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Vol. 144, No. 21 — October 13, 2010

Registration

SOR/2010-201 September 23, 2010

CANADIAN ENVIRONMENTAL PROTECTION ACT, 1999

P.C. 2010-1162 September 23, 2010

Whereas, pursuant to subsection 332(1) (see footnote a) of the Canadian Environmental Protection Act, 1999 (see footnote b), the Minister of the Environment published in the Canada Gazette, Part I, on April 17, 2010, a copy of the proposed Passenger Automobile and Light Truck Greenhouse Gas Emission Regulations, substantially in the annexed form, and persons were given an opportunity to file comments with respect to the Regulations or to file a notice of objection requesting that a board of review be established and stating the reasons for the objection;

Therefore, Her Excellency the Governor General in Council, on the recommendation of the Minister of the Environment, pursuant to sections 160 and 162 of the Canadian Environmental Protection Act, 1999 (see footnote c), hereby makes the annexed Passenger Automobile and Light Truck Greenhouse Gas Emission Regulations.

PASSENGER AUTOMOBILE AND LIGHT TRUCK GREENHOUSE GAS EMISSION REGULATIONS

INTERPRETATION

Definitions

1. (1) The following definitions apply in these Regulations.

“Act”
« Loi »

“Act” means the Canadian Environmental Protection Act, 1999.

“advanced technology vehicle”
« véhicule à technologie de pointe »

“advanced technology vehicle” means an electric vehicle, a plug-in hybrid electric vehicle or a fuel cell vehicle.

“alcohol dual fuel vehicle”
« véhicule à alcool à double carburant »

“alcohol dual fuel vehicle” means a vehicle that

(a) is designed to operate either on

(i) alcohol fuel or gasoline, or

(ii) alcohol fuel or diesel fuel;

(b) yields equal or greater energy efficiency, calculated in accordance with section 510(g)(1) of Title 40, chapter I, part 600, subpart F, of the CFR, while operating on alcohol fuel as it does while operating on gasoline or diesel fuel; and

(c) meets or exceeds the minimum driving range set out in section 5(a) of Title 49, subtitle B, chapter V, part 538, of the CFR.

“alcohol fuel”
« alcool carburant »

“alcohol fuel” means a fuel mixture containing 85% or more by volume of methanol, ethanol, or other alcohols.

“approach angle”
« angle d’approche »

“approach angle” means the smallest angle, in a plan side view of a vehicle, formed by the level surface on which the vehicle is standing and a line tangent to the front tire static loaded radius arc and touching the underside of the vehicle forward of the front tire.

“automobile”
« automobile »

“automobile” means any four-wheeled self-propelled vehicle that is designed for use on highways and that has a GVWR of less than 4 536 kg (10,000 pounds), except

(a) a vehicle manufactured in different stages by two or more manufacturers, if no intermediate or final-stage manufacturer of that vehicle manufactures more than 10,000 multistage vehicles per year; and

(b) a work truck.

“axle clearance”
« garde au sol sous les essieux »

“axle clearance” means the vertical distance from the level surface on which a vehicle is standing to the lowest point on the axle differential of the vehicle.

“break-over angle”
« angle de rampe »

“break-over angle” means the supplement of the largest angle, in the plan side view of a vehicle, that can be formed by two lines tangent to the front and rear static loaded radii arcs and intersecting at a point on the underside of the vehicle.

“car line”
« ligne de voitures »

“car line” means a group of vehicles of the same make and, if applicable, the same car division, that have a similar body or chassis.

“CFR”
« CFR »

“CFR” means the Code of Federal Regulations of the United States as amended from time to time.

“CO2
« CO2 »

“CO2” means carbon dioxide.

“curb weight”
« masse en état de marche »

“curb weight” means the actual or manufacturer’s estimated weight of a vehicle in operational status with all standard equipment and weight of fuel at nominal tank capacity and the weight of optional equipment.

“departure angle”
« angle de sortie »

“departure angle” means the smallest angle, in a plan side view of a vehicle, formed by the level surface on which the vehicle is standing and a line tangent to the rear tire static loaded radius arc and touching the underside of the vehicle rearward of the rear tire.

“electric vehicle”
« véhicule électrique »

“electric vehicle” means a vehicle that

(a) conforms to the emission standards of bin 1 set out in a horizontal row in Table S04-1 in section 1811 of Title 40, chapter I, subchapter C, part 86, subpart S, of the CFR;

(b) is powered solely by an electric motor drawing current from a rechargeable energy storage system, provided that recharge energy can be drawn from a source that is not on-board the vehicle; and

(c) does not have an on-board combustion engine-generator system as a means of providing electrical energy.

“emergency vehicle”
« véhicule d’urgence »

“emergency vehicle” means a vehicle that is manufactured primarily for use as an ambulance or a police vehicle.

“EPA”
« EPA »

“EPA” means the United States Environmental Protection Agency.

“EPA certificate”
« certificat de l’EPA »

“EPA certificate” means a certificate of conformity to U.S. federal standards issued by the EPA.

“footprint”
« empreinte »

“footprint” means the result of the product of the average width (measured in inches and rounded to the nearest tenth of an inch) of the lateral distance between the centrelines of the front and rear base tires at ground, multiplied by the longitudinal distance between the front and rear wheel centrelines (measured in inches and rounded to the nearest tenth of an inch), divided by 144 and rounded to the nearest tenth of a square foot.

“fuel cell vehicle”
« véhicule à pile à combustible »

“fuel cell vehicle” means an electric vehicle propelled solely by an electric motor, the energy for the motor being supplied by an electrochemical cell that produces electricity without fuel combustion.

“GVWR”
« PNBV »

“GVWR” means the gross vehicle weight rating specified by a manufacturer as the maximum design loaded weight of a single vehicle.

“hybrid electric vehicle”
« véhicule électrique hybride »

“hybrid electric vehicle” means a vehicle that is powered by an electric motor drawing current from a rechargeable energy storage system from an on-board electric source and by an internal combustion engine or heat engine.

“light truck”
« camion léger »

“light truck” means an automobile

(a) that has four-wheel drive or a GVWR of more than 2 722 kg (6,000 pounds) and that has at least four of the following characteristics calculated when the automobile is at curb weight, on a level surface, with the front wheels parallel to the automobile’s longitudinal centreline and the tires inflated to the manufacturer’s recommended pressure:

(i) approach angle of not less than 28 degrees,

(ii) break-over angle of not less than 14 degrees,

(iii) departure angle of not less than 20 degrees,

(iv) running clearance of not less than 20 centimetres,

(v) front and rear axle clearances of not less than 18 centimetres; or

(b) that is designed to perform at least one of the following functions:

(i) transport more than 10 persons,

(ii) provide temporary living quarters,

(iii) transport property on an open bed,

(iv) provide greater cargo-carrying than passenger-carrying volume, the cargo-carrying volume of a vehicle sold with a second-row seat being determined with that seat installed, regardless of whether or not the manufacturer has described that seat as optional,

(v) permit expanded use of the automobile for cargo-carrying purposes through the removal or stowing of seats to create a flat surface extending from the forwardmost point of installation of those seats to the rear of the automobile’s interior, with automobiles of the 2012 and subsequent model years being equipped with at least three rows of designated seating positions as standard equipment.

“model type”
« type de modèle »

“model type” means passenger automobiles or light trucks that have the same combination of car line, transmission class and basic engine or basic electric motor.

“model year”
« année de modèle »

“model year” means the year, as determined under section 4, that is used by a manufacturer to designate a model of vehicle.

“natural gas dual fuel vehicle”
« véhicule à gaz naturel à double carburant »

“natural gas dual fuel vehicle” means a vehicle that

(a) is designed to operate either on

(i) natural gas or gasoline, or

(ii) natural gas or diesel fuel;

(b) yields equal or greater energy efficiency, calculated in accordance with section 510(g)(1) of Title 40, chapter I, part 600, subpart F, of the CFR, while operating on natural gas as it does while operating on gasoline or diesel fuel; and

(c) meets or exceeds the minimum driving range set out in section 5(a) of Title 49, subtitle B, chapter V, part 538, of the CFR.

“nominal tank capacity”
« capacité nominale du réservoir à carburant »

“nominal tank capacity” means the volume of the fuel tank specified by the manufacturer to the nearest three eighths of a litre (one tenth of a U.S. gallon).

“passenger automobile”
« automobile à passagers »

“passenger automobile” means any automobile, other than a light truck, that is designed for use in the transportation of not more than 10 persons.

“plug-in hybrid electric vehicle”
« véhicule électrique hybride rechargeable »

“plug-in hybrid electric vehicle” means a hybrid electric vehicle that has the capability to recharge its energy storage system from an electric source that is not on board the vehicle.

“running clearance”
« jeu fonctionnel »

“running clearance” means the vertical distance from the level surface on which a vehicle is standing to the lowest point on the vehicle, excluding any point on a component that forms part of the vehicle’s unsprung weight.

“static loaded radius arc”
« arc du rayon sous charge »

“static loaded radius arc” means a portion of a circle whose centre is the centre of a standard tire-rim combination of a vehicle and whose radius is the distance from that centre to the level surface on which the vehicle is standing, measured with the vehicle at curb weight, the wheel parallel to the vehicle’s longitudinal centreline and the tire inflated to the manufacturer’s recommended pressure.

“temporary living quarters”
« abri provisoire »

“temporary living quarters” means a space in the interior of an automobile that includes sleeping surfaces and household conveniences and in which people may temporarily live.

“transmission class”
« catégorie de transmissions »

“transmission class” means a group of transmissions having the following common features:

(a) basic transmission type;

(b) number of forward gears used in the tests conducted for the purposes of subsection 18(3);

(c) drive system;

(d) type of overdrive, if applicable; and

(e) torque converter type, if applicable.

“useful life”
« durée de vie utile »

“useful life” means the period of time or use in respect of which an emission standard applies to a vehicle, as follows

(a) in the case of a passenger automobile or light truck other than a “medium-duty passenger vehicle” as defined in subsection 1(1) of the On-Road Vehicle and Engine Emission Regulations — 10 years or 120,000 miles; whichever occurs first; or

(b) in the case of a light truck that is a “medium-duty passenger vehicle” as defined in subsection 1(1) of the On-Road Vehicle and Engine Emission Regulations — 11 years or 120,000 miles; whichever occurs first.

“work truck”
« camion de travail »

“work truck” means a vehicle that has a GVWR of more than 3 856 kg (8,500 pounds) and less than or equal to 4 536 kg (10,000 pounds) and does not include a medium-duty passenger vehicle as defined in subsection 1(1) of the On-Road Vehicle and Engine Emission Regulations.

Basic engine and basic electric motor

(2) For the purposes of the definition “model type” in subsection (1), passenger automobiles or light trucks have the same basic engine or basic electric motor, if

(a) in the case of vehicles other than electric vehicles, their engines have the same

(i) manufacturer,

(ii) engine displacement,

(iii) number of cylinders,

(iv) fuel system, and

(v) catalyst; or

(b) in the case of electric vehicles, their electric motors have the same

(i) manufacturer,

(ii) electric traction motor,

(iii) motor controller,

(iv) battery configuration,

(v) electrical charging system, and

(vi) energy storage device.

CFR

(3) Standards that are incorporated by reference in these Regulations from the CFR are those expressly set out in the CFR and must be read as excluding

(a) references to the EPA or the Administrator of the EPA exercising discretion in any way;

(b) references to the Secretary of Transportation exercising discretion in any way;

(c) alternative standards related to fleet averages, other averages, emission credits, small volume manufacturers, or financial hardship; and

(d) standards or evidence of conformity of any authority other than the EPA.

PURPOSE

Purpose

2. The purpose of these Regulations is to reduce greenhouse gas emissions from passenger automobiles and light trucks by establishing emission standards and test procedures that are aligned with the federal requirements of the United States.

BACKGROUND

Background

3. These Regulations set out

(a) prescribed classes of vehicles for the purposes of section 149 of the Act;

(b) requirements respecting the conformity of passenger automobiles and light trucks with greenhouse gas emission standards for the purposes of section 153 of the Act;

(c) requirements respecting the conformity of fleets of passenger automobiles and light trucks with greenhouse gas emission standards and other requirements for carrying out the purposes of Division 5 of Part 7 of the Act; and

(d) a credit system for the purposes of section 162 of the Act.

MODEL YEAR

Model year

4. (1) A year that is used by a manufacturer as a model year must

(a) if the period of production of a model of vehicle does not include January 1 of a calendar year, correspond to the calendar year during which the period of production falls; or

(b) if the period of production of a model of vehicle includes January 1 of a calendar year, correspond to that calendar year.

Production period

(2) The period of production of a model of vehicle must include only one January 1.

PRESCRIBED CLASSES OF VEHICLES

Classes

5. (1) In these Regulations, subject to subsection (2), the following classes of vehicles are prescribed for the purposes of the definition “vehicle” in section 149 of the Act:

(a) passenger automobiles; and

(b) light trucks.

Exclusion

(2) The prescribed classes of vehicles referred to in subsection (1) do not include any vehicle that is being exported and that is accompanied by written evidence establishing that it will not be sold or used in Canada.

Transportation within Canada

(3) For the purposes of section 152 of the Act, the prescribed vehicles are the vehicles referred to in subsection (1) for which the main assembly is completed in Canada, except any vehicle that will be used in Canada solely for purposes of exhibition, demonstration, evaluation or testing.

NATIONAL EMISSIONS MARK

Application

6. (1) Any company that intends to apply the national emissions mark set out in Schedule 2 to the On-Road Vehicle and Engine Emission Regulations to a vehicle must apply to the Minister to obtain an authorization in accordance with subsection 7(2) of those Regulations.

Exception

(2) Subsection (1) does not apply to any company that, on the day on which these Regulations come into force, is authorized to apply the national emissions mark to a vehicle under the On-Road Vehicle and Engine Emission Regulations.

National emissions mark

7. A company that applies a national emissions mark to a vehicle must comply with section 8 of the On-Road Vehicle and Engine Emission Regulations.

GREENHOUSE GAS EMISSION STANDARDS

GENERAL

Definition of “fleet”

8. (1) In subsection 10(2) and sections 13 to 40, “fleet” refers to

(a) all passenger automobiles or all light trucks of a specific model year that a company manufactures in Canada or imports into Canada for the purpose of sale of those vehicles to the first retail purchaser; or

(b) if a company makes an election under section 24, all passenger automobiles or all light trucks of a specific model year that a company manufactures in Canada or imports into Canada for the purpose of sale of those vehicles to the first retail purchaser that have not been included in the temporary optional fleet created under section 24 for that model year.

Exclusions

(2) Despite subsection (1), a company may, for the purposes of sections 13 to 40, elect to exclude from its fleets and its temporary optional fleets any of the following:

(a) the passenger automobiles or light trucks that it manufactures and that will be used in Canada solely for the purposes of exhibition, demonstration, evaluation or testing, if it reports its election to exclude those vehicles in its end of model year report;

(b) the passenger automobiles or light trucks that it imports into Canada solely for the purposes of exhibition, demonstration, evaluation or testing, if it makes a declaration in accordance with section 41 of the On-Road Vehicle and Engine Emission Regulations and reports its election to exclude those vehicles in its end of model year report.

