Contributed by Robert Lyman © 2017

Robert Lyman is an Ottawa energy policy consultant, a former public servant of 27 years experience; prior to that he was a diplomat for 10 years.

See also the full report and power point “If It Moves, Tax it” – links at end of this summary.

The purpose of this paper is to provide an overview of the taxes now imposed on motor fuels in Canada, the likely path of those taxes in the near future, and the revenue consequences for governments.

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The prices of gasoline and diesel fuel vary considerable across Canada, both because of differences in the market prices (based on production, refining, transportation and marketing) costs and taxes. In May 2017 average gasoline prices ranged from $1.02 per litre in Manitoba to $1.18 per litre in Newfoundland. Diesel fuel prices ranged from $1.02 per litre in Manitoba to $1.19 per litre in Vancouver.


Taxes account for 43 cents per litre of the Canadian average gasoline price and 36 cents per litre of the diesel fuel price. This is mostly federal and provincial excise taxes. In 2017, total taxes paid on gasoline and diesel fuel will be about $23.6 billion.


The fastest growing fuel taxes are carbon taxes, scheduled to rise from $10 per tonne of carbon dioxide equivalent in 2018 to $50 per tonne in 2022. Carbon taxes per litre of gasoline will rise from 2 cents per litre in 2018 to 11 cents per litre in 2022. By 2022, that will add $200 to each car operator’s annual fuel cost. Carbon taxes may, however, rise to $300 per tonne, or 68 cents per litre, by 2050, adding about $1,200 per year to the annual average fuel bill.


International studies of the social benefits of emissions reduction indicate that they are may be worth U.S. $25 per tonne. Below that cost, investments in emissions reduction are beneficial and should be made; spending more than that makes the world worse off. The taxes already on Canadian motor fuels already far exceed the socially justified carbon tax level.


Raising the price of motor fuels tends to reduce the demand for them by somewhere between 20% (short term) and 80% (long term) of the percentage price increase. At the socially justified carbon charge of $U.S. 25 per tonne, the maximum carbon tax in Canada should be $31.68 per tonne or 7.3 cents per litre. The likely result would be a reduction in demand ranging from 1% to 5%. At a carbon tax of $300 per tonne, the price increase would be 58% and the demand reduction would range from 12% to 46%.


The motor vehicle greenhouse gas emission regulations issued in 2014 will increase light duty vehicle fuel efficiency by 41% from 2010 to 2025 and for the first time cover heavy duty vehicles. By imposing regulations and carbon taxes, governments are forcing car operators to pay twice. This is not cost-effective.

LINK to Power Point: If It Moves, Tax It Oct 26 2017 If It Moves, Tax It Oct 26 2017


cover taxing motor fuels


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