Popularity of electric cars will force governments to alternative taxes: analysts

Jan 19, 2010 - Ross Marowits - The Associated Press

The eventual popularity of electric cars will force governments to consider alternative revenues as they prepare to wean themselves off fuel taxes, industry observers say.

Canada's three levels of government share about $15 billion in taxes from fuel annually. But some of that revenue could be at risk if consumers turn en masse to plug-in electric or hybrid vehicles.

"What is being talked about is taxes on electricity, taxes on other modes of transportation like highway tolls," said Al Cormier of Electric Mobility Canada.

But the founder of the organization that promotes electric cars says taxation shouldn't be a major issue for at least five years. It will depend on fuel prices and electric car purchases.

The industry has forecast that there will be 500,000 plug-in electric cars in Canada by 2018. That's a small fraction of the 20 million vehicles on the country's roads today.

HEC business school professor Pierre-Olivier Pineau said governments have to rethink their tax intake as society looks to rid itself of its oil consumption habit.

He said the most likely option is to implement carbon taxes or increase ones already in place in B.C. and Quebec.

Part of the government's tax solution might also involve charging higher rates to recharge a car than for residential uses.

Existing networks only charge one price for each household. But "smart grids" that could be available in a decade would permit variances.

"It's becoming a buzzword and people think it will change a lot of things," he said.

While increasing electricity costs to charge cars may reduce the cost advantage of operating electric cars, University of Montreal professor Normand Mousseau said consumers ultimately have to pay.

"In the end, we'll have to pay for the roads one way or the other," he said.

Growing interest in electric cars has Canada's provincial and municipal electric utilities conducting pilot projects to get ready.

Hydro-Quebec recently announced a partnership with Mitsubishi to test the performance of 50 plug-in i-MiEV electric cars in the town of Boucherville over the next three years.

The $4.5-million project provides the public utility with another window on the electric car market. It is also testing a Ford Escape hybrid and a hybrid pick-up truck, while batteries developed by its TM4 subsidiary are being tested overseas in vehicles being developed by Indian carmaker Tata.

Spokeswoman Stacey Masson said the Mitsubishi project is part of the energy giant's overall strategy and will help it evaluate the impact of electric vehicles on its vast network.

"We have the power, we just need to see how it will impact our grid and our network so we can plan what kind of usage people will make of it so we can plan for the future," she said in an interview.

B.C. Hydro launched its own trial of the cars in November. Utility employees are driving two such cars.

The utility is also awaiting delivery of the Nissan Leaf in 2011 and is in discussion with other car manufacturers.

"This is one piece of the overall project for us into figuring out what this will look like for our province in the future," said spokeswoman Simi Heer.

She said preliminary estimates suggest at least 10 per cent of new vehicles purchased by 2025 could be electric plug-ins.

In Quebec, the cars will be distributed to selected local businesses and the municipality. A private partnership will establish charge centres.

Toronto and Calgary are also looking to test electric cars.

The vehicles are seen as part of the solution to global warming as they emit no greenhouse gases.

They cost little to charge. Based on B.C. residential electricity rate, Mitsubishi's model costs about $1.12 for a promised 120 kilometres, about one quarter the fuel costs for a Smart car.

However, the hefty current sticker price of more than $40,000 for plug-ins could limit demand.

Pineau says electric cars aren't a real solution in the medium-term because of their cost and their technological unreliability.

He said cheaper options for utilities to pursue are public transit and lighter cars that use available technology.

"In terms of energy policy, (and) environmental policy the priority should not be given to electric cars," he said.

Mousseau described Hydro-Quebec's electric car strategy as "dismal" and not ambitious enough.

"The best batteries in the world have been developed right here and it took them quite a bit of time to realize the importance of these batteries," he said.