Fleets of the 2011 model year

(3) A fleet of passenger automobiles or light trucks of the 2011 model year does not include vehicles that were manufactured before the coming into force of these Regulations, unless the company elects to include all of its passenger automobiles or light trucks of the 2011 model year in the fleet in question and reports that election in its end of model year report.

Emergency vehicles of the 2011 model year

(4) Despite subsection (1), a company may, for the purposes of sections 13 to 40, elect to exclude from its fleets of passenger automobiles and light trucks of the 2011 model year all emergency vehicles, if it reports that election in its end of model year report.

EMISSION CONTROL SYSTEMS

On-Road Vehicle and Engine Emission Regulations

9. (1) An emission control system that is installed in a vehicle to enable it to conform to the standards set out in these Regulations must be in conformity with subsection 11(1) of the On-Road Vehicle and Engine Emission Regulations.

Defeat device

(2) A vehicle must not be equipped with a defeat device.

Test procedures

(3) Subsections 11(3) and (4) of the On-Road Vehicle and Engine Emission Regulations apply, except that the test procedures in question are the ones set out in section 11.

STANDARDS FOR PASSENGER AUTOMOBILES AND LIGHT TRUCKS

Nitrous oxide and methane emission standards

10. (1) Subject to subsection (2) and section 12, passenger automobiles and light trucks of the 2012 or subsequent model years must conform to the exhaust emission standards for nitrous oxide (N2O) and methane (CH4) set out in section 1818 of Title 40, chapter I, subchapter C, part 86, subpart S, of the CFR, for the applicable model year.

Fleet emission calculation

(2) Instead of complying with subsection (1), a company may elect to include the exhaust emissions of nitrous oxide (N2O) and methane (CH4) of its passenger automobiles and light trucks of a model year when calculating their carbon-related exhaust emission value as set out in subsection 18(3) in respect of each of its fleets of that model year.

Election applicable to all models

(3) A company that makes an election under subsection (2) must ensure that it applies to all models of passenger automobiles and light trucks that it manufactures or imports.

Interpretation of standards

11. The standards referred to in section 10 are the certification and in-use standards at the applicable useful life, and include the test procedures, fuels and calculation methods set out for those standards in subpart B of Title 40, chapter I, subchapter C, part 86, of the CFR.

EPA certificate

12. (1) Every vehicle of a specific model year that is covered by an EPA certificate and that is sold concurrently in Canada and the United States must conform to, instead of the standards set out in sections 9 and 10, the certification and in-use standards referred to in the EPA certificate.

Subsection 153(3) of the Act

(2) For the purposes of subsection 153(3) of the Act, the provisions of the CFR that are applicable to a vehicle referred to in subsection (1), pursuant to the EPA certificate, correspond to the certification and in-use standards referred to in subsection (1).

EPA

(3) For the purposes of subsection 153(3) of the Act, the EPA is the prescribed agency.

FLEET AVERAGING REQUIREMENTS

General

Requirements respecting CO2 equivalent emissions

13. Subject to sections 14, 20 and 21, a company must ensure that the fleet average CO2 equivalent emission value for each fleet of its passenger automobiles and fleet of its light trucks of the 2011 and subsequent model years does not exceed the applicable fleet average CO2 equivalent emission standard for the model year in question.

Non application of the standards respecting CO2 equivalent emissions

14. (1) A company that manufactured or imported in total less than 750 passenger automobiles and light trucks for either the 2008 or 2009 model years for sale in Canada is not subject to sections 13 and 17 to 20 for vehicles of the 2012 model year or vehicles of a subsequent model year provided that

(a) its average number of passenger automobiles and light trucks manufactured or imported for sale in Canada for the three most recent consecutive model years preceding the model year in question is less than 750; and

(b) the company submits a declaration as set out in section 35.

Conditions

(2) If a company’s average number of passenger automobiles and light trucks for the three most recent consecutive model years, that are manufactured or imported for sale in Canada, are equal to or more than 750 — other than by reason of the company purchasing another company —, the company becomes subject to sections 13, 17 to 20, and sections 32 to 33, for its passenger automobiles and light trucks of the following model year:

(a) if that average number is less than 7,500, that of the second model year after the last model year used to establish the average number; or

(b) if that average number is equal to or greater than 7,500, that of the model year after the last model year used to establish the average number.

Rounding

15. If any of the calculations in these Regulations, except for those in paragraphs 17(4)(b) and (5)(b), results in a number that is not a whole number, the number must be rounded to the nearest whole number in accordance with section 6 of the American Society for Testing and Materials method ASTM E 29-93a, entitled Standard Practice for Using Significant Digits in Test Data to Determine Conformance with Specifications.

Fleet Average CO 2 Equivalent Emission Standards

Calculation of fleet average CO2 equivalent emission standard for the 2011 model year

16. (1) A company must calculate the fleet average CO2 equivalent emission standard, expressed in grams of CO2 equivalent per mile, in respect of its fleet of passenger automobiles and its fleet of light trucks of the 2011 model year, by dividing 8,887 by the following:

(a) in the case of passenger automobiles, the manufacturer specific passenger automobile fuel economy level for the 2011 model year determined in accordance with section 5(b) of Title 49, subtitle B, chapter V, part 531, of the CFR, applicable to that model year; and

(b) in the case of light trucks, the manufacturer specific light truck fuel economy level for the 2011 model year determined in accordance with section 5(a) of Title 49, subtitle B, chapter V, part 533, of the CFR, applicable to that model year.

Modification

(2) For the purposes of subsection (1), the equation in Figure 1 set out in section 5 of parts 531 and 533 of Title 49, subtitle B, chapter V, of the CFR, is modified as follows:

(a) “N” is the total number of passenger automobiles or light trucks in the fleet;

(b) “Ni” is the number of passenger automobiles or light trucks in each group “i” in the fleet; and

(c) “i” is a group of passenger automobiles or light trucks of the same model type and that have the same footprint.

Group

17. (1) For the purposes of this section, passenger automobiles or light trucks of the same model type and that have the same footprint constitute a group.

Rounding

(2) The CO2 emission target values calculated in accordance with paragraphs (4)(b) and (5)(b) must be rounded to the nearest 0.1 gram per mile.

Calculation of fleet average CO2 equivalent emission standard for 2012 and subsequent model years

(3) Subject to section 24, a company must calculate the fleet average CO2 equivalent emission standard in respect of each fleet of its passenger automobiles and fleet of its light trucks of the 2012 and subsequent model years in accordance with the following formula:

calculate-calcul

where

A is the CO2 emission target value for each group of passenger automobiles or light trucks, determined in accordance with subsection (4) or (5), as the case may be, and expressed in grams of CO2 per mile;

B is the number of passenger automobiles or light trucks in the group in question; and

C is the total number of passenger automobiles or light trucks in the fleet.

Targets — fleet of passenger automobiles

(4) The CO2 emission target value applicable to a group of passenger automobiles of a given model year corresponds to the following:

(a) in the case of each group with a footprint that is less than or equal to 3.8 m2 (41 square feet), the CO2 emission target value is as set out in the following table for the model year in question:

Item

Column 1

Model Year

Column 2

CO2 Emission Target Value (grams/mile)

1.

2012

244.0

2.

2013

237.0

3.

2014

228.0

4.

2015

217.0

5.

2016 and subsequent model years

206.0

(b) in the case of each group with a footprint that is greater than 3.8 m2 (41 square feet) and less than or equal to 5.2 m2 (56 square feet), the CO2 emission target value is to be calculated using the following formula:

(4.72 × f) + b

where

f is the footprint of the group, expressed in square feet, and

b is the value set out in the following table for the model year in question:

Item

Column 1

Model Year

Column 2

b

1.

2012

50.5

2.

2013

43.3

3.

2014

34.8

4.

2015

23.4

5.

2016 and subsequent model years

12.7

(c) in the case of each group with a footprint that is greater than 5.2 m2 (56 square feet), the CO2 emission target value is as set out in the following table for the model year in question:

Item

Column 1

Model Year

Column 2

CO2 Emission Target Value (grams/mile)

1.

2012

315.0

2.

2013

307.0

3.

2014

299.0

4.

2015

288.0

5.

2016 and subsequent model years

277.0

Targets — fleet of light trucks

(5) The CO2 emission target value applicable to a group of light trucks of a given model year corresponds to the following:

(a) in the case of each group with a footprint that is less than or equal to 3.8 m2 (41 square feet), the CO2 emission target value is as set out in the following table for the model year in question:

Item

Column 1

Model Year

Column 2

CO2 Emission Target Value (grams/mile)

1.

2012

294.0

2.

2013

284.0

3.

2014

275.0

4.

2015

261.0

5.

2016 and subsequent model years

247.0

(b) in the case of each group with a footprint that is greater than 3.8 m2 (41 square feet) and less than or equal to 6.1 m2 (66 square feet), the CO2 emission target value is to be calculated using the following formula:

(4.04 × f) + b

where

f is the footprint of the group, expressed in square feet, and

b is the value set out in the following table for the model year in question:

Item

Column 1

Model Year

Column 2

b

1.

2012

128.6

2.

2013

118.7

3.

2014

109.4

4.

2015

95.1

5.

2016 and subsequent model years

81.1

(c) in the case of each group with a footprint that is greater than 6.1 m2 (66 square feet), the CO2 emission target value is as set out in the following table for the model year in question:

Item

Column 1

Model Year

Column 2

CO2 Emission Target Value (grams/mile)

1.

2012

395.0

2.

2013

385.0

3.

2014

376.0

4.

2015

362.0

5.

2016 and subsequent model years

348.0

Calculation of Fleet Average CO2 Equivalent Emission Values

Fleet average CO2 equivalent emission value

18. (1) A company must calculate the fleet average CO2 equivalent emission value for each fleet of its passenger automobiles and fleet of its light trucks of the 2011 and subsequent model years in accordance with the following formula:

D – E – F– G

where

D is the fleet average carbon-related exhaust emission value for each fleet determined in accordance with subsections (2) or (3), subject to subsections (5) and (6);

E is the allowance for reduction of air conditioning refrigerant leakage determined in accordance with subsection (7);

F is the allowance for improving air conditioning system efficiency determined in accordance with subsection (8); and

G is the allowance for the use of innovative technologies that have a measurable CO2 emission reduction, determined in accordance with subsection (9).

Fleet average CO2 equivalent emission value for the 2011 model year

(2) The fleet average carbon-related exhaust emission value for the 2011 model year, expressed in grams of CO2 equivalent per mile, is calculated by dividing 8,887 by the company’s fleet average fuel economy for that model year determined in accordance with the following formula:

calculate-calcul1

where

A is the fuel economy level for each model type, expressed in miles per gallon, determined in accordance with the following provisions, taking into account subsection 19(2):

(a) in the case of advanced technology vehicles, the provisions of section 208 of Title 40, chapter I, part 600, subpart C, of the CFR, for the model year in question, and

(b) in all other cases, the provisions of section 510(c)(2) of Title 40, chapter I, part 600, subpart F, of the CFR, for the model year in question;

B is the number of vehicles of the model type in question in the fleet; and

C is the total number of vehicles in the fleet.

Fleet average carbon-related exhaust emission value for 2012 and subsequent model years

(3) Subject to subsection (11), the fleet average carbon-related exhaust emission value for each of the 2012 and subsequent model years and for the application of section 29 for fleets of the 2008 to 2010 model years is calculated using the following formula:

calculate-calcul1

where

A is the following carbon-related exhaust emission value for each model type, and includes, if applicable, the exhaust emission for nitrous oxide (N2O) and methane (CH4):

(a) in the case of electric vehicles and fuel cell vehicles, 0 gram of CO2 equivalent per mile,

(b) in the case of plug-in hybrid electric vehicles, the value determined in accordance with the provisions of section 208 of Title 40, chapter I, part 600, subpart C, of the CFR, for the model year in question, taking into account subsection 19(2), and expressed in grams of CO2 equivalent per mile, and

(c) in all other cases, the value determined in accordance with the provisions of section 510(j)(2) of Title 40, chapter I, part 600, subpart F, of the CFR, for the model year in question, taking into account subsection 19(2), and expressed in grams of CO2 equivalent per mile;

B is the number of vehicles of the model type in question in the fleet; and

C is the total number of vehicles in the fleet.

Advanced Technology

(4) When calculating the fleet average carbon-related exhaust emission value in accordance with the provisions of subsections (2) and (3) for the 2011 to 2016 model years, a company may, for the purposes of amounts B and C in subsections (2) and (3), elect to multiply the number of advanced technology vehicles in its fleet by 1.2, if the company reports this election and indicates the number of credits obtained as a result of this election in its end of model year report.

Maximum decrease for dual fuel vehicles

(5) For the purposes of subsections (2) and (3) for fleets of the model years 2011 to 2015 and for the application of section 29, for fleets of the 2008 to 2010 model years, if the fleet contains alcohol dual fuel vehicles or natural gas dual fuel vehicles, the fleet average carbon-related exhaust emission value is the greater of

(a) the fleet average carbon-related exhaust emission value calculated in accordance with subsections (2) or (3), and

(b) the fleet average carbon-related exhaust emission value calculated in accordance with subsections (2) or (3) but assuming that all alcohol dual fuel vehicles and natural gas dual fuel vehicles operate exclusively on gasoline or diesel fuel, minus the applicable limit set out in section 510(i) of Title 40, chapter I, part 600, subpart F, of the CFR.

Alternative value

(6) For the purposes of sections 510(j)(2)(vi) and (vii) of Title 40, chapter I, part 600, subpart F, of the CFR, a company may use an alternative value for the weighting factor “F” if the company provides the Minister with evidence demonstrating that the alternative value of “F” is more representative of the company’s fleet.

Allowance for reduction of air conditioning refrigerant leakage

(7) A company may elect to calculate an allowance for the use, in its fleet of passenger automobiles or light trucks, of air conditioning systems that incorporate technologies designed to reduce air conditioning refrigerant leakage, using the following formula:

calculate-calcul1

where

A is the CO2 equivalent leakage reduction for each of the air conditioning systems in the fleet that incorporates those technologies, determined in accordance with the provisions of sections 166 and 1866(b) of Title 40, chapter I, subchapter C, Part 86, of the CFR and expressed in grams of CO2 equivalent per mile;

B is the total number of vehicles in the fleet equipped with the air conditioning system; and

C is the total number of vehicles in the fleet.

Allowance for improving air conditioning system efficiency

(8) A company may elect to calculate an allowance for the use, in its fleet of passenger automobiles or light trucks, of air conditioning systems that incorporate technologies designed to reduce air-conditioning-related CO2 emissions by improving the air conditioning system efficiency of those fleets, using the following formula:

calculate-calcul1

where

A is the air conditioning efficiency allowance for each of the air conditioning systems in the fleet that incorporate those technologies, determined in accordance with the provisions relating to credits in sections 165 and 1866(c) of Title 40, chapter I, subchapter C, Part 86, of the CFR and expressed in grams of CO2 per mile;

B is the total number of vehicles in the fleet equipped with the air conditioning system; and

C is the total number of vehicles in the fleet.

