I have good news for the environmentalists who took to the streets in Montreal on Friday. News that should make our politicians think, at the risk of displeasing motorists.
Posted at 6:30 a.m.
The explosion in gas prices at the pump over the past two years has pushed summer fuel consumption in the United States back to a 22-year low, if we exclude the exceptional summer of 2020 when the pandemic began. . And this decline has very concrete effects on global warming, I have seen.
Roughly speaking, the lower volume consumed this summer in the United States translates into a saving of 32 million tonnes of GHGs compared to the peak of 2016. This is the equivalent of 40% of all GHG emissions produced in Quebec. annually.
How do we arrive at such a number? Comparing the 8.8 million daily barrels of gasoline consumed by Americans this summer to 9.7 million in the summer of 2016, according to data from the US Energy Information Administration.
For the 12 weeks of summer, the daily difference represents 77 million barrels saved. It is enormous.
Knowing that each barrel of gasoline emits 0.41 tonnes of GHGs when consumed by motorists, we can estimate that the atmosphere has been spared 32 million tonnes of GHGs thanks to the increase in prices at the pump, essentially1.
“This effect of prices on gas consumption and GHGs is excellent news. It shows that solutions are possible,” rejoices Pierre-Olivier Pineau, professor at HEC Montréal specializing in energy.
Obviously, the boom in prices at the pump has forced consumers to reduce their trips during the holidays, or to find alternative transportation solutions (carpooling, public transportation, use of smaller vehicles, etc.).
The effect of prices on consumption is clearer since 2005, according to my observations (see graph). Paradoxically, such detailed, yet crucial, data does not exist in Quebec and Canada, which is deplorable.
INFOGRAPHIC THE PRESS
The major price hikes at the pump have enraged motorists, prompting politicians, including Eric Duhaime, to propose a reduction in the gas tax, as in Ontario.
But according to the majority of economists, taxes and other royalties on carbon, which affect the price of gasoline, are precisely one of the most effective solutions for reducing GHGs.
The Trudeau government plans to gradually increase its carbon “tax” to $170 by 2030, $120 more than the current level. In 2030, the tax would have an impact of 40 cents per liter of gasoline.
The recent rise in the price at the pump, from $1.07 per liter in September 2020 in Montreal to more than $2 during the summer, is a unique opportunity to see whether taxes and other forms of taxation on carbon are an effective solution to reduce GHGs.
According to my observations, in the United States, the effect is significant, but it obviously takes a very strong price increase to have tangible results.
Why is this so? Because gasoline is a rather price-inelastic commodity, unlike supermarket foods, for example. It takes a significant and prolonged increase in the price at the pump for consumers to significantly change their behavior.
Teleworking, a factor
Motorists, it must be said, do not have many options. They are not buying a new vehicle after a few weeks of higher gas prices. And public transport does not suddenly become more accessible.
It’s the exact opposite of fruits and vegetables in a supermarket: when the price of broccoli rises too much, consumers turn to carrots or other vegetables to compensate.
“In Europe, the car fleet is 20% more efficient (in liters per 100 km) because the taxes on the purchase of vehicles and on fuel are higher [depuis longtemps] “, argues Pierre-Olivier Pineau.
Telework is another factor that plays in favor of a drop in consumption. During the announcement of its recent results, Alimentation Couche-Tard, one of the main gasoline retailers, also mentioned working from home and the increase in the price of fuel to explain the drop in its volumes. gasoline sold compared to last year.
The decrease for the same stores is 4% in the United States and 3.7% in Europe, compared to an increase of 0.4% in Canada2.
Yes to the bonus-malus
That said, the party might be short-lived for environmentalists. The US Federal Reserve’s interest rate hike had the effect of pushing the price of a barrel of oil below US$79 a barrel on Friday. This same barrel was trading for US$120 in early June.
The price at the pump is likely to continue to fall, as it has been doing for several weeks. It will relieve consumers, who are facing historic inflation, but the environment will suffer, once again.
In this context, the proposals of Québec solidaire or the Parti Québécois aimed at improving the supply of public transport and lowering fares are welcome, although several aspects could be rethought.
Similarly, the higher tax on gas-guzzling vehicles, but lower on greener ones (bonus-malus), as suggested by Québec solidaire, is a good idea. Do we want to reduce GHGs or not?
1. The summer data I used is from late June to mid-September for each year. This summer, consumption fell by 7% compared to the corresponding period of 2021 (and by almost 10% compared to the peak of 2016). The price at the pump has climbed 33% between the summers of 2021 and 2022, reaching US$4.31 per gallon this summer, on average.
2. However, this pullback had no impact on profits, given the significant increase in profit margins on gas, among other things. Couche-Tard’s earnings per share were up nearly 20% in the quarter ended July 17.