columbia, Vancouver and Victoria charge 27 cents and 20 cents per litre, respectively; the rest of the province pays 14.5 cents per litre.

Fuel taxes favour vehicles with lower fuel consumption ratings (measured in litres consumed per 100 kilometres).  Vehicles with a lower fuel consumption are typically smaller and weigh less. The more the vehicle is driven, regardless of its fuel consumption, the greater the cost to the driver.

The amount of tax paid is calculated and collected every time a vehicle is refueled. The system is straightforward and works if all vehicles using the roads rely on a fuel that is subject to the fuel tax.

Electric vehicles circumvent this system because they run on a fuel — electricity — that is not subject to the fuel tax.

Essentially a subsidy

As a result, drivers of electric vehicles benefit from using Newfoundland and Labrador's roads without having to pay for their upkeep.

This is essentially a subsidy to drivers of electric vehicles.

The problem is twofold. First, most jurisdictions have not devised a method of taxing electric vehicle road use. Second, since electric vehicles, unlike conventional ones, can be charged (that is, refuelled) anywhere, a consistent method of tax collection is difficult, if not impossible.

Several jurisdictions with growing numbers of electric vehicles have realized that electric vehicles must contribute to road upkeep and have instituted fees for road use. At least 18 states in the United States have some form of flat fee to charge electric vehicles for their road use. In Canada, Saskatchewan has an annual $150 fee on all electric vehicles.

There are limitations to the flat-fee tax when compared with the gasoline fuel tax: neither the vehicle's road usage nor its size is considered. Quite simply, the flat fee is potentially unfair to owners of EVs that drive limited distances.

Fuel taxes help pay for road upkeep, writes Hughes, so exempting drivers of electric vehicles from paying that tax is essentially a subsidy. (Submitted by Matt Butt)

A vehicle's road usage can be obtained by comparing its current odometer reading with a previously recorded value. The total distance driven can be determined in jurisdictions that enforce motor vehicle inspections. If the inspection is done every two years, the reading could be done annually by the vehicle's owner reporting the current year's odometer value to the motor vehicle inspection agency.

If the vehicle's annual road-usage charge is based on the distance driven, a cost per kilometre is required. The value could be a flat rate for all electric vehicles; however, if the vehicle class is used, the size of the vehicle can be taken into consideration.

One approach is to base the electric vehicle's annual road-usage fee on the cost per kilometre of the most fuel-efficient gasoline vehicle in its vehicle class (found in NRCan's annual Fuel Consumption Guide).

For example, in the mid-size class, the most fuel-efficient gasoline vehicle is the Hyundai Elantra, with a combined city-highway fuel consumption rating of 6.7 litres per 100 kilometres. Applying Manitoba's road tax of 14 cents per litre (roughly the Canadian average) would require an owner of a mid-sized Tesla Model S to pay less than a penny per kilometre; if the car were driven 15,000 kilometres a year, the road-usage fee would be about $140.

An argument against electric vehicle owners paying a road-usage fee is that electric vehicles are less polluting than internal combustion vehicles. This argument misses the point; the road fee is for the upkeep of the roads and is not an environmental tax. Furthermore, electric vehicles can hardly claim to tread lightly on the province's roads; the Tesla Model S weighs about 930 kilograms more than a Hyundai Elantra.

Road-usage fees are a must

The method of collecting a road-usage fee I've described is not perfect. It does not make a distinction between driving done inside or outside the vehicle's region of registration, such as by tourists.

These problems can be overcome if the vehicle records its location each time it is charged. When it comes time to calculate the annual road-usage fee, the odometer readings could be exchanged with the jurisdiction in which the charging took place. Although this allows a fairer distribution of the fee, there are potential privacy issues.

Most levels of government promote electric vehicles as a means of reducing greenhouse gas emissions in the transportation sector to meet various national, provincial or territorial emissions targets. If electric vehicles become a sizable portion of the vehicle fleet and these vehicles do not pay for their use of the roads, revenues for the upkeep of our roads will decline, and provinces will find it increasingly difficult to pay for road maintenance.

The promised electric-vehicle future must include sensibly designed road-usage fees.

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Larry Hughes

Freelance contributor

Larry Hughes is a founding fellow of the MacEachen Institute for Public Policy and a professor in the department of electrical and computer engineering at Dalhousie University in Halifax.


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