Allowance for innovative technologies

(9) A company may elect to calculate an allowance for the use, in its fleet of passenger automobiles or light trucks, of innovative technologies that have a measurable CO2 emission reduction, using the following formula, if the CO2 reduction cannot be captured by the test procedures used to determine the carbon-related exhaust emissions for those technologies:

calculate-calcul1

where

A is the allowance for each innovative technology used in the fleet, determined in accordance with the provisions for the 5-cycle methodology set out in section 1866(d)(2)(i) of Title 40, chapter I, subchapter C, Part 86, of the CFR and expressed in grams of CO2 per mile;

B is the total number of vehicles in the fleet equipped with the innovative technology; and

C is the total number of vehicles in the fleet.

Alternative procedure

(10) If the 5-cycle methodology referred to in subsection (9) cannot adequately measure the emission reduction attributable to an innovative technology, a company may calculate the allowance in question using an alternative procedure if

(a) the alternative procedure has been approved by the EPA for that technology, under section 1866(d)(2)(ii) of Title 40, chapter I, subchapter C, Part 86, of the CFR; and

(b) the Minister is provided with evidence of the EPA approval in the end of model year report.

Limits

(11) For the application of subsection (3), the company must replace the carbon-related exhaust emission value, referred to in the description of A, by the value of 120 grams of CO2 equivalent per mile for all its advanced technology vehicles in its fleets that are in surplus of the following applicable number:

(a) in the case of a company that manufactured or imported less than 3,750 advanced technology vehicles for the 2012 model year for sale in Canada, and has already included 30,000 advanced technology vehicles in its fleets of the 2011 to 2016 model years, or in its fleets of the 2008 to 2016 model years in the case where the company obtained early action credits in respect of its fleets of the 2008 to 2010 model years, 30,000; and

(b) in the case of a company that manufactured or imported 3,750 or more advanced technology vehicles for the 2012 model year for sale in Canada, and has already included 45,000 advanced technology vehicles included in its fleets of the 2011 to 2016 model years, or in its fleets of the 2008 to 2016 model years in the case where the company obtained early action credits in respect of its fleets of the 2008 to 2010 model years, 45,000.

Interpretation of standards

19. (1) The carbon related exhaust emission value and the fuel economy level that are calculated using the formulas set out in section 18 include the test methods, fuels and the calculation methods set out for those standards in subpart B of Title 40, chapter I, subchapter C, part 86, of the CFR.

Representative data

(2) When a company calculates the fleet average carbon-related exhaust emission value under section 18, the data and values used in the calculation of that value must represent at least 90 % of the company’s total number of vehicles in its fleet with respect to the configuration.

CO 2 Equivalent Emission Credit System

CO2 equivalent emission credits

20. (1) For the purposes of subpara graph 162(1)(b)(i) of the Act, a company obtains CO2 equivalent emission credits if the fleet average CO2 equivalent emission value in respect of a fleet of passenger automobiles or a fleet of light trucks of a specific model year is lower than the fleet average CO2 equivalent emission standard for that fleet and model year and the company reports the credits in its end of model year report.

Deficits

(2) A company incurs deficits if the fleet average CO2 equivalent emission value in respect of a fleet of passenger automobiles or a fleet of light trucks of a specific model year is higher than the fleet average CO2 equivalent emission standard for that fleet and model year.

Calculation

(3) A company must calculate the credits or deficits for each of its fleets using the following equation:

calculate-calcul2

where

ECD is the number of credits, if the result is positive, or the number of deficits, if the result is negative, expressed in megagrams of CO2 equivalent;

A is the fleet average CO2 equivalent emission standard calculated in accordance with section 16 or 17, as the case may be, expressed in grams per mile;

B is the fleet average CO2 equivalent emission value calculated in accordance with section 18, expressed in grams per mile;

C is the total number of passenger automobiles or light trucks in the fleet; and

D is the assumed total mileage of the vehicles in question, namely,

(a) 195,264 miles for a fleet of passenger automobiles, or

(b) 225,865 miles for a fleet of light trucks.

Date of credit or deficit

(4) A company obtains credits and incurs deficits for a specific fleet on the day on which the company submits the end of model year report for the model year in question.

Validity — time limit

(5) Credits obtained for a fleet of passenger automobiles or light trucks of a specific model year can be used in respect of any fleet of passenger automobiles or light trucks of five model years after the model year in respect of which the credits were obtained, after which the credits are no longer valid.

Offsetting Deficits and Use of Credits

Deficits

21. (1) Subject to subsection (5), a company must use credits obtained for a fleet of passenger automobiles or light trucks of a specific model year to offset any outstanding deficits incurred for any of its fleets.

Remaining credits

(2) A company may bank any remaining credits to offset a future deficit or may transfer the remaining credits to another company, except during the 2012 to 2015 and if applicable, 2016 model years if the company elects to create a temporary optional fleet under section 24.

Offset

(3) Subject to subsection (4), a company may offset a deficit with an equivalent number of credits obtained in accordance with section 20 or with an equivalent number of credits transferred from another company.

Adjustment

(4) The number of credits obtained in respect of fleets of the 2011 model year that contain alcohol dual fuel vehicles or natural gas dual fuel vehicles and that are available to offset a deficit incurred in respect of a fleet of passenger automobiles or light trucks of the 2012 or subsequent model years must be adjusted with the assumption that all alcohol dual fuel vehicles and natural gas dual fuel vehicles operate only on gasoline or diesel fuel.

Offset — time limit

(5) A company must offset a deficit incurred in respect of a model year no later than the day on which the company submits the end of model year report for vehicles of the third model year after the model year for which the company incurred the deficit.

Purchased or merged companies

22. (1) A company that purchases another company or that results from the merger of companies is responsible for offsetting any outstanding deficits of the purchased or merged companies.

Ceasing activities

(2) If a company ceases to manufacture, import or sell passenger automobiles or light trucks, it must, before submitting its last end of model year report, offset all outstanding deficits for its fleets.

Obtention of Credits upon Payment to the Receiver General

Receiver General — 2011 model year

23. (1) Upon payment to the Receiver General, a company may obtain the necessary number of credits to offset a deficit incurred for the 2011 model year at a rate of $20 per megagram of CO2 equivalent.

Payment date to Receiver General

(2) To obtain the credits under subsection (1), a company must make the payment no later than the day preceding the earlier of:

(a) the date of submission of the end of model year report for model year 2014; and

(b) May 1, 2015.

Restriction

(3) The credits obtained by a company under subsection (1) can only be used to offset a deficit incurred for the 2011 model year and cannot be transferred to another company.

TEMPORARY OPTIONAL FLEETS

Optional fleet

24. (1) Subject to sections 27 and 28, a company may elect not to include for a given year a certain number of vehicles of its fleets in the calculation of the fleet average CO2 equivalent emission standard set out in section 17 and to create temporary optional fleets of passenger automobiles or light trucks if the following conditions are met:

(a) if the company manufactured or imported in total 750 or more, but less than 7,500, passenger automobiles and light trucks of the 2009 model year for sale in Canada, the combined total number of passenger automobiles and light trucks included in the temporary optional fleets must not exceed 30,000 of the model years 2012 to 2015 and 7,500 of the 2016 model year;

(b) if the company manufactured or imported in total 7,500 or more, but less than 60,000, passenger automobiles and light trucks of the 2009 model year for sale in Canada, the combined total number of passenger automobiles and light trucks included in the temporary optional fleets must not exceed 15,000 of the model years 2012 to 2015;

(c) subject to sections 25 and 26, the fleet average CO2 equivalent emission value for a company’s temporary optional fleet of passenger automobiles and temporary optional fleet of light trucks of a given model year must not exceed the optional fleet average CO2 equivalent emission standards for that model year, calculated in accordance with subsection (2); and

(d) the company must have manufactured or imported at least one passenger automobile or light truck of the 2009 model year for sale in Canada.

Optional fleet average standards

(2) A company that creates a temporary optional fleet must calculate the optional fleet average CO2 equivalent emission standard in accordance with the following formula for each model year:

calculate-calcul3

where

A is the CO2 equivalent emission target value for each group of passenger automobiles or light trucks included in the temporary optional fleet, determined in accordance with

(a) subsection 17(4) for the groups of passenger automobiles, or

(b) subsection 17(5) for the groups of light trucks;

B is the number of passenger automobiles or light trucks in the group in question; and

C is the total number of passenger automobiles or light trucks in the temporary optional fleet.

Optional fleet average values

(3) A company that creates a temporary optional fleet must determine, for each model year, the optional fleet average CO2 equivalent emission value using the formula set out in section 18.

Application of section 20

25. (1) A company that creates a temporary optional fleet of passenger automobiles or light trucks obtains credits or incurs deficits in respect of its temporary optional fleet in accordance with subsection 20(1) or (2), as the case may be.

Calculation

(2) The company must calculate the credits or deficits for each of its temporary optional fleets using the equation set out in subsection 20(3).

Application of subsection 20(4)

(3) Subsection 20(4) applies to credits obtained or deficits incurred in accordance with this section.

Validity — time limit

(4) Credits obtained for a temporary optional fleet of passenger automobiles or light trucks of a given model year can only be used to offset a deficit incurred in respect of temporary optional fleets of passenger automobiles or light trucks of the following model years, after which the credits are no longer valid:

(a) 2012 to 2016, for a company set out in paragraph 24(1)(a); or

(b) 2012 to 2015, for a company set out in paragraph 24(1)(b).

Offsetting — application of sections 21 and 22

26. (1) Subsections 21(1) and (5) and section 22 apply to credits obtained and deficits incurred for a temporary optional fleet.

Limit on use of credits

(2) A company must not use credits obtained for a temporary optional fleet to offset a deficit incurred for a fleet to which the fleet average CO2 equivalent emission standard set out in section 17 applies.

Future deficit

(3) A company may bank any remaining credits obtained for a model year for a temporary optional fleet to offset a future deficit incurred for another temporary optional fleet.

Use of credits

(4) A company must use any remaining credits obtained for a fleet of passenger automobiles or light trucks to which the fleet average CO2 equivalent emission standard set out in section 17 applies to offset a deficit incurred for a temporary optional fleet.

Merger

27. (1) If a company merges with one or more companies after the day on which these Regulations come into force, the company that results from the merger may make an election under section 24 and report that election in its first end of model year report if the following conditions are met:

(a) the total number of passenger automobiles and light trucks of the 2009 model year set out in section 24 is equal to the total number of passenger automobiles and light trucks manufactured or imported for sale in Canada by the merged companies for the 2009 model year; and

(b) the conditions set out in subsection 24(1) are met taking into account the adjustments set out in subsection (2).

Adjustments

(2) If the total calculated in accordance with subsection (1) is, as the case may be,

(a) equal to or greater than 750, but less than 7,500 for the 2009 model year, the combined total number of passenger automobiles and light trucks included in the temporary optional fleets by the merged companies, for the model years preceding the merger, must be subtracted from the applicable quantitative limits set out in paragraph 24(1)(a); or

(b) equal to or greater than 7,500, but less than 60,000 for the 2009 model year, the combined total number of passenger automobiles and light trucks included in the temporary optional fleets by the merged companies, for the model years preceding the merger, must be subtracted from the applicable quantitative limits set out in paragraph 24(1)(b).

Purchase

28. (1) If a company purchases one or more companies after the day on which these Regulations come into force, it must

(a) in the case where the company had made an election under section 24 before the purchase, recalculate its total number of passenger automobiles and light trucks manufactured or imported for sale in Canada for the 2009 model year to include that total for each of those purchased companies and report it in its first end of model year report after the purchase year; or

(b) in the case where the company makes an election under section 24 after the purchase, calculate the total number of passenger automobiles and light trucks manufactured or imported for sale in Canada for the 2009 model year to include that total for each of those purchased companies.

Adjustments

(2) The company that purchases one or more companies and that is still eligible under section 24 must adjust, for the purposes of paragraph 24(1)(a) or (b) in accordance with the calculation set out in subsection (1), the combined total number of passenger automobiles and light trucks included as of that day in the temporary optional fleet by adding to it the combined total number of passenger automobiles and light trucks that have been included in the temporary optional fleets of the companies that it purchased.

EARLY ACTION CREDITS

Early action credits — 2008, 2009 and 2010 model years

29. (1) A company may obtain early action credits in respect of its fleets of passenger automobiles and light trucks of the 2008, 2009 and 2010 model years if the total number of credits calculated in respect of those fleets of the 2008, 2009 and 2010 model years is greater than the total number of deficits incurred for those model years and the company reports the credits in its 2011 model year report.

Date of early action credits

(2) The early action credits are obtained by a company on the day on which the report referred to in subsection (1) is submitted.

Calculation

(3) Early action credits obtained or deficits incurred in respect of the company’s fleets of passenger automobiles and light trucks of the 2008, 2009 and 2010 model years must be calculated in accordance with subsection 20(3), except that the fleet average CO2 equivalent emission standard for the 2008, 2009 and 2010 model years, as determined for A, is the following:

(a) in the case of fleets of passenger automobiles, 323 grams/mile; and

(b) in the case of fleets of light trucks, either the quotient of 8,887 divided by the light truck fuel economy level for the applicable model year determined in accordance with section 5 of Title 49, subtitle B, chapter V, part 533, of the CFR, applicable to that model year, or

(i) 395 grams/mile for the 2008 model year,

(ii) 381 grams/mile for the 2009 model year, and

(iii) 376 grams/mile for the 2010 model year.

Modification

(4) For the purposes of paragraph (3)(b), the equation in Figure 1 set out in section 5 of Title 49, subtitle B, chapter V, part 533, of the CFR is modified as follows:

(a) “N” is the total number of passenger automobiles or light trucks in the fleet;

(b) “Ni” is the number of passenger automobiles or light trucks in each group “i” in the fleet; and

(c) “i” is a group of passenger automobiles or light trucks of the same model type and that have the same footprint.

2008 model year — limitation

(5) Early action credits obtained for a fleet of passenger automobiles or light trucks of the 2008 model year can only be used to offset a deficit incurred in respect of a fleet of passenger automobiles or light trucks of the 2011 model year, after which the credits are no longer valid.

Validity — time limit

(6) Early action credits obtained for a fleet of passenger automobiles or light trucks of the 2009 or 2010 model year can be used as of the 2011 model year, but only in respect of any fleet of passenger automobiles or light trucks of five model years after the model year in respect of which the credits were obtained, after which the credits are no longer valid.

Use of early action credits

(7) Subject to subsection (8) and paragraph 30(3)(b), the rules set out in sections 21 and 22 with respect to credits also apply to early action credits.

Adjustment

(8) If the early action credits are obtained in respect of fleets of the 2009 and 2010 model years that contain alcohol dual fuel vehicles or natural gas dual fuel vehicles, the number of early action credits that are available to offset a deficit incurred in respect of a fleet of passenger automobiles or light trucks of the 2012 or subsequent model years must be adjusted with the assumption that all alcohol dual fuel vehicles and natural gas dual fuel vehicles operate only on gasoline or diesel fuel.

