Impact of Ontario’s cap-and-trade plan on gasoline prices

Categories: Big picture
Published on: March 1, 2016

Transition Brockville / 01 March 2016

Some back-of-the-napkin calculations by Alan Medcalf: It looks like the additional cost at the pumps will start at $0.043/litre.

NRC estimates that the average vehicle produces 2.3kg/CO2 per litre burned, which means that CO2 will be priced into the pumps at $18.70/metric ton of CO2 – quite a bit below where it needs to be, but a start. $30/metric ton of CO2 would be about $0.07/litre, which is where B.C. is at right now. The average car on the road today, according to NRC as well, burns 10.9 l/100km, so the additional cost per km averages to $0.043*10.9/100km = $0.47/100km, or an increase of just 0.8% on the average per km cost of operating a vehicle, based on CRA’s allowable per km expense of $0.55.

Based on BC experience and recent auto industry sales results, this will start to swing the pendulum back to purchases of more fuel efficient vehicles. It will be a small nudge for continued R&D into more efficient vehicles, and it’s a small offset for the much higher social costs per litre of fuel burned in cars.