Carbon tax hits diesel prices in four Canadian provinces

Canadian carriers face higher fuel prices because of a federal carbon tax. Image: iStock

Canadian carriers face higher fuel prices because of a federal carbon tax. Image: iStock

Diesel got more expensive in four of Canada’s provinces, including Ontario, as a federal carbon surcharge took effect today, April 1.

The price of diesel will increase by about C$0.054 per liter or about C$0.20 per gallon (a Canadian dollar currently is valued at US$0.75) in Ontario, Saskatchewan, New Brunswick, and Manitoba. The federal government mandated the charge in those provinces because their governments did not implement a carbon-pricing scheme.

“I don’t think a lot of people are happy about it,” said Mark Osborne, vice president of Day & Ross Transportation in New Brunswick. “I think what gets lost on people is the amount of money a trucking company spends on fuel on a daily basis.”

The Canadian Trucking Alliance (CTA) estimates that the surcharge will add C$3,500 the annual costs to operate a long-haul truck per year. The surcharges will eventually increase to C$0.134 per liter by 2022, or C$3.2 billion industrywide.

“The reality is that transportation costs are going up because of the carbon tax,” said Stephen Laskowski, president of the CTA. “No doubt, trucking companies and their customers are going to be discussing this.

Osborne said he expected the charge will ultimately be passed onto consumers, though Day & Ross is still evaluating how it will affect its own rates.

The diesel surcharge is part of a broad effort by the government of Prime Minister Justin Trudeau to curb greenhouse gas emissions. Carbon pricing also will affect regular gas. Meanwhile, the government is introducing tax rebates of about C$200-C$400 for individuals.  

Laskowski rejected the premise of the surcharge as a way to curb emissions. Canadian trucking companies run an operating ratio of 0.94 “on a good day” and often hit 0.96 or 0.97, he said.

“If your leading cost or second-leading cost is fuel, one doesn’t need an extra motivation of a carbon tax for fuel efficiency,” Laskowski said.

The CTA has called for revenue from the carbon tax to be returned to the industry for carbon-reducing investments. “It would be far more palatable of a policy,” he said.

Osborne of Day & Ross agreed that the federal government should create more incentives for fleets to reduce emissions. But he also said the carbon tax may have a positive effect.

“It will force the industry to find ways to make our trucks and trailers more efficient,” Osborne said.