Definitions

30. (1) For the purposes of this section

(a) “heavy light-duty truck”, “light-duty vehicle”, “light light-duty truck” and “medium-duty passenger vehicle” have the same meaning as in subsection 1(1) of the On-Road Vehicle and Engine Emission Regulations; and

(b) “loaded vehicle weight” means the curb weight of a vehicle plus 136.1 kg (300 pounds).

Alternative fleet combination for early action credits

(2) Instead of obtaining early action credits in respect of its fleets of passenger automobiles and light trucks of the 2008, 2009 and 2010 model years, a company may obtain early action credits in respect of its combined fleet of light-duty vehicles and light light-duty trucks that have a loaded vehicle weight of 1 701 kg (3,750 pounds) or less or its combined fleet of light light-duty trucks that have a loaded vehicle weight of more than 1 701 kg (3,750 pounds), heavy light-duty trucks and medium-duty passenger vehicles of the same model years.

Fleet average CO2 equivalent emission standard

(3) Section 29 applies to the combined fleets referred to in subsection (2), except that

(a) the fleet average CO2 equivalent emission standard provided for in subsection 29(3) is the following:

(i) in the case of the 2008 and 2009 model years, the fleets of light-duty vehicles and light light-duty trucks that have a loaded vehicle weight of 1 701 kg (3,750 pounds) or less, 323 grams/mile,

(ii) in the case of the 2008 and 2009 model years, the fleets of light light-duty trucks that have a loaded vehicle weight of more than 1 701 kg (3,750 pounds), heavy light-duty trucks and medium-duty passenger vehicles, 439 grams/mile,

(iii) in the case of the 2010 model year, the fleets of light-duty vehicles and light light-duty trucks that have a loaded vehicle weight of 1 701 kg (3,750 pounds) or less, 301 grams/mile, and

(iv) in the case of the 2010 model year, the fleets of light light-duty trucks that have a loaded vehicle weight of more than 1 701 kg (3,750 pounds), heavy light-duty trucks and medium-duty passenger vehicles, 420 grams/ mile; and

(b) a company that obtains early action credits in respect of its combined fleet of the 2009 model year cannot transfer them to another company.

REPORTS

2011 model year report

31. (1) A company must submit to the Minister a report for the end of model year for the 2011 model year signed by a person who is authorized to act on behalf of the company no later than May 1, 2012.

Content of report

(2) Subject to subsection (3), the end of model year 2011 model year report must contain the following information:

(a) in respect of each of the company’s fleets of the 2011 model year,

(i) the fleet average CO2 equivalent emission standard, calculated in accordance with section 16, and expressed in grams per mile,

(ii) the fleet average carbon-related exhaust emission value, calculated in accordance with subsection 18(2), and all the values and data used in the calculation of that value,

(iii) the total number of advanced technology vehicles included in the fleet for calculating the fleet average carbon-related exhaust emission value,

(iv) the number of credits or deficits, calculated in accordance with subsection 20(3) and, if applicable, the number of available credits adjusted in accordance with subsection 21(4),

(v) the information set out in paragraphs 33(2)(g), (j) to (o), (q), (r) and (t),

(vi) if applicable, a statement that the company has elected to exclude from its fleets the passenger automobiles or light trucks that it manufactures or imports and that will be used in Canada solely for the purposes of exhibition, demonstration, evaluation or testing,

(vii) if applicable, a statement that the company has elected to include in its fleets all of its passenger automobiles or light trucks of the 2011 model year,

(viii) if applicable, a statement that the company has elected to exclude all emergency vehicles from its fleets of passenger automobiles or light trucks, and

(ix) if any, the number of CO2 emission credits and early action credits that are used to offset a deficit incurred in respect of the fleets, as well as their identification by fleet of origin and model year; and

(b) in respect of its fleets of the 2008 to 2010 model years, the total number of early action credits calculated in accordance with subsection 29(1), and, if applicable, the number of available early action credits adjusted in accordance with subsection 29(8) for both fleets of those model years; and

(c) the total number of advanced technology vehicles included for the fleets of the 2008 to 2010 model years in the calculation conducted for the purposes of section 29.

Reporting early action credits

(3) In order to obtain early action credits under section 29 or 30 in respect of its fleets of the 2008 to 2010 model years, a company must also include in its 2011 model year report the following information in respect of each of the 2008 to 2010 model years and each fleet:

(a) the number of credits or deficits calculated in accordance with subsection 20(3);

(b) the fleet average CO2 equivalent emission standard used in the calculation of the number of credits or deficits;

(c) the fleet average CO2 equivalent emission value, calculated in accordance with section 18;

(d) the fleet average carbon-related exhaust emission value, calculated in accordance with subsection 18(3);

(e) the total number of vehicles in the fleet;

(f) the carbon-related exhaust emission value for each model type in the fleet, calculated in accordance with subsection 18(3), and all the values and data used in the calculation of that value;

(g) the number of vehicles of each model type;

(h) if the company calculates an allowance referred to in subsection 18(7), the value of the allowance for the fleet and, for each air conditioning system,

(i) a description of the system,

(ii) the CO2 equivalent leakage reduction, calculated in accordance with that subsection, and all the values and data used in the calculation of the reduction, and

(iii) the total number of vehicles in the fleet that are equipped with the system;

(i) if the company calculates an allowance referred to in subsection 18(8), the value of the allowance for the fleet and, for each air conditioning system,

(i) a description of the system,

(ii) the air conditioning efficiency allowance, calculated in accordance with that subsection, and all the values and data used in the calculation of the allowance, and

(iii) the total number of vehicles in the fleet that are equipped with the system;

(j) if the company calculates an allowance referred to in subsection 18(9), the value of the allowance for the fleet and, for each innovative technology,

(i) a description of the technology,

(ii) the allowance for each innovative technology, calculated in accordance with that subsection and, if applicable, subsection 18(10), and all the values and data used in the calculation of the allowance, and

(iii) the total number of vehicles in the fleet that are equipped with the technology; and

(k) if applicable, evidence of the EPA approval referred to in subsection 18(10).

Annual preliminary report

32. (1) Unless a company meets the conditions of section 14, it must submit to the Minister, for vehicles of the 2012 and subsequent model years, a preliminary report signed by a person who is authorized to act on behalf of the company, no later than September 1 of the calendar year preceding the calendar year that corresponds to the model year in question.

Content

(2) A company must determine the carbon-related exhaust emission value for each model type in its fleets of a given model year, calculated in accordance with subsection 18(3), and must include in its preliminary report, for each of its fleets, the value for each model type and all the values and data used in the calculation of that value.

End of model year report

33. (1) Unless a company meets the conditions of section 14, it must submit to the Minister, for vehicles of the 2012 and subsequent model years, an end of model year report signed by a person who is authorized to act on behalf of the company, no later than May 1 of the calendar year following the calendar year that corresponds to the model year in question.

Content

(2) The end of model year report, for a given model year, must contain the following information in respect of each of the company’s fleets:

(a) if applicable, a statement that the company has elected to create a temporary optional fleet of passenger automobiles or light trucks;

(b) if applicable, a statement that the company has elected to exclude from its fleets the passenger automobiles or light trucks that it manufactures or imports and that will be used in Canada solely for the purposes of exhibition, demonstration, evaluation or testing;

(c) the fleet average CO2 equivalent emission standard, calculated in accordance with subsection 17(3);

(d) the CO2 emission target value for each group, calculated for the purposes of section 17, and all the values and data used in the calculation of that value;

(e) the number of vehicles in each group constituted for the purposes of section 17;

(f) the total number of vehicles in the fleet;

(g) the fleet average CO2 equivalent emission value, calculated in accordance with section 18;

(h) the fleet average carbon-related exhaust emission value, calculated in accordance with subsection 18(3);

(i) the carbon-related exhaust emission value for each model type, calculated in accordance with subsection 18(3), and all the values and data used in the calculation of that value;

(j) the total number of advanced technology vehicles included in the fleet in the calculation of the fleet average carbon-related exhaust emission value;

(k) the number of vehicles of each model type in the fleet;

(l) if the company calculates an allowance referred to in subsection 18(7), the value of the allowance for the fleet and, for each air conditioning system,

(i) a description of the system,

(ii) the CO2 equivalent leakage reduction, calculated in accordance with that subsection, and all the values and data used in the calculation of the reduction, and

(iii) the total number of vehicles in the fleet that are equipped with the system;

(m) if the company calculates an allowance referred to in subsection 18(8), the value of the allowance for the fleet and, for each air conditioning system,

(i) a description of the system,

(ii) the air conditioning efficiency allowance, calculated in accordance with that subsection, and all the values and data used in the calculation of the allowance, and

(iii) the total number of vehicles in the fleet that are equipped with the system;

(n) if the company calculates an allowance referred to in subsection 18(9), the value of the allowance for the fleet and, for each innovative technology,

(i) a description of the technology,

(ii) the allowance for each innovative technology, calculated in accordance with that subsection and, if applicable, subsection 18(10), and all the values and data used in the calculation of the allowance, and

(iii) the total number of vehicles in the fleet equipped with the technology;

(o) if applicable, evidence of the EPA approval referred to in subsection 18(10);

(p) the number of credits or deficits, calculated in accordance with subsection 20(3) for the fleet;

(q) if applicable, a statement that the company has elected to apply subsection 18(4) and the number of credits obtained as a result of this election;

(r) if any, the number of CO2 emission credits and early action credits that are used to offset a deficit incurred in respect of the fleet of the model year in question or an outstanding deficit incurred in respect of the fleet, as well as their identification by fleet of origin and model year;

(s) if any, the amount of the payment made to the Receiver General to obtain the credits and the number of credits obtained upon such payment under section 23 that are used to offset a deficit incurred in respect of the fleets; and

(t) an accounting of all the CO2 emission credits and early action credits and deficits incurred for each model year and for each fleet.

Content — temporary optional fleets

(3) If a company elects to create a temporary optional fleet of passenger automobiles or light trucks, the end of model year reports for all the model years in respect of which an optional fleet was created must also contain the following information in respect of each of the company’s temporary optional fleets:

(a) a statement that

(i) the company has elected to exclude from its temporary optional fleets the passenger automobiles or light trucks that it manufactures or imports and that will be used in Canada solely for the purposes of exhibition, demonstration, evaluation or testing,

(ii) indicates the total number of passenger automobiles or light trucks manufactured or imported for sale in Canada of the 2009 model year and, if applicable, those from the companies that have been purchased or merged, and

(iii) indicates that it results from the merger that has taken place after the coming into force of these Regulations or if it has acquired other companies after that date;

(b) the optional fleet average CO2 equivalent emission standard, calculated in accordance with subsection 24(2);

(c) the CO2 emission target value for each group, calculated for the purposes of section 17, and all the values and data used in the calculation of that value;

(d) the number of vehicles in each group constituted for the purposes of section 17;

(e) the total number of vehicles in the temporary optional fleet;

(f) the fleet average CO2 equivalent emission value, calculated in accordance with section 18;

(g) the fleet average carbon-related exhaust emission value, calculated in accordance with subsection 18(3);

(h) the carbon-related exhaust emission value for each model type, calculated in accordance with subsection 18(3), and all the values and data used in the calculation of that value;

(i) the number of vehicles of each model type in the temporary optional fleet;

(j) if the company calculates an allowance referred to in subsection 18(7), the value of the allowance for the temporary optional fleet and, for each air conditioning system,

(i) a description of the system,

(ii) the CO2 equivalent leakage reduction, calculated in accordance with that subsection, and all the values and data used in the calculation of the reduction, and

(iii) the total number of vehicles in the temporary optional fleet that are equipped with the system;

(k) if the company calculates an allowance referred to in subsection 18(8), the value of the allowance for the temporary optional fleet and, for each air conditioning system,

(i) a description of the system,

(ii) the air conditioning efficiency allowance, calculated in accordance with that subsection, and all the values and data used in the calculation of the allowance, and

(iii) the total number of vehicles in the temporary optional fleet that are equipped with the system;

(l) if a company calculates an allowance referred to in subsection 18(9), the value of the allowance for the temporary optional fleet and, for each innovative technology,

(i) a description of the technology,

(ii) the allowance for each innovative technology, calculated in accordance with that subsection and, if applicable, subsection 18(10), and all the values and data used in the calculation of the allowance, and

(iii) the total number of vehicles in the temporary optional fleet that are equipped with the technology;

(m) if applicable, evidence of the EPA approval referred to in subsection 18(10);

(n) the number of credits or deficits, calculated in accordance with subsection 20(3);

(o) if any, the number of CO2 emission credits, credits obtained in respect of a temporary optional fleet and early action credits that are used to offset a deficit incurred in respect of the temporary optional fleet of the model year in question or an outstanding deficit incurred in respect of the temporary optional fleet, as well as their identification by fleet of origin and model year; and

(p) an accounting of all the credits obtained in respect of a temporary optional fleet and deficits incurred for each model year and for each temporary optional fleet.

Additional information

(4) The end of model year report must also contain the following information on each CO2 emission credit transfer and early action credit transfer to or from the company since the submission of the previous end of model year report:

(a) the name, street address and, if different, the mailing address of the company that transferred the credits and the model year in respect of which that company obtained those credits;

(b) the name, street address and, if different, the mailing address of the company that received the credits;

(c) the date of the transfer; and

(d) the number of credits transferred, expressed in megagrams.

Format for submission

34. Any report to be submitted under these Regulations must be submitted electronically in the format provided by the Minister, but the report must be submitted in writing if

(a) no such format is provided; or

(b) it is, owing to circumstances beyond the control of the person required to submit the report, impracticable to submit the report electronically in the format provided.

DECLARATION

Low volume manufactures or importers

35. (1) The company referred to in section 14 must submit to the Minister a declaration signed by a person who is authorized to act on behalf of the company no later than the first of the following dates:

(a) 30 days before the day on which the first vehicle of the model year was offered for sale following the last three model years for which the average was calculated; and

(b) December 31 of the calendar year preceding the calendar year corresponding to the vehicle’s model year.

Contents of declaration

(2) The declaration must contain the following information:

(a) the total number for each of the 2008 and 2009 model years of passenger vehicles and light trucks manufactured or imported for sale in Canada; and

(b) the total number of passenger vehicles and light trucks manufactured or imported for sale in Canada for the three most recent consecutive model years.

RECORDS

EVIDENCE OF CONFORMITY

Evidence of conformity

36. (1) In the case of a vehicle that is covered by an EPA certificate and that is sold concurrently in Canada and the United States, evidence of conformity for the purpose of paragraph 153(1)(b) of the Act in respect of a company must consist of

(a) a copy of the EPA certificate covering the vehicle;

(b) a document demonstrating that vehicles covered by the EPA certificate are sold concurrently in Canada and the United States;

(c) a copy of the records submitted to the EPA in support of the application for the issuance of the EPA certificate in respect of the vehicle; and

(d) a U.S. emission control information label that is permanently affixed to the vehicle in the form and location set out in section 1807 of Title 40, chapter I, subchapter C, part 86, subpart S, of the CFR, for the applicable model year.

