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Globe editorial: It’s time to end subsidies for green vehicles
Friday, 5 January 2018 - 9:45am
PUBLISHED JANUARY 5, 2018
Norway reached a remarkable milestone in 2017, when it became the first country where zero-emission and hybrid vehicles accounted for more than half of new car sales in a calendar year. There are wait times for customers who want to buy one.
At the same time, however, the government of Norway announced that it wants to cut back lavish subsidies that allow citizens to save thousands of dollars on the price of a Tesla and other models, while sticking to its plan to make every new car sold a zero-emissions vehicle by 2025.
The Norwegian experience sums up the debate over how best to move away from fossil-fuel cars and onto the next generation of ground transportation – that is, whether or not subsidies for customers are worth it.
But it also raises the question of whether that debate has become a moot point. The switch to electric vehicles appears to be speeding up globally, largely fuelled by innovation and government policy in major markets. The world of zero-polluting cars and trucks – which may also be self-driving – is not some shimmering, distant future.
In China, a company called Nio began mass-producing electric cars in 2017 with the help of heavy subsidies from a Chinese government that is eager to see the end of fossil-fuel cars in its polluted cities – even as its electricity-generating stations spew carbon. China is now the world's biggest car market, and the government is committed to building a large battery-charging network for travellers to further speed the transition away from the internal-combustion engine.
This past year also saw Tesla, North America's most innovative and aggressive builder of electric cars, roll out a less-expensive model and promise to start making battery-powered semi-trailer trucks and pickups in the coming years.
At some inevitable point, traditional carmakers that are currently laggards in e-vehicle production will get on board in order to compete in China and other growing markets, and costs will fall thanks to market forces.
The push to increase sales of electric vehicles in the meantime is expensive, as Norway has learned, but also understandable. Transport is not the highest-emitting sector for carbon emissions – that honour generally falls to the oil and gas sector, or to energy production in places like China, India and the U.S. – but it is the fastest-growing worldwide.
Transportation accounts for about 14 per cent of annual emissions globally, and more in industrialized countries – in Canada the figure is 24 per cent, according Ottawa. That makes cars and trucks a juicy target for governments looking to enact swift cuts, and also to brand themselves as green.
Several Canadian jurisdictions have taken up the e-vehicle cause. A federal zero-emissions strategy has been promised for 2018, while Quebec and Ontario already have expensive cash-back incentives for new electric-car buyers.
But the Montreal Economic Institute put out a study last July that pegged the cost to taxpayers of lowering greenhouse-gas emissions in Ontario via vehicle subsidies at a whopping $523 per tonne. It also said that, for Ontario to reach its goal of electric vehicles constituting five per cent of the new-car market, it will have to spend $8.6-billion in subsidies over the next 13 years.
That is simply too much money for too little outcome. The smart way to dissuade car buyers from gasoline and diesel models is to tax carbon. Make fossil-fuel burners more expensive to fill up, and electric cars become competitive.
Alberta increased its carbon tax on Jan. 1, and Prime Minister Justin Trudeau has vowed to impose a $10-per-tonne carbon tax in provinces that don't yet have a pricing system in place. British Columbia is out in front of everyone, with a well-established carbon tax regime.
Carbon taxes aren't always popular, and they are an easy target for conservative politicians in Canada and the United States. But when it comes to electric cars, they are less expensive and more efficient than consumer subsidies, and they reduce more than just the emissions from tailpipes.
More critically, governments are subsidizing a product that may not need the help. There is every indication that the world has reached a tipping point, and that natural competitive forces will soon start to bring down the cost of electric vehicles.
Canadian governments should abandon their car-buying subsidies, focus on carbon taxes, and let the market do its job from here on in.