Saskatchewan will be the first province to implement a controversial tax on electric vehicles, bringing an issue that other jurisdictions in North America have already grappled with to the fore in Canada
In a time of global pandemic, mass unemployment and social isolation, it’s an unusual event these days that brings people out of their bubbles to protest. Yet that is exactly the reaction Saskatchewan’s recently announced fully battery electric vehicle road-use tax — a Canadian first — achieved.
Across the province, several dozen drivers out of the province’s 403 registered plug-in electric vehicles (PEVs) grabbed their EVs and either parked in front of the legislature in Regina or drove in a rally through downtown Saskatoon to protest last week’s announcement.
Despite the backlash, the province is holding fast in its pledge to levy a $150 annual tax on passenger PEVs. It’s a move, the government says, that brings fairness to roads as combustion cars are already taxed through fuel surcharges every time they visit the pumps. Obviously, PEV drivers escape this baked-in fee, yet still need roads to drive on and add to their wear and tear.
“This is the start to recognize that we need to have fairness across the system as everybody contributing to road maintenance and repair,” Warren Kaeding, minister of environment, said about the announcement.
The primary concern among protestors is the tax could slow down adoption in the province and, should other jurisdictions follow Saskatchewan’s lead, could have a chilling effect across the country.
“Everyone needs to pay their share of maintaining the roads we all use,” says Wilf Steimle, president of Electric Vehicle Society in an interview with Electric Autonomy Canada. “Is this the optimum time to begin that policy when what matters right now is accelerating the shift to sustainable transportation? No. We don’t know the exact impact of this on EV sales but we do know that delaying the implementation would help with EV adoption.”
Precedents for an EV tax
There are at least 18 states in the United States that have an annual tax on registered EVs and all but two of those states don’t offer a purchase incentive. Additionally, several states in Australia have adopted a similar road-use taxes for EVs. Most of these jurisdictions have faced public pushback on the tax, but it’s unclear if those taxes, where implemented, have had a negative effect on adoption rates.
“Other jurisdictions in North America have contemplated whether this is the right time and have decided it’s not yet,” says Steimle. “And the states that do have a tax, largely, have incentives. If that’s the way you need to have the money flow — saying, ‘We need to have money to fund the road so we are going to tax you,’ but also saying ‘We see the value and over here we are going to have an incentive to offset that tax,’ then fine.”
In March, Utah actually struck down a bill that proposed a hike from US$120 to US$300 in PEV road-use fees. One public interest group, The Southwest Energy Efficiency Project (SWEEP), said in a release after the bill failed: “An excessive EV fee would have failed to raise money, but it would have also created a disincentive for Utahns to replace their gas cars with cleaner and more efficient EVs.”
Breaking down Saskatchewan’s numbers
“For the Government’s 2019-20 fiscal year, road-use Fuel Tax revenues totalled almost $454 million, while road maintenance expenditures totalled almost $616 million,” reads the 2021-2022 Saskatchewan budget.
“Electric vehicles (EVs) are being purchased in ever increasing numbers across Canada and around the world. While the number of these vehicles in Saskatchewan is currently relatively low, they are increasing in number every year. These vehicles contribute to wear and tear on provincial roadways, but because they do not consume traditional fuels they are not contributing to highway maintenance through the provincial Fuel Tax.”
It’s worth noting that Saskatchewan recorded an overall surplus in its 2019-2020 budget of $34.4 million and road maintenance expenditures for that fiscal year exceeded fuel tax revenues by $162 million.
The 2019-2020 budget went on to highlight the province anticipated a $6-million increase in the fuel tax for that year “as a result of increased economic activity and continued population growth.” The 2021-2022 budget projects an even larger jump with “a $34 million increase in Fuel Tax revenue as a result of the rebound in economic activity.”
The revenue from the $150 road-use tax, if it was applied to all 403 EVs currently registered in Saskatchewan today, is roughly $60,000.
Saskatchewan struggles with heavy emitter image
In an addendum to the PEV taxation announcement, Kaeding clarified the Saskatchewan provincial government also does not intend to offer any purchase incentives on either PEVs or hybrid electric vehicle purchases. A few days after those remarks, Environment and Climate Change Canada released a report that identified Saskatchewan as Canada’s leading emitter of greenhouse gases (GHGs).
With significant industry, manufacturing and exports and only 25 per cent of the provincial energy generation considered renewable, Saskatchewan has long been known as a heavy polluter.
Government of Canada data from 2017 shows the province’s oil and gas sector accounts for 33 per cent of emissions; agriculture, 23 per cent; and largely coal-fired based electricity generation, 20 per cent. Data from Prairie Resilience: A Made-in-Saskatchewan Climate Change Strategy in 2017 identifies the transportation sector accounting for 14 per cent of the province’s GHG emissions.
“Saskatchewan is still very heavily coal dependent. The reality is there is still an improvement in emissions when you move to an EV in Saskatchewan.” explains Steimle.
“Equally important is the fact that as the province’s electrical grid begins to shift away from coal because coal is no longer economically viable, EVs that are already on the road become even cleaner.”
The path forward
While Saskatchewan stands as an outlier in Canada with the PEV tax, from the standpoint of boosting EV sales growth it suffers from similar challenges faced by other provinces and territories in Canada — ranging from not having a rebate and a lack of education programs around EVs to underdeveloped charging networks and a lack of vehicle supply.
It’s improving this holistic picture that Steimle says is the key to turning any jurisdiction towards a successful and more rapid transition. Rather than focusing exclusively on debating the PEV road-use tax, public energy and advocacy resources could be better utilized by calling for government investment in the ecosystem.
“I encourage the four pillars of a successful adoption strategy: education, incentives, infrastructure, and supply. If consumers — whether they are consumers, business, or government — don’t understand the capabilities and benefits of EVs there is not going to be genuine demand,” says Steimle. “For a successful transition to a more sustainable future we need to tackle all four pillars in harmony.”