Knee-jerk taxes aren't the answer to the carbon dilemma

When Canada signed the Kyoto accord in 1998, gasoline pump prices averaged 65 cents a litre. One can well imagine the public outrage had the Liberal government combined that signing with announcement of a carbon tax that would double fuel prices. Yet, as a result of rising oil prices, average pump prices have more than doubled since 1998 to over $1.30 a litre. If the road to meeting Canada's Kyoto targets was to be driven by an unthinkably huge carbon tax, world oil prices have instead more than obliged and analysts are predicting that prices will keep on obliging without any help from government.

Curiously, while businesses and consumers reel from skyrocketing fuel costs, B.C. Premier Gordon Campbell decides now is a good time to further tighten the screws. After a short period of basking in a green glow, B.C.'s allegedly "revenue neutral" tax is widening the rural-urban divide into a chasm. Already hammered by big cuts in fishery quotas and Depression-era conditions in the forest sector, the fuel tax hits communities throughout B.C.'s vast hinterlands disproportionately as they struggle to survive. In Ottawa, Stéphane Dion seems ready to apply the axiom "better late than never" as he muses about plans to fight the next election on the carbon tax he and his Liberal colleagues decided not to implement 10 years ago. I've tried my best to understand Mr. Dion's logic, but from any angle - economic, environmental or political - his reasoning is baffling.

These puzzling policy strategies come at a time when fuel taxes are being attacked in all the greenest places. Last week, I waited impatiently as big lorries blocked a major highway into London in protest of Prime Minister Gordon Brown's next carbon tax increase scheduled for July 1. Most of the motorists delayed by the congestion reacted by waving and yelling support for the truckers, which led to U.K. news headlines stating "Europe Cries 'Enough.' " Meanwhile, across the channel, French President Nicolas Sarkozy is calling for an EU-wide cap on fuel taxes. With pump prices in France, Germany, Italy, the Netherlands and U.K. ranging upward from $2.20 a litre, is it any wonder that Europeans have concluded that additional fuel tax increases are all pain with negligible environmental gain?

While our average pump price of around $1.30 a litre looks darned good against European prices, their shorter travel distances and fast, efficient passenger rail systems help a lot. In Canada, piling even more tax on top of the already rising cost of fuel just adds more pain for people whose commuting requirements or business activity leaves them without short-term options.

Creating those options will need co-operation and leadership. Knee-jerk policy reactions must be replaced by a thoughtful, holistic examination of needed structural changes. These include transforming urban transit from inefficient, smoke-spewing buses into the latest environmentally friendly light-rail transit, rethinking the "sprawl around the mall" urban commuting paradigm and best-practice approaches to urban densification. When it comes to hauling freight, rail is both safer and more energy efficient. None of these changes will be easy to get done. Urban design changes need the shared vision of municipal, provincial and federal leaders, and the move to more rail freight will have to overcome the powerful truckers' lobby. Mindlessly adding to the already doubled cost of fuel, while failing to act on these and other fundamental structural changes, sacrifices Canadian living standards and jobs without helping the environment.

Then there is the other side of the fuel tax coin: fuel subsidies. Half of our planet's population live in countries that subsidize fuel prices. Regular gasoline in Venezuela sells for 5 cents a litre; which not only stimulates demand but also means the oldest, highest-polluting vehicles stay on the road. I experienced the result first-hand travelling from the sea level airport to the mountain capital of Caracas on a road jammed with decrepit old vehicles spewing choking blue fumes.

In Nigeria, Iran and Saudi Arabia, pump prices are under 15 cents. Mexican, Malaysian, and Indonesian prices average about 65 cents while in China, now the world's biggest polluter, prices are about 75 cents a litre.

Examination of oil consumption data tells a consistent story. Demand growth is led by the subsidizing countries. Ironically, these countries have no emissions reduction obligations under the Kyoto accord. London-based Global Insight estimates the world's fleet will grow from the current 887 million vehicles to over a billion in the next four years. Virtually all of this will occur in Kyoto-exempt countries, where the International Energy Agency (IEA) forecasts almost 4-per-cent growth in oil demand this year. Meanwhile, in the Western developed countries with much higher fuel prices, the IEA expects oil demand to fall by nearly 1 per cent. Even the much-maligned Americans are driving less - by 11 billion fewer miles in March compared with March, 2007. And in both the U.S. and Canada, SUV sales have tanked while dealers can't keep up with the demand for fuel-friendly vehicles.

Emissions are a global issue. Inflicting more tax pain on those already trying to adjust to rising fuel prices, while exempting the subsidizers of any responsibility, is a recipe for economic and environmental failure.

Gwyn Morgan is the retired founding CEO of EnCana Corp.