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Editorial: Pay as you drive?

October 18, 2017 – Unless you’ve been living on the moon, you’ve likely heard the concerns echoing around the world regarding climate change. With the majority of U.N. member countries signing on to the Paris climate accord, we can expect to see a wide variety of initiatives rolling out in an effort to battle rising temperatures.

One of the ways some countries are tackling the issue is through aggressive pushes for more electric vehicles to reduce CO2 emissions generated by fossil-fuel-powered vehicles. Recent articles have stated that electric vehicles could be cheaper to produce than fossil-fuel-powered vehicles by as early as 2020. The push by countries to ban the sale of fossil-fuel-powered vehicles will definitely speed up the production and sales of the electric vehicle market – China recently joined France, the U.K. and several other nations stating that it is working with regulators to set a date for the end of sales of fossil-fuel-powered vehicles across the country. While there are definitely significant environmental benefits to reducing the CO2 emissions generated by gasoline- and diesel-powered vehicles, countries like Canada and the U.S., among others, will be faced with a new challenge: replacing gas tax revenues.

In Canada, the Federal Gas Tax Fund offers a long-term source of funding for municipalities that is used to replace, repair and build infrastructure, which in turn generates big economic benefits to a municipality’s economy including a significant number of good paying construction sector jobs. In 2016, Association of Municipalities Ontario (AMO) administered $617 million for infrastructure projects for municipalities across the province from the Federal Gas Tax Fund. Alberta is set to receive $222 million in 2017-18, and $1.08 billion from 2014-15 to 2018-19. In short, municipalities across the country rely on this fund to aid in their battles against aging infrastructure. So, if people and companies stop paying at the pumps, where does that lost revenue come from?

One option being considered in several countries is a pay-as-you-drive model, where people who own vehicles would be charged an annual fee based on the number of kilometres that they drive. I suspect the formula would end up being more complicated than that in the end, but it is definitely a model being considered to replace lost revenues from fuel taxes.

As much as some people might not agree with this model, the reality is that as fossil-fuel-powered vehicles are removed from the roads, we will need to find a new revenue stream to pay for the construction and maintenance of our roads and bridges. Would this model be effective? That’s the question some counties are currently trying to gauge. Hopefully the powers-that-be can find a solution to lost fuel tax revenues that doesn’t leave our municipalities scrambling or economies reeling. Only time will tell.