Fuel economy and BC’s carbon tax
I’m deep into figuring out what the new BC carbon tax means for different income groups. But stumped by some anomalous results from the modeling, I took a detour and ended looking at my own output of GHGs. Living in hydro-power-rich BC, our electricity is almost entirely GHG-free, and in the rest of the home it is a natural gas fireplace that does fairly little damage. The big family contributor is the car, a 1992 Toyota Corolla stationwagon, known locally as Isis (don’t ask).
Isis gets an average fuel efficiency, according to the US Department of Energy (see for yourself here), of 27 miles per gallon, which north of the 49th parallel translates into 8.7 litres per 100 km. Relative to the overall fleet, this is above average fuel efficiency, probably because she was built at a time when the SUV was just becoming fashionable and fuel economy was still a priority of automakers after the run-up in energy prices in the late-1970s.
According to the BC Budget, which has a nice table of various cars, fuel efficiency and estimated carbon tax, the most fuel efficient 2008 passenger car out there is the Toyota Prius hybrid, consuming 4.1 litres per 100 km. The top light truck is the Ford Escape hybrid at 7.0 L/100km. The budget does not list every car, but interestingly, the least fuel efficient vehicles on the page are the top two in light truck sales, the Ford F-series pick-up and the Dodge Ram pick-up, at 14 L/100km. (According to the US government site mentioned above, the absolute worst in fuel efficiency are high end sports cars, like the Lamborghini, which gobbles about 22 L/100km.)
So here’s the consumer economics. If we drive 10,000 km this year (higher than our average in recent years but lower than most drivers), we can expect to pay an additional $21 due to the carbon tax of $10 per tonne. The Prius will pay an extra $10, and the Ford F-Series pick-up an extra $34. In addition is the general cost of gassing up the vehicle, which, at yesterday’s posted gas price of $1.20 per litre, works out to $1,680 for the Ford pick up, $1,044 for Isis, and $492 for the Prius.
The carbon tax is thus ridiculously small in terms of behavioural incentives. If I buy a Prius it will be to save $552 per year in fuel costs, not the extra $11 in carbon tax. Of course, the idea behind the carbon tax is that it will steadily increase over time. By 2012, the BC carbon tax will reach $30 per tonne, adding an extra $33 for Isis relative to the Prius baseline.
So how big would the carbon tax have to be before it made any kind of dent in decision-making? At $200 per tonne (a level that Mark Jaccard and company figure will be necessary by 2050 to meet a federal GHG reduction target of 45%), the difference between Isis and Prius still only amounts to $220 per year, less than half the current difference based on fuel economy alone. This may, however, be enough to change my incentive on the margin when contemplating a new purchase if the comparator had equivalent fuel efficiency to Isis (ie annual savings in total of $772 per year). (Note that Jaccard’s modeling is based on changing technology not changing behaviour or any other structural considerations, like higher density and mixed use neighbourhoods.)
The other part of the equation is that there are major fixed GHG emissions associated with any sort of driving. Estimates vary but perhaps half of the total emissions associated with a car come from manufacturing and disposal, and the emissions associated with building and maintaining roads (see this post). So the best thing to do from the perspective of climate change is to stop driving entirely. I already bike to work, and with some major transit upgrades I could forsee a car-free future.
Engendering a society-wide shift that dramatically reduces vehicle kms travelled is going to be one of the biggest challenges we face. A growing carbon tax may be a start but other measures are going to be needed, too. It may be more effective to restrict the amount of road space and parking, and turning over some of the existing space to bikes and transit, than to rely on pricing alone.