U.S. control information label

(2) For the purpose of subsection (1), the U.S. emission control information label may be permanently affixed to the vehicle in any other form and location that may be specified in Title 40, chapter I, subchapter C, part 86, of the CFR.

Vehicles not sold in the United States

37. (1) For the purpose of paragraph 153(1)(b) of the Act, a company must obtain and produce evidence of conformity for a vehicle other than one referred to in subsection 36(1) in a form and manner satisfactory to the Minister, instead of as specified in that subsection.

Time of submission

(2) For greater certainty, a company must submit the evidence of conformity to the Minister before importing a vehicle or applying a national emissions mark to it.

Subsection 153(2) of the Act

38. For greater certainty, a company that imports a vehicle or applies a national emissions mark to it under subsection 153(2) of the Act is not required to provide the Minister with the evidence of conformity referred to in subsection 37(1) before importing it or applying a national emissions mark to it, but must provide that evidence in accordance with subsection 153(2) of the Act before the vehicle leaves the possession or control of the company and before it is presented for registration under the laws of a province or an aboriginal government.

FLEET AVERAGE RECORDS

Records — fleets

39. (1) A company must maintain records containing the following information for each of its fleets:

(a) the model year;

(b) the applicable fleet average CO2 equivalent emission standard;

(c) the fleet average CO2 equivalent emission value;

(d) all the values and data used in calculating the fleet average CO2 equivalent emission value, including information relating to the calculation of allowances; and

(e) all the values used to calculate the CO2 emission credits, the credits obtained in respect of a temporary optional fleet and the early action credits.

Records — vehicles

(2) A company must maintain records containing the following information for each vehicle in the fleet referred to in subsection (1):

(a) the model type and model year;

(b) the applicable fleet average CO2 equivalent emission standard;

(c) in the case of a vehicle covered by an EPA certificate, the applicable test group described in subpart S of Title 40, chapter I, subchapter C, part 86, of the CFR;

(d) the name and street address of the plant where the vehicle was assembled;

(e) the vehicle identification number;

(f) the applicable carbon-related exhaust emission value and all values and data used in calculating that value; and

(g) the name and street or mailing address of the first purchaser of the vehicle in Canada.

MAINTENANCE AND SUBMISSION OF RECORDS

Maintenance of records

40. (1) A company must maintain, for vehicles of each model year, in writing or in a readily readable electronic or optical form,

(a) for a period of at least eight years after the end of the calendar year that corresponds to the model year in question, a copy of the reports referred to in sections 31 to 33;

(b) for a period of at least eight years after the date on which the main assembly of the vehicle was completed, the evidence of conformity referred to in section 36; and

(c) for a period of at least eight years after the end of the calendar year that corresponds to the model year in question, the records referred to in section 39.

Records maintained on behalf of a company

(2) If the evidence of conformity, the records and the copy of reports referred to in subsection (1) are maintained on behalf of a company, the company must keep a record of the name and street address and, if different, the mailing address of the person who maintains those records.

Written request for records

(3) If the Minister makes a written request for the evidence of conformity or the records referred to in subsections (1) and (2), or a summary of any of them, the company must provide the Minister with the requested information, in either official language, within

(a) 40 days after the request is delivered to the company; or

(b) if the evidence of conformity or records referred to in section 36 or 37 must be translated from a language other than French or English, 60 days after the request is delivered to the company.

IMPORTATION DOCUMENT

Importation for exhibition, demonstration, evaluation or testing

41. The declaration referred to in paragraph 155(1)(a) of the Act must be made in accordance with section 41 of the On-Road Vehicle and Engine Emission Regulations.

RENTAL RATE

Rental rate

42. The annual rental rate to be paid to a company by the Minister under subsection 159(1) of the Act, prorated on a daily basis for each day that a vehicle is made available, is the rate prescribed in section 43 of the On-Road Vehicle and Engine Emission Regulations.

APPLICATION FOR EXEMPTION

Application

43. A company applying under section 156 of the Act for an exemption from conformity with any standard specified under these Regulations must submit in writing to the Minister the information set out in section 44 of the On-Road Vehicle and Engine Emission Regulations.

DEFECT INFORMATION

Notice of defect

44. (1) The notice of defect referred to in subsections 157(1) and (4) of the Act must be given in writing and must contain the information set out in subsection 45(1) of the On-Road Vehicle and Engine Emission Regulations.

Reports

(2) In respect of a notice of defect issued under these Regulations, a company must comply with the provisions set out in subsections 45(2) and (3) of the On-Road Vehicle and Engine Emission Regulations.

Applicable standard

(3) For the application of section 157 of the Act, the prescribed standard that applies to a vehicle is the product of 1.1 multiplied by the carbon-related exhaust emission value for the model type in question, calculated in accordance with subsection 18(3), or by the equivalent value in the case of a model type of the 2011 model year.

COMING INTO FORCE

Registration

45. These Regulations come into force on the day on which they are registered.

REGULATORY IMPACT
ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Executive summary

Issue: Greenhouse gases (GHGs) are primary contributors to climate change. The most significant sources of GHG emissions are anthropogenic, mostly as a result of combustion of fossil fuels. The emissions of GHGs have been increasing significantly since the industrial revolution and this trend is likely to continue if no action is taken. Historical data indicates that emissions in 2008 were about 24% above the 1990 levels. The Government of Canada is committed to reducing domestic GHG emissions by 17% below the 2005 level by 2020.

Transportation is one of the largest sources of GHG emissions in Canada, accounting for about 27% of total GHG emissions in 2008. Passenger cars and light trucks account for around 12% of total GHG emissions or 43% of transportation emissions. Accordingly, taking action to reduce emissions from new cars and light-duty trucks is an essential element of the Government’s strategy to reduce air pollutant and GHG emissions to protect the environment and the health of Canadians.

Description: The objective of the Passenger Automobile and Light Truck Greenhouse Gas Emission Regulations (the Regulations) is to reduce GHG emissions by establishing mandatory GHG emission standards for new vehicles of the 2011 and later model years that are aligned with U.S. standards. The alignment of vehicle emission standards across North America provides a level playing field that will lead North American manufacturers to produce more advanced vehicles, while enhancing their competitiveness in North American and export markets.

The Regulations require that vehicle manufacturers and importers meet fleet average GHG emission standards for their passenger automobiles and light trucks for the 2011 and later model years as well as vehicle-specific standards for emissions of methane and nitrous oxide. The Regulations also include provisions that establish compliance flexibilities designed to provide appropriate lead-time for technological improvements and a smooth transition to a more stringent regulatory program. These flexibilities include a system for generating, banking and trading emission credits that could be used to offset any emission deficits incurred, allowances for making GHG-reducing improvements to vehicle air conditioning systems and for innovative technologies to reduce GHG emissions. Flexibilities also include incentives for vehicles with dual-fuel capability and advanced technology vehicles and optional standards for companies selling smaller volumes of vehicles. Companies are required to submit annual reports, to maintain records relating to the GHG emission performance of their fleets and to establish compliance with the Regulations.

Cost-benefit statement: Over the lifetime operation of all 2011 to 2016 model year vehicles sold in Canada, the Regulations are estimated to result in a cumulative reduction of 92 megatonnes (Mt) of carbon dioxide equivalent (CO2e) in GHG emissions (or an average annual incremental reduction of 15.3 Mt CO2e per model year). The present value of total benefits of the Regulations is estimated to be $13.4 billion. The benefits quantified include pre-tax fuel savings, reduced refuelling time, additional driving, reductions in criteria air contaminant (CAC) emissions and reductions in GHG emissions. The present value of total costs of the Regulations is estimated to be $4.2 billion. This includes technology costs, vehicle testing, compliance promotion, enforcement and administration and costs from added noise, increased road congestion and associated accidents. The present value of net benefits of the Regulations (i.e. total benefits of $13.4 billion minus total costs of $4.2 billion) is estimated to be $9.2 billion. Overall, the total benefits exceed total costs by a ratio of over 3:1.

Business and consumer impacts: The Regulations are anticipated to increase the cost of manufacturing passenger automobiles and light trucks. These costs are expected to be passed on directly to consumers purchasing these vehicles, and will add an additional $89 to the average purchase price of a 2011 model year vehicle, and an additional $1,195 to the average purchase price of a 2016 model year vehicle (less than 5% of the average purchase price). The benefits resulting directly from the Regulations include fuel savings of approximately 28 billion litres over the lifetime of the vehicles of 2011 to 2016 model years. It is estimated that the added costs to these vehicles will be more than offset by pre-tax fuel savings with a payback period averaging less than 1.5 years.

Domestic and international coordination and cooperation: Consultations were conducted with industry, provincial and territorial governments, other federal government departments and environmental non-governmental organizations (ENGOs). In addition, discussions with the United States Environmental Protection Agency (U.S. EPA) were also undertaken to better understand the development process of their rules and their cost-benefit analysis. These consultations have enabled the development of an aligned approach and standards.

Performance measurement and evaluation plan: The evaluation of the Regulations will be based on the measurement of a set of immediate outcomes, including

  • the awareness of the regulated community of the regulatory requirements;
  • the timely and accurate reporting of data; and
  • the compliance with the fleet average emission standards and with standards for individual vehicle models.

The key indicators to monitor the performance of the Regulations with respect to these immediate outcomes will include

  • percentage of known regulatees that are aware of the Regulations;
  • percentage of known regulatees that are reporting on time and accurately;
  • rate of compliance with standards for individual vehicle models;
  • rate of compliance with fleet average emission standards; and
  • fleet average emissions.

Issue

As a result of human activities, predominantly the combustion of fossil fuels, the atmospheric concentrations of greenhouse gases (GHGs) have increased substantially since the onset of the Industrial Revolution. In view of the historical emissions of GHGs from anthropogenic sources, and the quantity of emissions expected in the near future, GHGs, as significant air pollutants, are expected to remain a key contributor to climate change.

Across Canada we are witnessing the impacts of a changing climate first-hand, which is having a negative effect on the environment and the health of Canadians. For example, a warming climate has been linked to the melting of permafrost in the North that has destabilized the foundations of homes and schools. While the specific impacts vary by region, all of Canada’s provinces and territories are experiencing the effects of a changing climate. (see footnote 1)

In a warmer world, snow cover will be reduced, sea ice will continue to shrink, and it is very likely that heat waves and heavy precipitation events will continue to be more frequent. Increases in the amount of precipitation are very likely at high latitudes, while decreases are likely in most subtropical land regions, many of which are already arid. (see footnote 2)

While Canada produces just 2% of global GHG emissions, its per capita emissions are among the highest in the world and continue to increase. In 2007, GHG emissions in Canada totalled 747 Mt CO2e, an increase of 4.0% from 2006 levels and of 26% from the 1990 levels of 592 Mt.

Transportation is a significant source of GHG emissions in Canada, accounting for 27% of total emissions in 2008. Within the transportation sector, passenger cars and light-duty trucks account for nearly half of GHG emissions, (see footnote 3) or approximately 12% of total emissions in Canada. Emissions in the transportation sector rose by about 53 Mt, or 36.4%, from 1990 to 2008. Of particular note in this sector is a 24.1-Mt increase (more than 116%) in the emissions from light-duty gasoline trucks, reflecting the growth in sales of sport utility vehicles. (see footnote 4) Accordingly, taking action to reduce emissions from new cars and light-duty trucks is an essential element of the Government of Canada’s strategy to reduce air pollutant emissions and GHG emissions to protect the environment and the health of Canadians.

Carbon dioxide (CO2) is the predominant GHG emitted by motor vehicles and is directly related to the amount of fuel that is consumed by vehicles. Vehicles also emit other GHGs, including tailpipe emissions of methane (CH4) and nitrous oxide (N2O), and hydrofluorocarbons (HFCs), through the leakage of air conditioning system refrigerant.

Objectives

The objective of the Regulations is to reduce GHG emissions from passenger automobiles and light trucks by establishing mandatory emission standards for new vehicles of the 2011 and later model years that are aligned with the national standards of the United States. The Regulations are established under the authority of Part 7, Division 5, of the Canadian Environmental Protection Act, 1999 (see footnote 5) (CEPA 1999).

The implementation of a comprehensive set of national standards for regulating GHG emissions from new vehicles reflecting a common North American approach requires significant environmental improvements to new vehicles, provides regulatory certainty, and sets a level playing field in the automotive sector. The Regulations require manufacturers selling vehicles in Canada to deploy emission reduction technologies which will benefit the environment, human health and Canadian consumers. The Regulations are designed to achieve these objectives while minimizing the regulatory compliance burden of Canadian industry.

Description

The Regulations

The Regulations introduce progressively more stringent GHG emission standards for passenger automobiles and light trucks that align with the national fuel economy standards of the United States Department of Transportation (DOT) for 2011 model year vehicles. In addition, they align with the national GHG emission standards of the United States Environmental Protection Agency (U.S. EPA), under the Clean Air Act, for the 2012 and later model years. The Regulations apply to companies that manufacture and import new passenger automobiles and light trucks for sale in Canada.

Corresponding fuel economy and GHG Regulations of the United States

On March 27, 2009, the National Highway Traffic Safety Administration (NHTSA) of the U.S. DOT released a final rule establishing fuel economy standards for passenger cars and light trucks of the 2011 model year. The final rule for model year 2011 was to be the first in a series of increasingly stringent regulations to ensure an industry-wide average fuel efficiency standard of 35 miles per gallon for passenger cars and light-duty trucks by 2020 — the goal established by the U.S. Congress in the Energy Independence and Security Act of 2007.

On September 15, 2009, the NHTSA and the U.S. EPA jointly announced a set of complementary new proposed regulations for passenger automobiles and light trucks of the 2012 to 2016 model years. Following a public consultation period, the NHTSA and the U.S. EPA announced a final rule on April 1, 2010, which was subsequently published in the Federal Register on May 7, 2010. In this joint rulemaking, the NHTSA is implementing tighter fuel economy standards through amended Corporate Average Fuel Economy (CAFE) standards under the Energy Policy and Conservation Act (EPCA), with fuel economy standards defined in terms of miles per gallon (mpg). The U.S. EPA regulations implement GHG emission standards under the Clean Air Act, with standards defined in terms of grams of CO2e per mile (g CO2e/mi). The U.S. EPA’s national GHG emission standards require a GHG emission performance of 250 g CO2e/mi, which is equivalent to an average fuel economy of 35.5 miles per gallon, by 2016, four years ahead of the schedule established by the U.S. Congress in 2007.

While the U.S. EPA standards for CO2 tailpipe emissions are coordinated with the fuel economy rules, the U.S. EPA’s standards also address other GHG emissions, including exhaust emissions of N2O and CH4, as well as the release of HFCs from air conditioning systems. Under the U.S. regulations, each vehicle manufacturer is required to comply with unique fleet average standards for emissions and CAFE standards, depending on the number and footprint of vehicle models it sells. The intent of the U.S. rules is to provide a consistent and coordinated approach to the regulation of light-duty vehicle GHG emissions and fuel economy.

