## Canada Introduces Measures to Encourage Fuel-Efficient Vehicle Purchases

##### 21 March 2007

The Canadian government is introducing several new measures designed to encourage consumers to purchase or lease fuel-efficient vehicles and get older vehicles off the road.

The measures in Budget 2007 include up to C$2,000 in rebates for the purchase or long-term lease of a fuel-efficient vehicle; up to C$4,000 in a gas-guzzler tax; C$6 million over two years for a seven-fold increase for vehicle scrappage programs; and C$30 million over two years to remove older vehicles from Canadian roads.

In addition to the initiatives above, the government will also invest C$33 billion in transportation infrastructure, including public transit, and C$2 billion over the next seven years for the production of renewable fuels.

Rebates. Transport Canada establishes and manages the list of vehicles available for rebates. The list currently includes new cars getting 6.5 l/100km (36 mpg US) or better and new light trucks getting 8.3 l/100km (28.3 mpg US) or better. In addition, new flexible-fuel vehicles with combined fuel consumption E85 ratings of 13.0 l/100km (18 mpg US) or less will be eligible.

Green Levy—the gas-guzzler tax. Manufacturers or importers will have to pay a Green Levy on new passenger vehicles (excluding trucks) with fuel consumption of 13.0 l/100 km combined (18 mpg US) or more. The tax will start at C$1,000 for passenger vehicles with combined fuel consumption ratings of at least 13.0 l/100 km but less than 14.0 l/100 km. The rate will increase in$1,000 increments for each full liter per 100 km increase in the combined fuel-efficiency rating above the 13.0 l/100 km floor, to a maximum of C$4,000. With the introduction of the new levy, the existing excise tax on heavy vehicles will be eliminated effective 20 March 2007. Fuels. The Canadian government recently announced a minimum 5% average renewable content requirement in Canadian gasoline by 2010. The government also intends to develop a regulation for diesel fuel and heating oil to contain 2% average renewable content by 2012. More than 2 billion liters of renewable fuels will be needed to meet those targets. Budget 2007 invests up to C$2 billion in support of renewable fuel production in Canada to help meet these requirements, including up to C$1.5 billion for an operating incentive and$500 million for next-generation renewable fuels.

Up to C$1.5 billion over seven years will be allocated towards an operating incentive to producers of renewable alternatives to gasoline, such as ethanol, and renewable alternatives to diesel, such as biodiesel, under conditions where industry requires support to remain profitable. Incentive rates will be up to$0.10/liter for renewable alternatives to gasoline and up to $0.20/liter for renewable alternatives to diesel for the first three years, then decline thereafter. The government will not provide support when a company’s rate of return exceeds 20% annually. Support to individual companies will be capped to ensure that benefits are provided to a wide range of participants in the sector, not just the largest oil-producing companies. Budget 2007 also makes C$500 million over seven years available to Sustainable Development Technology Canada to invest with the private sector in establishing large-scale facilities for the production of next-generation renewable fuels such as cellulosic ethanol.

Other measures in Budget 2007 include a focus on reducing federal fleet greenhouse gas emissions, and a phasing out of tax breaks for oil sands production.

Federal fleet greenhouse gas reductions. The government is also targeting a 15% reduction in greenhouse gas emissions per vehicle-kilometer in its 26,000-vehicle fleet from 2002-03 levels.

Federal departments now have about 1,400 alternative fuel and hybrid vehicles in use, and vehicles purchased for the federal fleet must be capable of operating on alternative fuels, where cost-effective and operationally feasible. In addition, where it is available, all gasoline purchased for federal road vehicles must be ethanol-blended.

Oil sands tax break. The government intends to phase out a tax break for oil sands producers that allows them to write off investment costs, setting a final deadline of 2015 for the changes.

Accelerated capital cost allowance (ACCA) is sometimes used to promote investment in certain emerging industries and in clean energy technologies that have broad social benefits in terms of reduced environmental impacts. By accelerating the timing of capital cost deductions, ACCA defers taxation and improves the financial return from investments in particular assets.

Canada provided ACCA for investments in the oil sands at a time when it was an emerging sector and special support was appropriate to help offset some of the risk associated with early investments. Given the current health of the oil sands sector, the government decided that ACCA is no longer required. Budget 2007 phases out the existing ACCA for assets in this sector, leaving in place the regular 25% CCA rate for these assets.

The existing ACCA that encourages industries to invest in equipment that generates energy more efficiently or by using renewable energy sources will be extended to equipment acquired before 2020. It will also be expanded to cover wave and tidal energy, and additional solar energy and waste-to-energy technologies.

(A hat-tip to Bob!)

Resources:

I mostly frown on Govt programs. Govts tend to proceed anyway so I am glad to see them subsidize the scrapping of old vehicles.

Scrapping may not be the best of all plans but it is immediate and the effect can be rather accurately known.

Provided the subsidy is low and the program adequately audited it makes sense to simply get rid of the worst vehicles on the road. Such vehicles are mostly driven by the poor so this can help them buy something a little newer and less polluting.

Here in my state the vehicle pollution inspections seem to be well done by disinterested inspectors. But there are loopholes to avoid burdening the poor. So some end up smoking down the road.

Gasoline and diesel in Canada are taxed much higher than other goods. By reducing overall fuel consumption, government effectively reduces its direct tax revenue and tax burden on Canadians. Unlike most other countries.

The automakers might just raise the price of their vehicles to offset the rebates.

