Subsidy-powered vehicles get a tune-up from Ottawa

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Appeared in the Calgary Sun, April 17, 2019
Subsidy-powered vehicles get a tune-up from Ottawa

With the election behind us, here’s something completely different. It’s long been known that government subsidies drive electric vehicle sales—not their price or performance. Whether it was the $14,000 subsidy in Ontario (struck down by Premier Doug Ford), the $5,000 subsidy for potential buyers in British Columbia (where you also get a subsidy for installing a charger), or the even more generous $8,000 in Quebec (for vehicles under $75,000).

But as with carbon taxes, the Trudeau government has decided it’s not enough to leave this largess to the provinces. No, Ottawa now thinks all Canadians should qualify for a subsidy, whether their province offers one or not. In fact, the feds plan to spend $130 million (over five years) building electric vehicle (or EV) charging stations in “workplaces, public parking spots, commercial and multi-unit residential buildings, and remote locations.” Further, it will provide $5 million, also over five years, to work with auto manufacturers to “secure voluntary zero-emission vehicle sales targets to ensure that vehicle supply meets increased demand.”

But the largest EV spending item (as mapped out in last month’s federal budget) is the $300 million (over three years) on federal “purchase incentives” of up to $5,000 for electric battery (or hydrogen fuel-cell vehicles) that cost less than $45,000. (Call that, the No-Tesla clause, sorry Mr. Musk.)

To bribe businesses to buy EVs, Ottawa will make battery and/or fuel-cell powered cars eligible for a full tax write-off in the year they are put in use. Immediate expensing kicked-in last month and expires in 2024. Capital costs for zero-emission passenger vehicles will be deductible up to a limit of $55,000 plus sales tax—an increase from the previous capital cost limit of $30,000 plus sales taxes. It seems odd that, even as we’re being told that EVs are dropping in price, the subsidies and tax credits to get people or businesses to buy them keep going up.

Canada has set a target to sell 100 per cent electric vehicles by 2040, with sales goals of 10 per cent by 2025 and 30 per cent by 2030. (In 2017, EV sales reached 4 per cent of passenger car sales, 3.5 per cent in Quebec.) Not surprisingly, the three provinces with the highest rebates—B.C., Quebec and Ontario account for 95.8 per cent of EV sales nationwide (this includes fully electric cars and plug-in hybrids).

Last month’s federal budget also observed that 25 per cent of greenhouse gas emissions come from vehicles, implying that subsidizing EVs will lower emissions. But a study for the Montreal Economic Institute pegged the cost of emission reductions from electric vehicles at an estimated $523 per tonne of averted GHGs in Toronto and $288 per tonne in Quebec—an absurdly large number, when carbon offsets in North America were selling for about $18 per tonne.

So in addition to imposing carbon-pricing on provinces it deems unwilling to impose its own pricing plan, the Trudeau government will spend our tax dollars to subsidize new car buyers who are buying vehicles many Canadians can’t afford, and giving away massive tax write-offs to businesses, to obtain carbon emissions at orders of magnitude higher than simply buying carbon emission credits online. Make sense?

Once again, Ottawa’s authority is creeping into provincial prerogatives under the “anything goes” rubric for climate change.

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