The Canadian NGV Market – Taxes, Subsidies and Government

The final instalment in our series focusing on the NGV Market in Canada

Environmental regulation in Canada is constantly evolving, and as such can be seen as being a cause for concern amongst anyone involved in the natural gas vehicles sector. However, there is no doubting the willingness of stakeholders and operators to comply, as long as legislation and guidance is clear and fair.

Here, we look at how worries over equipment and infrastructure availability are posing questions about Canada’s ability to meet it new targets, and explore the areas in government policy where some in the industry feel more could be done to help Canada move more effectively towards its clean energy goals.

Policy

According to Arvind Ramakrishnan, Energy Products and Services Manager at Fortis BC, The Greenhouse Gas Reduction Regulation (GGRR) has been a key incentive. “Enacted by the BC government, no other utility has made the kind of progress we have to date,” Arvind told FC Gas Intelligence. Progress in this field has included getting 400 NGVs on the road, as well as considerable success in the use of CNG in the refuse and transit segments.

Meanwhile, for Chris Hoad, ENN Canada Marketing Manager, greenhouse gas regulations on the trucking industry are getting tighter, which is a significant spur for fleet managers moving to NGVs. There remains a relatively slow rate of adoption, however, which could mean that Canada may be unable to meet stricter regulation expected around 2018.

“The trucking community has been plagued with greenhouse gas standards and we know those are getting tighter. We had an email from the Canadian Trucking Alliance urging the government to do something because they’re concerned that the US with its far advanced natural gas infrastructure will dictate stricter emission policy and it will be tough for Canada to harmonize with their GHG targets," Hoad said.

Alicia Milner, CNGVA President, adds that Government has a central role to play in helping to create the confidence needed to stimulate private sector investments and to drive the country towards harmonized compliance on vehicle regulations, while for Ritch Murray of Enbridge Gas Distribution, some work still remains in terms of harmonizing certain policies across provinces.

Tax

ENN are looking for tax certainty by 2021, according to Chris Hoad. “Tax certainty is currently a big problem, and one the government can act on. There’s too much back and forth on whether to tax LNG and it’s scaring fleet owners, causing them not to invest.

“One fleet is running natural gas but is not putting trucks into Ontario because they’re not sure of what the tax implications are. They know it’s a heavy tax province and are worried that this will offset the gains from NG prices,” Hoad said.

Weight restrictions

For Chris Hoad, some form of exception for heavy duty NGVs on the weight question were needed. However, there are no moves towards this at present.

“There is no doubt that trucks run heavier in Canada,” said CNGVA’s Milner. “With the natural gas power threshold at 400hp, if a fleet is operating at 475hp they will have to wait.”

Milner adds that early adopters have used natural gas for Long Combination Vehicles (LCV) with double trailers with no problems, but they have had to manage the total vehicle weight. Despite this, one fleet showed a greenhouse gas reductions of over 70% when they combined natural gas with an LCV and optimized routing.

The way forward

It is well known that Canada lags behind the US when it comes to the deployment of natural gas vehicles, although there are reasons for this.

"The US had an immediate imperative to find a replacement for expensive, foreign oil as a vehicle fuel and acted with incentives to jumpstart the market," says Gordon Exel, president of Cummins Westport Inc.

In Canada meanwhile, there are few incentives of any kind in place to help Canadian fleets make the switch.

“The big thing that’s needed is for shippers to step up and see the potential benefits from requiring lower emissions from their carriers,” said Alicia Milner. “Shippers need to begin rewarding carriers that can provide contracts with natural gas. We haven’t seen that pull from shippers in the Canadian market but it’s a huge driver in the marketplace.”

For Chris Hoad, meanwhile, the most important driver will be education. This, indeed, he sees as an area where the Government is making an impact, with the implementation roadmap and education schemes.

Along with the obvious advantages of incentive schemes, subsidies and tax breaks, the removal of uncertainty is something that could really accelerate the growth of NGVs in Canada. Markets being what they are, there will always be some degree of uncertainty when it comes to infrastructure investment and thus fuel availability, but it becomes clear that clear policy on fuel and weight taxes will make a big difference to NGV uptake.

Compliance with regulations emissions is desired by fleets and the benefits of moving to a cleaner, alternative fuel are largely understood, but it will take a combination of government and private enterprise to answer these questions and the response will not be immediate.