What's a couple thousand dollars on a new car anyway ... nothing! It's about half of the taxes you'd pay on the ticket price meaning your not getting any less than the ticket price anyway.

And talk about insurance on these new cars. They're through the roof! I suggest the government do something about car insurance premiums to address the working poor.

All in all it's not a bad incentive to get people to buy more fuel efficient vehicles.

WTF !! Light trucks get a much higher threshold!! So a POS front drive Escape Hybrid (7.7l/100km) which has less interior space than a yaris (6.3l/100km), weighs twice as much gets $2000 rebate while you only get$1000 on the Yaris?

And why the heck are trucks exempt. Is it because that would shut down GM, Chrysler and Ford overnight! C'mon, WTF!! Trucks are the biggest polluters of them all, and don't gimme that, i need to haul lumber BS, buy a V70!!

The reason for the difference is a ton of small companies converted thier fleets from medium duty trucks to light duty to both save a ton of fuel andget tax breaks. A great many of those same companies save alot of money by no longer storing thier cars on company land and instead have emploies drive em home.

The result is that along with certain other big political groups they all dont want light trucks screwed with.

The downside is ableeping ton of asshats are sing the badly worded and setup system yo buy and operate trucks they have no idea how to properly droive and have no reason to own.

We should have these incentives in the U.S. first:

1. Fuel Efficiency mandates should be upped to 40 mpg within 5-10 years.
2. 50% Tax write-offs for any fuel efficient vehicle, not just for hybrids.
3. A program to quickly remove older vehicles and
4. 50% Tax write-offs for anyone who trades in their older vehicle to purchase a new one.

Why don't you backdate the '06 models rebates back to the beginning of the '06 model year so that everyone who bought or lease an '06 can benefit.

Diesels have been around long before any hybrids even existed. Now it's getting the attention because of the hybrids. Come on, diesel should have been the benchmark for others to follow. Just dumb!!

Good Morning,

We are going to buy a Compass Sport (Chrysler) vehicle.
We are wondering if we could get a rebate.
If yes, how could we get an application for that rebate!

Thank you.

We are going to buy a camry hybrid (toyota) or altima
hybrid (nissan), any rebate and how to apply. Thanks

Something that makes no sense to me is that mileage estimates for the US and Canada are so different. For example a KIA Spectra5 in Canada lists the highway mileage as 46 MPG. The same car in the US is listed as 35 MPG. The new US EPA ratings list the KIA Spectra5 at 32 MPG. Most people reporting in forums report less that 30 MPG. It seems the same is true for most models of cars. The Canadian websites always seem to list at least 10 MPG better mileage than the US websites. The few exceptions are car companies like Subaru which have never stressed mileage...

How do I get my $1000.00 rebate that was promised when we purchased our Toyota Yaris Re: John Kwan's post: The difference between Canadian and US milage estimates is due to the size difference between US and Canadian (imperial) gallons...The Canadian gallon being 20% larger. 3.78 litres per US Gallon vs. 4.54 litres per Canadian (imperial) gallon. Similarly the Imperial pint is 20 oz vs. 16 oz (US) and 40 oz (imperial quart) vs. 32 oz (US qt) How do I go about getting my rebate for buying a 2007 Toyota Yaris? I want to know how to get my rebate? I leased my vehichle on August 23, 2007 from the Toyota Dealership on Kenmount Road in St. John's on August 23, 2007? Does that apply to suv's and pickup's How do I go about getting the rebate for the Jeep Patriot? WE JUST BOUGHT A MAZDA 3 2008. ARE WE ELIGIBLE FOR A REBATE, AND HOW DO WE APPLY? What a lame attempt by the government to motivate Canadian consumers to purchase fuel efficient cars. The government proposes a Green Levy of a few thousand dollars for consumers who purchase vehicles with poor gas mileage. Upon visiting the Canadian Natural Resources Website and reading their fuel consumption findings on every car sold in Canada, my initial thought was confirmed. Do you really believe that someone purchasing a vehicle that only gets 18 mpg (or worse) really cares about an extra$4000?
The fuel consumption guide can be sorted by fuel consumption, so I found the first few cars with 18 mpg or worse (and found a huge number of pick up trucks in there), so I had to keep looking in order to find a car - and happen to come across the Audi S4. A quick visit to the Audi website shows that a S4 starts at $70,000. Think about it, is an Audi owner really all that concerned about spending another$4000 for a Green Levy? I don't think so. Why don't we take another random example?
Scrolling down towards the 13 mpg cars shows more and more pickup trucks, so I kept looking. Oh - what about an American made gas guzzler? Cadillac's XLR roadster comes in with a 18 mpg rating. And for those owners of GM's flagship luxury car, what's an extra 4 grand when you already spent $98,995 on your "pride and joy". My final point - stop with the rediculous taxes, if you really want to make people second guess about their next vehicle purchase, start taxing them on percentages (10% for example), not just round numbers. Maybe then the Lamborghini owners might think twice before slapping down$300,000 to drive around in style.
And what's the big idea of leaving out the pickup trucks? Why are they so special?

Since pickups are excused from the levy,the whole thing becomes farcical.

WOULD I BE ENTITLED FOR THE FUEL TAX REBATE IF I BOUGHT A CAR IN THE UNITED STATES/

WE bought A Honda Fit 2008 on June 4th are we not intitled to a rebate on it .It gets 50 miles to the gallon of gas
Thank you
Maxine

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