This article was first published in Castanet Mar 5, 2024
It sounded like a great idea. Women need menstrual products once a month. These products are not discretionary, they are necessary, so why should people in the United Kingdom be forced to pay the VAT tax? Following this reasoning the “tampon tax” was repealed in 2021, lifting a 5% tax. However, the results were unexpected and disappointing -- retailers responded by raising prices and consumers only experienced a savings of 1%.
The same thing is happening in the sustainability space. There’s a particularly distorted interaction between the auto industry quotas and government rebates. In the US California (and eleven other states) set up a Zero Emission Vehicle Program, which requires automakers to sell an increasing percentage of electric vehicles (EVs). The US also has state and federal incentives -- $1,000 to $7,500 in state incentives and $7,500 in federal tax credits.
Automakers find it more expensive to build electric vehicles. Automakers, whose goal is to make a profit, comply with the requirements by selling the minimum number of EVs. In the absence of incentives how do automakers encourage more EV sales? They lower prices. Along comes state and federal incentives, which raise consumer demand for EVs. Because it is still in the automakers best interest to produce fewer EVs, this allows companies to charge more.
Canada is in a similar situation. Nationwide EV sales for light duty vehicle automakers are required to be 20% of the total by 2026, 60% of the total in 2030 and 100% by 2035. BC provincial incentives are $2,000 - 4,000 and federal incentives are $2,000-5,000. Here we have the same tradeoff -- it is in the automakers best interest to only meet minimum sales targets, so the rebates, rather than increase the number of EV sales, raises the cost to the consumer.
We see a similar situation with heat pumps and rebates in BC. Clean BC, BC Hydro and Fortis BC are offering rebates for heat pumps. The general rebates range from $1,000-$9000 (in addition to federal rebates) and cover systems from minisplits to central forced air. There is anecdotal evidence that suggests that when the rebates began quotes for installing heat pumps went up.
It is harder to identify rebate inflation because most contractors don’t provide itemized quotes. Larry Whaley with Nanaimo Climate Action found, when he went to have a heat pump installed in his home, that quotes were between $22,000-32,000. He had done research on affordable and reliable heat pumps and found the cost of the heat pump was a small fraction of the total cost. He asked for contractors to break the quote into two parts: the cost of the heat pump and the cost to install it. Out of more than ten qualified installers, only two would provide a break down -- and those quotes were significantly lower. He finally chose “Supersave Heating, Plumbing and Cooling” who provided a quote of $11,400 dollars. Income-qualified rebates covered all but $1,400.
There are reasons why contractors, in general, don’t provide itemized quotes. Some find that itemized quotes result in an endless round of bargaining (“How much would it cost to leave this in and take that out?”). Some find that clients try to swap quality parts with cheaper items that break, forcing the contractor to come back and replace them. However, one of the strongest forces for preventing rebate inflation is transparency, which will require itemized quotes.
Geoff de Ruiter is also concerned about prices for heat pump systems -- in this case markup between the manufactures and the homeowners. In October 2023 he put together a study: “Supply Chain Costing Spotlight for Central Forced Air Heat Pumps.” Heat pumps are marked up at three points: when the manufacturer sells them to the wholesalers, when the wholesaler sells them to the installer and when the installer contracts with the homeowner. The most commonly installed heat pump is 36,000 BTU/3.0 ton/11 kW and the average installation cost in BC is $19,000. However, if BC could make use of wholesale pricing, cost to the consumer would come down as low as $13,100. If BC could take advantage of wholesale pricing we could afford to install many more heat pumps. This is actually being done for PEI, where heat pumps are purchased at wholesale prices in order to provide low income households with free heat pumps.
Consumer costs in BC for heat pump installation, September 2023, courtesy of Geoff de Ruiter
We don’t have unlimited funding to throw at carbon reduction, so it is critical that every dollar of taxpayer or utility-payer money is put to good use. Pricing transparency is needed for rebates to do their jobs. Let’s spend smarter when it comes to carbon reduction.
More information on pricing heat pumps can be found at Nanaimo Climate Action: https://www.nanaimoclimateaction.org/
Articles and cartoons on Teaspoon Energy by Kristy Dyer are licensed under a Creative Commons Attribution-NoDerivatives 4.0 International License You may reprint this as-is for free.
Comments
Post a Comment