The U.S. National Program provides for a system of emission credits and deficits to allow companies increased flexibility in meeting the annual fleet average emission standards. Manufacturers are also able to generate additional credits by improving the environmental performance of air-conditioning systems, producing dual-fuel and alternative fuel vehicles, incorporating advanced GHG-reduction technologies in their vehicle base and installing technologies that achieve GHG reductions that are not accounted for in standard test procedures.

In May 2009, the state of California announced its support for the proposed U.S. National Program by committing to revise its stringent GHG emission regulations for the 2012 to 2016 model years such that compliance with the U.S. EPA’s proposed national GHG emission standards would be deemed as meeting California’s regulations. The commitment was based on the understanding that the final national GHG standards would be substantially of the same stringency as those that were announced as part of the National Plan. On February 25, 2010, the California Air Resources Board approved amendments to California’s regulations to meet this commitment. These amendments were approved by the Office of Administrative Law on April 1, 2010, and became effective on the same day. Effectively, this will result in there being one regulatory GHG emissions standard applicable in the United States to new vehicles for model years 2012 to 2016.

Key elements of the Regulations

In order to ensure a common North American approach to regulating GHG emissions from new vehicles, Environment Canada (EC) has developed the Regulations by seeking to adopt the same emission standards and test procedures as the United States and to provide Canadian companies with equivalent compliance flexibilities to meet the stringent standards. The Regulations come into force on the day on which they are registered. The following sections summarize the key elements of the Regulations.

(a) General application

The Regulations establish stringent fleet (see footnote 6) average GHG emission standards for new vehicles that companies either manufacture in Canada, or import into Canada for the purpose of sale beginning with the 2011 model year. The standards are aligned with the final U.S. national fuel economy standards for the 2011 model year and the U.S. national GHG emission standards for the 2012 and later model years.

The Regulations do not apply to “used vehicles” imported into Canada, new vehicles being exported from Canada, or vehicles imported on a temporary basis for the purposes of exhibition, demonstration, evaluation and testing.

(b) Fleet average GHG emission standards for the 2011 model year

The Regulations establish fleet average GHG emission standards for the 2011 model year, expressed in grams of CO2-equivalent per mile. Each company is required to comply with unique fleet average GHG emission standards for its fleets of passenger automobiles and light trucks, aligned with applicable U.S. fuel economy standards for the 2011 model year. Each company’s fleet average GHG standards are determined based on the size and the number of vehicles in the company’s 2011 model year fleets. The size of vehicles is defined based on the “vehicle footprint” attribute, namely the distance between the tires multiplied by the distance between the axles. Footprint-based standards generally assign higher fuel economy targets and lower CO2 emissions targets to smaller vehicles compared to larger vehicles.

Each company must determine the applicable fleet average GHG emission standards for the 2011 model year by first calculating the fuel economy level that would apply based on the U.S. regulatory procedures (i.e. in miles per gallon) using the number of vehicles in its Canadian fleet. The calculated fuel economy level must then be converted to the equivalent gCO2/mi standard, using a specified conversion factor. Companies will use the same fuel economy “footprint curves” as those specified in the United States for the 2011 model year for passenger automobiles and light trucks. The “footprint curves” establish different fuel economy targets for each category of vehicle based on the footprint of the vehicle. Each company’s fleet average GHG emission standard effectively consists of a sales-weighted (see footnote 7) average of the individual targets of all vehicles in its fleet in a given model year.

Vehicles of the 2011 model year that are manufactured prior to the coming into force of the Regulations are not included in the company’s fleet, unless the company elects to include all of its vehicles manufactured in the 2011 model year in its fleet.

(c) Fleet average GHG emission standards for 2012 and later model years

For the 2012 and subsequent model years, the Regulations establish a comprehensive regulatory program for reducing GHG emissions aligned with the GHG-based regulatory program that has been finalized by the U.S. EPA.

Companies are required to meet a fleet average GHG emission standard for each of their fleet of passenger automobiles and light trucks, expressed in grams of CO2-equivalent per mile, based on their fleet composition for each model year, aligned with applicable GHG emission standards in the United States.

Similar to the approach for the 2011 model year, a company must calculate its fleet average GHG emission standard for the 2012 and later model years based on the size (i.e. footprint) of its vehicles and the number of vehicles in the company’s fleet for each model year. However, the “footprint curves” represent CO2 emissions target values based on the footprint of the vehicle. These curves are the same as those that apply under the U.S. EPA’s regulatory standards for model years 2012–2016, which become increasingly stringent with each model year over that time period. It is important to note that the Regulations continue to require compliance with fleet average GHG emission standards for the 2017 and later model years, based on the same level of stringency as for the 2016 model year (i.e. same footprint curves).

A company’s fleet average GHG emission standard effectively consists of a sales-weighted average of the individual CO2 emission targets of all vehicles in its fleet in a given model year.

(d) Calculation of actual fleet average GHG emission values

A company’s fleet average CO2-equivalent emission value for its passenger automobile and light truck fleets consists of the fleet average carbon-related exhaust emission value, minus any allowances for air-conditioning improvements, including refrigerant leakage reduction and system efficiency improvements and other innovative technologies whose GHG-reducing impacts are not captured during conventional city/highway emission testing.

The fleet average carbon-related exhaust emission value is the actual average performance of a company in a given model year, for its passenger automobile and light truck fleets, expressed in grams of CO2 equivalent per mile. The fleet average carbon-related exhaust emission value takes into account emissions of two carbon-related combustion products in addition to CO2, namely, CO (carbon monoxide) and HC (hydrocarbons). This ensures that carbon-containing exhaust emissions that ultimately contribute to the formation of CO2 are also recognized. The sales-weighted average is calculated based on actual CO2, HC and CO emission test results for each model type over the conventional U.S. city and highway emission test procedures (i.e. weighted based on a 55% city and 45% highway driving distribution and the number of vehicles manufactured or imported for each model type).

In establishing compliance with the fleet average GHG emission standards, the measured carbon-related exhaust emissions from a test vehicle of a given model type and model year should not exceed the carbon-related exhaust emission value for that model type used by a company in the calculation of its fleet average CO2e emission value and reported by the company in its end of year report submitted to the Minister for that model year. For the purposes of the application of section 157 of CEPA 1999, the applicable standard is the carbon-related exhaust emission value used in the calculation of the company’s fleet emissions multiplied by 1.1.

The above allowances are calculated in the same manner as corresponding “credits” under the U.S. rules; however, in the U.S. such “credits” are calculated separately from a company’s fleet average emissions.

(e) Emission credit system

The Regulations include a system of emission credits to help meet overall environmental objectives in a manner that provides the regulated industry with compliance flexibility.

A company must calculate (see footnote 8) emission credits and deficits in units of megagrams (Mg) of CO2e for each of its passenger automobile and light truck fleets of a given model year. Using the provided mathematical formula, if the result of the calculation is positive, the company will generate credits for that model year. If the result of the calculation is negative, the company will incur a deficit. Effectively, credits are obtained by companies whose fleet emission levels fall below the company’s fleet average GHG emission standard, while deficits are incurred by companies whose fleet emissions exceed the applicable standard.

The Regulations allow a company to transfer credits between its own passenger automobile and light truck fleets to offset a deficit. Credits may alternatively be applied by a company to offset a past deficit for up to three model years prior to the year in which the credits were earned, or may be banked to offset a future deficit for up to five model years after the year in which the credits were obtained (i.e. credits have a five-year lifespan). Credits may also be transferred to another company without limits. Credits that are banked will retain their full value through the five subsequent model years after the model year in which they were obtained, regardless of whether or not they are transferred to another company. Emission deficits incurred in a given model year will have to be offset with an equivalent number of emission credits within the subsequent three model years.

When a company obtains credits, it must first use these credits to offset any existing deficit incurred by the company. Any remaining credits may then be used to offset a future deficit or may be transferred to another company.

(f) Credits for early action

Companies are able to generate credits if their company’s fleet emissions for the 2008–2010 model years are better than the emission levels specified in the Regulations. A company may choose one of two means to calculate early actions credits, using emission levels and vehicle classes that effectively

1. correspond to the U.S. CAFE standards that were in place for the 2008–2010 model years; or

2. correspond to California’s GHG emission regulations for 2009–2010 (i.e. California’s standard for 2009 would also serve as the threshold emission level for 2008).

If a company opts to take part in the optional early credit program, all three model years (2008–2010) are required to be included. Any deficits accrued in 2008–2010 are required to be offset by any credits acquired in those same model years before calculating any credits that may be carried forward into the 2011 model year. Credits obtained over the 2008–2010 period can be used to comply with the 2011 model year fleet average GHG emission standards. Credits obtained over the 2009–2011 period can be used to comply with the fleet average GHG emission standards for the 2012 and later model years, subject to such credits being adjusted with the assumption that all dual-fuel vehicles operated only on gasoline or natural gas. Early action credits earned by a company for the 2009 model year cannot be transferred between companies, if the company chooses to generate them using thresholds that correspond to California’s GHG emission regulations for that model year.

This provision recognizes early action and good performance during the preceding years and allows for the option of banking credits to help a company comply with its applicable fleet average emission standards beginning with the 2011 model year.

(g) Purchase of credits for the 2011 model year

For the 2011 model year only, a company may offset an emission deficit incurred with an equivalent number of credits obtained by payment to the Receiver General of Canada at a rate of $20 per Mg of CO2e emissions. This rate is not intended to be reflective of the value of GHG emissions, but rather to provide compliance flexibility comparable to the payment of a fine under the U.S. CAFE program. Because the conversion from miles per gallon to grams per mile leads to a non-linear relationship, it is impractical to specify a rate for the purchase of credits to offset an emission deficit that would always match the corresponding fine that would be paid under the CAFE program. In general, a rate of $20 per Mg of CO2e emissions provides a reasonably comparable approach to the U.S. CAFE fine without resulting in a higher payment than would apply under the CAFE program.

(h) Other compliance flexibilities

The Regulations include the option for companies whose 2009 model year fleets consisted of a combined total of less than 60 000 passenger automobiles and light trucks to subject a limited portion of their fleets to a temporary, less stringent fleet average standard during the 2012 through 2015 model years. Companies meeting the above criterion are permitted to create temporary optional fleets in each model year that are subject to a less stringent standard corresponding to 125% of the fleet average standards that would otherwise apply. The combined total number of passenger automobiles and light trucks for the 2012 to 2015 model years that a company can include in the temporary optional fleets is limited to a maximum of 15 000. If a company opts to meet the temporary optional fleet GHG standard, it will be subject to restrictions on the generation and usage of emission credits.

The Regulations also provide additional compliance flexibility to companies that sold between 750 and 7 500 new vehicles in 2009. These provisions allow such companies to subject a greater number of vehicles to the less stringent emission standards during the transition period, and also give an additional year for which the temporary provisions will apply (i.e. 2016). In addition, the fleet average GHG emission standards for 2012 and the following years do not apply to companies that manufacture or import a total of passenger automobiles and light trucks that is less than the prescribed threshold.

The Regulations include provisions that are intended to create an incentive for bringing advanced technology vehicles to market, which consist of electric vehicles, fuel cell electric vehicles, and plug-in hybrid electric vehicles (PHEVs). When calculating its fleet average GHG emissions for the 2011–2016 model years, a company would use a carbon-related exhaust emission value of zero g/mile for electric vehicles. Similarly, companies would use a zero g/mile value for the electric portion of plug-in hybrids (i.e. when PHEVs operate as electric vehicles) and fuel cell vehicles. For the purpose of these calculations, a company can also multiply the number of advanced technology vehicles in its fleet by a factor of 1.2. While it is recognized that there are upstream GHG emissions resulting from the production of electricity needed to recharge electric vehicles, and hydrogen necessary for fuel cell vehicles, this approach is intended to promote the market introduction of these advanced technologies in the shorter term. Companies will be limited to using a zero g/mile value for the first 30 000 advanced technology vehicles sold in Canada during the 2011–2016 model years if it sells less than 3 750 of these vehicles in model year 2012. If it sells 3 750 or more of these vehicles in model year 2012, it will be limited to using a zero g/mile value for the first 45 000 advanced technology vehicles sold in Canada during the 2011–2016 model years. If any advanced technology vehicles were sold during model years 2008-2010, the applicable years of the early action credits, these vehicles are also counted against this cap. If a company exceeds its cap, it will be required to account for the net increase in upstream GHG emissions relative to comparable gasoline vehicles. For the advanced technology vehicles that are in surplus of the above caps, the Regulations prescribe a carbon related exhaust emission value of 120 grams of CO2 equivalent per mile.

The provisions for advanced technology vehicles are generally consistent with those in the U.S. EPA final rule with the exception of the use of the multiplying factor of 1.2 and the use of the 120 grams of CO2 equivalent per mile value for vehicles sold in surplus of the caps. According to the U.S. EPA final rule, for vehicles in surplus of the caps, companies must measure and calculate emissions according to an EPA test procedure and methodology that would take into account the vehicle’s upstream GHG emissions resulting from the electricity production process. However, the test procedure and methodology have yet to be finalized by the U.S. EPA. While the Government of Canada ultimately intends to review and align with the U.S. EPA testing procedures and methodology for advanced technology vehicles, once finalized (i.e. taking into consideration factors such as Canada’s reliance on renewable energy sources and grid transmission losses) the Regulations prescribe a general value of 120 grams/mile to provide regulatory certainty in the short term. This value is based on the U.S. EPA’s assessment of a medium-sized electric vehicle’s net upstream emissions when compared to the upstream greenhouse gas emissions of a typical midsize gasoline car. (see footnote 9) Since Canada’s electricity production relies on fewer fossil fuel energy sources than does that of the U.S., it is recognized that the 120 grams/mile value may overestimate the upstream emissions for some advanced technology vehicles that will operate in Canada. Nonetheless, the use of the general value provides an interim common benchmark to account for upstream emissions pending the development and implementation of applicable test procedures. Further, since it is unlikely that companies will import or manufacture for sale in Canada enough advanced technology vehicles to exceed the caps before the new test procedures are developed and incorporated into the Regulations, it is anticipated that the selection of this value will not have a significant impact on the implementation of the Regulations.

Natural gas dual fuel vehicles and alcohol dual fuel vehicles [e.g. flexible fuel vehicles (FFVs)], are treated in a manner consistent with the U.S. rules. In the short term, a company’s fleet average GHG emissions for the 2011–2015 model years can be improved through the sale of such vehicles, subject to specified limits, even though these vehicles may ultimately be operated largely on gasoline in the marketplace. Starting in 2016, the Regulations ensure this benefit is only available where it can be demonstrated that these vehicles are using the alternative fuel (e.g. E-85 in the case of FFVs) in the marketplace. This approach provides a longer-term incentive to improve the marketplace availability of alternative fuel and achieve the associated emission benefits.

(i) Emission standards applicable to individual vehicles

The Regulations also establish separate standards for other tailpipe GHG emissions, such as N2O and CH4. The standards are generally intended to cap vehicle N2O and CH4 emissions at levels that are representative of existing new vehicles to ensure that levels do not increase in future vehicles. However, companies may elect to include N2O and CH4 emissions (i.e. on a CO2e basis) from all of its vehicle model types in the calculation of its fleet average carbon-related exhaust emissions.

The Regulations do not require that emissions of GHGs be monitored by a vehicle’s on-board diagnostic system, consistent with the U.S. regulations. Accordingly, on-board diagnostic systems will continue to only have to monitor air pollutant emissions in accordance with the existing On-Road Vehicle and Engine Emission Regulations under CEPA 1999.

(j) Annual reporting requirements

2011 model year report

Companies are required to submit to the Minister a report for the 2011 model year no later than May 1, 2012. This report will provide all of the information necessary for the calculation of the company’s fleet-average standards and fleet average emission values and related credits or deficits for their 2011 model year fleet. In addition, companies are required to report specified information relating to the generation of early action credits for the 2008–2010 model years.

Annual preliminary report

Beginning with the 2012 model year, companies are required to submit to the Minister an annual preliminary report including information corresponding to the carbon-related exhaust emission values for each model type in their vehicle fleet. This report must be submitted by no later than September 1 of the calendar year preceding the model year. For the 2012 model year, this report must be submitted no later than September 1, 2011.

End-of-model-year report

Companies are required to submit to the Minister an end-of-model-year report for each model year, which indicates the fleet average emission value achieved, and includes all of the necessary data to calculate that value. The report includes all of the information required to calculate the number of credits or deficits, the balance of credits or deficits and information on any credit transfers between companies. This report must be submitted by no later than May 1 after the end of the model year (e.g. May 1, 2013, for the 2012 model year).

(k) Other administrative provisions aligned with existing regulations under CEPA 1999

For efficiency, several administrative provisions under the Regulations are aligned with those under the On-Road Vehicle and Engine Emission Regulations, including provisions respecting the national emissions mark, maintenance and submission of records, the cost for test vehicles, application for exemptions and notices of defect.

(l) Other related issues

The Government of Canada recognizes that information relating to fuel consumption performance is an important consideration for consumers when purchasing a new vehicle. The federal government plans to continue promoting the availability of vehicle fuel consumption and CO2 emission information, such as the annual Fuel Consumption Guide published by Natural Resources Canada and fuel consumption labelling information on new vehicles, as part of public outreach efforts aimed at promoting environmentally friendly vehicle purchasing decisions. The Government of Canada will also continue to assess options to improve the effectiveness of such measures in the future.

Background on policy development

The Government of Canada first announced its commitment to take regulatory action to reduce GHG emissions from 2011 and later model year passenger automobiles and light trucks in the Notice of intent to develop and implement regulations and other measures to reduce air emissions published in the Canada Gazette, Part I, on October 21, 2006. This commitment was confirmed in the subsequent Regulatory Framework for Air Emissions, released in April 2007. The Government intended to establish regulated vehicle fuel consumption standards under the Motor Vehicle Fuel Consumption Standards Act (MVFCSA) beginning with the 2011 model year. Nonetheless, the Government’s primary objective for regulating the fuel consumption of new vehicles was to reduce GHG emissions. Carbon dioxide is the predominant GHG emitted from vehicles and is directly related to the amount of fuel consumed by a vehicle.

While the Government originally intended to reduce GHG emissions through vehicle fuel consumption standards under MVFCSA, it became clear that this Act would require significant amendments and the required legislative process risked a delay in the Government’s ability to take timely regulatory action.

On April 4, 2009, the Government published the Notice of intent to develop regulations limiting carbon dioxide emissions from new cars and light-duty trucks in the Canada Gazette, Part I, (see footnote 10) to inform Canadians of a new regulatory approach to achieve its policy objective of reducing GHG emissions from new vehicles. The Government announced that it was proceeding with the immediate development of regulations under CEPA 1999 to limit emissions of GHGs from new passenger automobiles and light-duty trucks to take effect beginning with the 2011 model year. This approach ensured that the Government had the flexibility to align with U.S. national standards for the 2011 model year and with future U.S. national standards as they emerged, which is crucial to achieving an aligned approach that takes both our environment and economy into account.

National context

The Government of Canada is committed to a common North American regulatory approach to limit GHG emissions from new vehicles and will continue working with the United States towards aligned national standards. To achieve this goal, Canada’s approach to regulating GHG emissions under CEPA 1999 has the flexibility to ensure that the Government can align with U.S. standards as they emerge, which is crucial to achieving an aligned approach that takes both our environment and the economy into account.

The Government of Canada recognizes that effectively addressing climate change will require action by all levels of government in Canada. The Government will continue to work with all provinces and territories to develop a coherent national plan and ensure that our efforts align and reinforce one another to the greatest possible extent. Given our deeply integrated automotive industry, there are significant environmental and economic benefits to an aligned approach both nationally and across North America for the regulation of new vehicles. The Government of Canada will continue to consult with the provinces and territories toward developing national standards for vehicles that meet Canada’s environmental and economic objectives.

Actions in other Canadian jurisdictions

On January 14, 2010, new regulations came into effect in the province of Quebec to limit GHG emission regulations for new cars and light-duty trucks sold in the province. (see footnote 11) The Regulations establish mandatory fleet average emission standards beginning with the 2010 model year and are generally intended to align with California’s standards. In recent years, a number of other provinces have indicated their intent to adopt California-based GHG emission standards for new vehicles but have not publicly released draft regulations in this regard.

Actions in international jurisdictions

United States

The United States has implemented mandatory fuel economy standards for new vehicles since 1978. More recently, in March 2009, the U.S. NHTSA finalized fuel economy standards for passenger cars and light trucks of the 2011 model year. On September 15, 2009, the NHTSA and the U.S. EPA jointly announced a set of complementary new proposed regulations for passenger automobiles and light trucks for the 2012–2016 model years. Following a public consultation period, the NHTSA and the U.S. EPA announced a final rule on April 1, 2010, which was subsequently published in the Federal Register on May 7, 2010. The U.S. rules establish coordinated and progressively tighter federal regulations to address the closely intertwined issues of energy independence and climate change under a joint “National Program.” In this joint rulemaking, the NHTSA will implement more stringent fuel economy standards under the Energy Policy and Conservation Act, while the U.S. EPA regulations under the Clean Air Act will implement the progressively tighter GHG emission standards, achieving a fleet average performance of 250 g CO2/mile by 2016. The U.S. EPA’s national GHG emission standards will effectively achieve this level of performance four years ahead of the schedule established by the U.S. Congress in 2007 for the fuel economy program. The national standards will also provide an equivalent GHG emission performance to California’s GHG emission standards by the 2016 model year.

California

The Clean Air Act contains a general prohibition against individual states adopting emission standards for new vehicles, except for California. Under the Clean Air Act, the Administrator of the U.S. EPA is required to waive this prohibition for California if the State determines that its standards will be at least as protective of public health and welfare as applicable federal standards. However, the Clean Air Act states that a waiver cannot be granted if the Administrator finds (a) that California’s determination is arbitrary and capricious; (b) the different California standards are not needed to meet compelling and extraordinary conditions; or (c) the California standards accompanying enforcement procedures are not consistent with those of the federal program. The Clean Air Act enables other states to adopt the California emission standards in lieu of the U.S. federal standards for vehicles registered within its borders. States cannot adopt standards different from those of California or the U.S. EPA.

The California Air Resources Board approved GHG emission regulations for cars and light trucks in 2004 and subsequently filed a request with the U.S. EPA on December 21, 2005, for a waiver to enact and enforce the standards. On March 6, 2008, the U.S. EPA published its formal decision to deny California’s request for a waiver to establish GHG emission standards. On January 26, 2009, President Obama signed a Presidential Memorandum requesting the U.S. EPA to re-assess the previous Administration’s decision to deny the California waiver request. Following a process of consultation and re-examination, on June 30, 2009, the U.S. EPA granted a waiver to California to implement its state-level GHG emission standards for vehicles beginning with the 2009 model year. California’s regulations include progressively tightening fleet average GHG emission standards through to the 2016 model year.

In May 2009, the State of California expressed its support for the national GHG emission control program being developed by the U.S. EPA and the Department of Transportation. Given the stringency of the planned national U.S. standards, as previously indicated, California has amended its GHG emission regulations for vehicles so that compliance with the national standards will be deemed to meet the California standards for the 2012–2016 period. This will effectively create a single U.S. national GHG emission standard, beginning in 2012.

Other international regulatory actions to reduce GHGs/fuel consumption from vehicles

A number of other international jurisdictions have established regulatory regimes that directly or indirectly serve to reduce GHG emissions from new vehicles. For example, the European Union (EU) is taking a similar approach to those of Canada and the United States by implementing a legally binding standard for new passenger cars that is based on limiting tailpipe GHG emissions. The Council of the European Union adopted legislation in April 2009 requiring vehicle manufacturers to comply with a fleet average emission standard for new cars sold in the 27 countries of the EU of 120 g CO2/km starting in 2012. Compliance with the standard is phased in to account for a progressively greater fraction of a manufacturer’s new vehicle fleet, with 65% of a company’s fleet required to comply with the standard in 2012 and ultimately requiring compliance for 100% of a manufacturer’s fleet beginning in 2015. The EU standards are to be met in two ways: by reducing average emissions to 130 g CO2/km through engine technology plus an additional reduction of 10 g CO2/km through more efficient vehicle features, such as improvements to air conditioning systems and tires.

On the other hand, other countries are taking the approach of regulating vehicle fuel efficiency. Japan, for example, has implemented the “Top-Runner Program” which identifies and designates as the “top-runner” the most fuel-efficient vehicle in each weight range. The program has the objective to improve the fleet average fuel-efficiency of all vehicles in that weight range to match that of the top-runner. China and South Korea have also established mandatory fuel efficiency standards, albeit to different levels of stringency and scope.

Regulatory and non-regulatory options considered

(1) Voluntary approach

Over the past 30 years, Canada has had a voluntary regime for improvements in fuel consumption from cars and light trucks, with automobile manufacturers agreeing to meet U.S. fuel economy standards for new cars and light trucks sold in Canada. In 2005, the vehicle suppliers signed a Memorandum of Understanding to reduce GHG emissions from all cars and light trucks on Canadian roads by 5.3 million tonnes in 2010. Despite improvements in the fuel consumption performance of some new vehicles achieved, total fuel consumed and GHG emissions from light-duty vehicles have risen substantially over the last two decades due to increases in the total number of kilometres travelled by Canadians and increased sales of heavier, more powerful vehicles, in particular sport utility vehicles (SUVs).

A regulatory program will establish an enforceable, level playing field for companies manufacturing and importing new vehicles for sale in Canada. The Regulations ensure that no single company is allowed to deviate from established standards and put other companies under competitive pressure to do likewise.

Given the importance of addressing climate change, most industrialized countries are moving to establish regulated requirements for the control of fuel consumption and/or GHGs from new vehicles.

For the above reasons, the Government believes that a regulatory framework is appropriate for controlling GHG emissions from new passenger automobiles and light trucks in Canada.

(2) Regulations under MVFCSA

As noted above, the Government of Canada originally intended to reduce GHG emissions through the adoption of vehicle fuel consumption standards under MVFCSA. The key driver for proceeding under this legislation was to use an approach that was consistent with the historical approach of regulating vehicle fuel economy in the United States.

While the MVFCSA was passed in 1982, it had never been proclaimed by previous Governments, which were in favour of a voluntary approach to addressing fuel consumption in Canada. In November 2008, the Government proceeded with the proclamation of the MVFCSA in order to provide the legislative authority to develop regulated fuel consumption standards in Canada.

It was subsequently determined that significant amendments were required to the MVFCSA in order to be able to put in place regulations that would align with the U.S. fuel economy standards for the 2011 model year, including the ability to provide for credit trading — a new compliance flexibility under the U.S. program. The required legislative amendments posed a significant risk of delay to implementing regulatory standards, thereby placing Canadian policy out of alignment with U.S. fuel economy standards for the 2011 model year. Further, the new U.S. administration had signalled a possible move towards a GHG emissions-based regulatory approach in the post-2011 model year timeframe. Accordingly, the Government determined that proceeding with the development of GHG emission regulations under CEPA 1999 provided a significantly stronger approach, as it provided the flexibility to align with U.S. national fuel economy standards for the 2011 model year and with future U.S. national GHG emission standards as they would emerge.

For the above reasons, the approach of proceeding with Canadian fuel consumption Regulations was rejected.

(3) Regulations under CEPA 1999

CEPA 1999 contains considerable flexibilities to enable timely alignment with U.S. fuel economy standards for the 2011 model year and to enable alignment with U.S. national GHG emission standards for the 2012–2016 model years, which is crucial to achieving an aligned approach that takes both our environment and economy into account.

CEPA 1999 also enables the implementation of innovative compliance flexibilities such as a system for the banking and trading of emission credits to help meet overall environmental objectives in a manner that provides the regulated industry with maximum compliance flexibility.

The establishment of GHG emission standards under CEPA 1999 is also in line with the approach of other international jurisdictions that are moving to implement GHG-based vehicle regulations, notably the European Union. Additionally, this approach is consistent with the existing use of CEPA 1999 to establish standards limiting smog-forming air pollutant emissions from new vehicles.

The Government of Canada has determined that establishing regulated vehicle GHG emission standards under CEPA 1999 represents the best option to align Canada’s requirements with the national mandatory standards of the United States.

(a) Standards regulated under CEPA 1999 aligned with those of the United States

Through the Regulations, the Government of Canada is aligning its vehicle GHG emission standards with the progressive national standards of our largest trading partner and market for approximately 80% of all light-duty vehicles produced in Canada. A common North American approach to regulating GHG emissions from new vehicles will benefit the environment, the automotive industry and consumers.

The Canadian regulatory requirements must be established in a manner that is consistent with the authorities under CEPA 1999. Accordingly, in some cases this requires a slightly different structure to some regulatory elements compared to the United States; however, the Regulations have been designed to achieve an equivalent end result. For example, the GHG-reduction allowances are incorporated directly into the calculation of a company’s fleet average emission value for a given model year, to ensure consistency with provisions in CEPA 1999. While the approach taken under CEPA 1999 is slightly different than that employed by the U.S. EPA, the net credits/deficits distribution in a given model year will be equivalent to that calculated under the U.S. provisions.

The implementation of comprehensive and stringent national standards for regulating GHG emissions from new passenger automobiles and light trucks that are aligned with those of the United States will require environmental improvements from new vehicles, provide regulatory certainty, set a level playing field for the automotive sector, and minimize regulatory compliance burden on Canadian industry.

For the above reasons, the Government of Canada has adopted the above approach.

(b) Standards regulated under CEPA 1999 not aligned with those of the United States

Given the economic ties between Canada and the United States, it is critical that a coordinated approach be implemented to address climate change that will advance our respective environmental objectives and renew the North American economy at the same time. Given the stringency of the U.S. national GHG emission standards and the associated implementation schedule, the State of California has amended its GHG emission regulations for vehicles so that compliance with the national standards will be deemed to meet the California standards for the 2012–2016 per- iod, effectively creating a single U.S. national GHG emission standard.

Aligning Canada’s national vehicle GHG emission standards with U.S. federal standards represents the preferred approach as it provides Canada with the most effective available technologies to reduce GHG emissions in a cost-effective way. Accordingly, the option of adopting standards that are different from U.S. federal emission standards was rejected.

Benefits and costs

An analysis of the benefits and costs of the Regulations was conducted in order to estimate and monetize the impacts of the regulatory initiative on stakeholders, including the Canadian public, industry, and government. (see footnote 12) Under this analysis, the estimated impacts of the Regulations accrue for changes to the 2011–2016 model year vehicles, which are assumed to have a maximum vehicle lifetime of 26 years for cars and 31 years for light duty trucks. The number of vehicles from each model year that are assumed to be in service over this maximum lifetime declines over time to reflect normal vehicle retirements due to accidents and wear and tear. In total, the analysis measures costs and benefits under the Regulations over the period 2011 to 2047.

Summary

While the Regulations would impose costs on industry, consumers and government, the benefits from reduced GHG emissions and CAC emissions, coupled with substantial fuel savings and additional driving, will result in a significant net benefit. These costs and benefits are summarized in Table 1 below.

The present value of total incremental technology costs is estimated to be $3.6 billion for 2011–2016 model year vehicles. These costs will be borne by motor vehicle producers and it is assumed that most or all of these incremental costs will be passed on to consumers in the form of higher motor vehicle purchase prices. At the same time, modeled results show that fuel savings allow for a payback period averaging less than 1.5 years for the average vehicle (see Table 5 below). The costs can be considered to represent a high-cost scenario as the full range of flexibilities available to companies was not modeled in this analysis.

Significant environmental benefits result in the analysis, with the reduction in GHG emissions estimated to be 92 Mt CO2e over the cohort of 2011–2016 vehicle fleets, leading to a present value of $1 billion, using a carbon value of $25 per tonne.

The present value of all benefits included in the analysis is estimated to be approximately $13.4 billion, and the present value of all costs is estimated at approximately $4.2 billion. The present value of the net benefits (i.e. total benefits of $13.4 billion minus total costs of $4.2 billion) of the Regulations is $9.2 billion. Overall, the total benefits exceed total costs by a ratio of over 3:1.

The costs and benefits below represent cumulative impacts over the lifetime of each indicated model year. These costs and benefits are incremental to the 2008 model year baseline so, for example, technology costs add $138 million (present value) to the costs of the model year 2011 fleet over the model year 2008 fleet, and add $1.273 billion (present value) to the costs of the model year 2016 fleet over the model year 2008 fleet.

Table 1: Summary of main costs and benefits of the Regulations (2009 $M, using 8% discount rate)

Incremental Costs and Benefits

MY* 2011

MY 2012

MY 2013

MY 2014

MY 2015

MY 2016

Combined MYs 2011 – 16

Quantified Costs

A. Consumer Costs

Technology
Costs

138

262

472

649

876

1,273

3,670

B. Costs to Canadians

Noise, Accidents, Congestion

32

71

79

85

98

123

488

C. Costs to Government

Compliance Promotion

0.28

0.02

0.02

0.01

0.01

0.01

0.35

Enforcement

0.05

0.06

0.06

0.05

0.05

0.05

0.32

Regulatory Administration

0.62

0.63

0.48

0.44

0.41

0.38

2.96

Vehicle Emission Testing

0.63

1.32

0.95

0.88

0.78

0.73

5.30

Sum of Costs

172

335

553

735

975

1,397

4,167

Monetized Benefits

Pretax Fuel Savings

944

1,114

1,421

1,633

2,004

2,560

9,676

Reduced Refueling time

56

62

78

89

109

141

535

Additional Driving

128

274

299

316

353

421

1,791

Reduction in CACs

32

37

48

55

67

86

325

Reduction in GHGs

96

119

152

174

212

267

1,020

Sum of Benefits

1,256

1,606

1,998

2,267

2,745

3,475

13,347

 

NET BENEFIT

1,084

1,271

1,445

1,532

1,770

2,078

9,180

 

Fuel savings (billion litres)

2.13

2.7

3.71

4.61

6.11

8.38

28

Emission reductions (Mt CO2e)

6.59

8.9

12.37

15.48

20.6

27.9

92

Benefit to Cost Ratio:

7.4

4.8

3.6

3.1

2.8

2.5

3.2

Vehicle Sales (thousands)

1,522

1,538

1,565

1,576

1,595

1,597

9,395

Qualitative and Non-Monetized Impacts

Oil Extraction, Petroleum Refiners and Retailers


Administrative and reporting costs

  • Firms involved in oil extraction, petroleum refiners and retailers may be impacted by reduced demand for motor gasoline.
  • This could lead to reduced growth in the Canadian industry, or, if growth is not reduced, increased exports.
  • Incremental costs are expected to be marginal given that the regulated community is already subject to the reporting requirement of other environmental regulations.

* Model year

Sector profile

The Canadian automotive industry is labour and capital intensive, globalized and export-oriented. It is Canada’s largest manufacturing sector, contributing 12% of Canadian manufacturing GDP (or 1.7% of total Canadian GDP). Canadian automotive assemblers include General Motors, Ford, Chrysler, Toyota, Honda and Suzuki. (see footnote 13) In 2008, the Canadian automotive manufacturing sector directly employed over 141 000 people. Auto industry exports totalled $56 billion or 12% of total Canadian merchandise exports. In 2008, 96% of Canadian automotive industry exports were destined for the United States, representing $54.2 billion, while Canada imported $68 billion of automotive goods from the United States reflecting a trade deficit. The production of the automotive manufacturing sector in Canada is heavily concentrated in Ontario, representing, in 2008, 94% of all automotive shipments, 94% of all automotive exports, and 83% of total automotive employment.

Analytical framework

Incremental impact: Impacts are analyzed in terms of incremental changes to emissions, and costs and benefits to stakeholders. The incremental impacts were determined by comparing two scenarios: a regulatory policy scenario and business as usual (BAU) scenario. The two scenarios are presented below.

Timeframe for analysis: The time horizon used for evaluating the impacts is 37 years. The first year of analysis is 2011, when the Regulations come into force. The Regulations also apply to the 2017 model year and later; however, the costs and benefits of the Regulations estimated in this analysis accrue only to 2011–2016 model year vehicles, over their maximum lifetime of 26 years for cars and 31 years for trucks. (see footnote 14)

Approach to cost and benefit estimates: The costs of the Regulations have been estimated using the Optimization Model for Reducing Emissions of Greenhouse Gases from Automobiles (OMEGA) model, originally developed by the U.S. EPA. Canadian data was used in order to estimate the impacts of the Regulations related to the Canadian fleet. The model estimates the costs to producers of meeting the Regulations, which are based on the cost of technologies applied to vehicles in order to meet the Regulations. Benefits associated with a reduction in emissions of GHGs, CACs, reductions in fuel consumption, and the benefit of fewer trips to the filling station have been estimated and monetized. Both costs and benefits are increased due to the rebound effect, (see footnote 15) which provides additional benefits to vehicle owners in the form of increased vehicle-kilometres driven, but can also increase societal costs due to increased traffic congestion, motor vehicle crashes, and noise. These sources of costs and benefits are also estimated monetarily.

Analytical scenarios

The business as usual: The cost-benefit analysis makes a “business as usual” forecast for vehicles of the 2011–2016 model years, including business as usual assumptions regarding their technological characteristics, lifetime usage, fuel consumption and emissions in the absence of the U.S. and Canadian regulations. The forecast incorporates recent trends in technologies, and announced product plans by manufacturers. For each manufacturer the forecast includes the fuel consumption/GHG emission characteristics of each vehicle model (“nameplate”) and main variants — i.e. the technologies incorporated, and the fuel consumption/emission rates per vehicle-kilometre.

The regulatory policy: This scenario is defined by the implementation of the Regulations.

The 2008 model year is the baseline for analysis, and the technology costs reported by model year are incremental to the 2008 model year. Under the regulatory scenario, technologies and compliance options are applied to vehicles in order for companies to meet their regulated standards, and the estimated incremental cost per vehicle is calculated on this basis. This leads to increased prices for purchasers of new vehicles; however, results from the OMEGA model, described below, show that increases in fuel efficiency allow for a simple payback period averaging less than 1.5 years for the average vehicle; and that fuel savings will be higher than the increased cost of the vehicles.

Increases in fuel efficiency lead to benefits in the form of reductions in GHG emissions per vehicle, and an overall reduction in fuel demand. GHG emissions are reduced at the tailpipe, and both GHG and CAC emissions are reduced in the extraction, transportation, production and storage of fuels. However, the rebound effect (see footnote 16) reduces a portion of these benefits in the form of increased CAC emissions from vehicles due to higher vehicle-kilometres travelled. The benefit of increased driving and less time spent at the fuelling station also leads to societal costs in the form of increased traffic congestion, motor vehicle crashes, and noise.

Because Canadian standards will be equivalent to those in the United States, it is the assumption of the Canadian analysis that each vehicle offered in Canada will be modified as for the U.S. market, as in practice manufacturers will design for the larger market. The OMEGA outputs from the U.S. EPA analysis were applied to the Canadian fleet in order to calculate the scenario results.

OMEGA, sources of data, and main assumptions

OMEGA (see footnote 17)

OMEGA is a vehicle technology forecasting and costing model. OMEGA shows how each of the vehicles could be modified by the application of technologies to meet the standards at least cost, given assumptions about the menu of available technologies. OMEGA compares all practical sets of modifications and selects that which minimizes total costs for each manufacturer. The output from OMEGA consists of estimated average emission rates for cars and light trucks, average costs per vehicle and total costs, for the specified model year standard. OMEGA predicts changes in the fuel consumption and emissions of each vehicle variant, which might change their performance characteristics and their prices, but it does not predict sales changes (i.e. sales remain constant throughout the analysis). OMEGA also does not predict credit trading between companies or advanced technology credits.

Fuel prices

An input required by OMEGA is Canadian fuel price forecasts. A National Energy Board (see footnote 18) forecast of fuel prices was used for the period up to 2020, and was extended for the period from 2021–2050 with a forecast from EC’s E3MC model.

Sales forecasts

An input required by OMEGA is Canadian vehicle sales forecasts, which were provided to EC by industry experts Desrosiers Automotive Consultants Inc. Estimates for sales in the 2010–2016 model years were based on macroeconomic variables and forecasts, estimates of replacement demand, and other market intelligence. It should be noted that these forecasts represent only one view of potential sales of vehicles in Canada, and that other views exist. The GHG performance of each of the vehicles was estimated with data from Transport Canada’s Vehicle Fuel Economy Information System (VFEIS).

Value of GHGs

The social cost of carbon (SCC) estimates the monetary value of the global damage an incremental tonne of emitted carbon is expected to impose over its lifespan in the atmosphere. Estimates of the SCC value vary widely and there is no consensus as to precise values to use for a benefits analysis. For example, experts such as William Nordhaus, Chris Hope and Richard Tol have reported mean SCC values in the range of $10 to $25 for per tonne of CO2e, whereas the Stern review reported a value closer to $100. In large part, the variability of estimates relates to key parameter choices in the estimation of the SCC, for example, the appropriate discount rate to use in the calculation. It is generally acknowledged that estimates, even from the same model, vary widely depending on the chosen levels of this and other key variables. Other benchmarks for carbon valuation in a benefits analysis include the price of carbon on exchange markets and target prices announced by key jurisdictions, which represent the marginal cost of reducing CO2e emissions. The price of carbon on the European Climate Exchange (ECX) is currently trading in the neighbourhood of $24. (see footnote 19) The most recent United Kingdom values for carbon valuation (see footnote 20) range from $21 to $47, with a central value of $39 in the traded sector and from $46 to $138, with a central value of $92 (see footnote 21) in the non-traded sector for 2010. Together, the above factors suggest that a plausible range of CO2e value estimates would normally fall within a range of approximately $10 to $100 per tonne of CO2e.

While research to determine the appropriate price of carbon for use in cost-benefit analysis is continuing, for this analysis a value of $25 per tonne of CO2e has been adopted, growing at 3% annually. This value is broadly consistent with the range of estimates of the expected U.S. price of carbon, the current trading value of permits in the European Climate Exchange, and average peer reviewed estimates of the SCC. (see footnote 22) Sensitivity analysis on the $10 to $100 range (also including a growth rate of approximately 2.4% per year as suggested by the IPCC Working Group II [2007, p. 822]) was also conducted.

Discount rate

A discount rate of 8% was used for estimating the present value of the costs and benefits in this analysis, as per Treasury Board Secretariat guidelines. Sensitivity analysis on the costs and benefits was also conducted at a 3% discount rate, and undiscounted.

Recent U.S. EPA Changes

The calculations of CO2 emission target values, technology costs, and technology effectiveness have changed slightly between the U.S. Notice of Proposed Rulemaking (NPRM) and the final rule. The calculations of CO2 emission target values have become less than 1% less stringent for 2016 model year vehicles, while overall costs for technologies decreased. Collectively, these changes have resulted in a 1.6% increase in estimated GHG emissions reductions in the U.S. analysis, while technology costs are roughly $100, or 10% lower per 2016 model year vehicle in the final rule than in the NPRM.

Environment Canada recognizes that similar changes could be applied to the Canadian analysis, given the integrated nature of the North American automobile industry. Our review indicated that these changes would serve to slightly increase the estimated net benefits of the Regulations from the values presented here, as the estimated cost increase per vehicle will fall while the GHG emissions reductions will be somewhat higher. However, as these changes would not affect the central results of the analysis in a significant way (i.e. the benefit to cost ratio of over 3:1 would not significantly increase), it was not deemed necessary or cost-effective to redo the analysis.

Costs

Automobile manufacturers

Automobile manufacturers will need to redesign and apply technologies to their vehicles (see footnote 23) in order to comply with the Regulations. It is assumed that manufacturers will meet the Regulations by making the necessary modifications to the forecasted fleet. It is not within the capacity of OMEGA to model the full range of compliance flexibility. For instance, manufacturers could also comply by changing the sales mix of their fleets, or adding new vehicles to their fleet, such as electric vehicles. This suggests that other lower cost options that have not been modeled may be available to companies. Further, because the full range of credit opportunities available to manufacturers was not modeled, the costs of the Regulations may be somewhat over-estimated. For example, while car/truck trading was modeled, cross-manufacturer trading and advanced technology credits were not modeled.

It is assumed that there is no impact on vehicle sales, because the value of fuel savings over the first year of driving outweighs the expected cost increase for the average vehicle. (see footnote 24) It is also assumed that all costs to automotive manufacturers are passed on to consumers and cost estimates are monetized as costs to the consumer.

Petroleum refiners and retailers and oil extraction

Petroleum refiners and retailers, and firms involved in oil extraction may be impacted by reduced demand for motor gasoline. It has been assumed in this analysis that a reduction in oil extraction, petroleum refining and retailing occurs in Canada. In reality, the Regulations could potentially lead to the assumed reduced growth in the Canadian industry, or, if future production does not change, to increased exports. These impacts are difficult to analyze, as any assumptions on the impacts of the proposed Regulations on the industry would be highly speculative, given the global nature of oil demand and supply. Further, the impacts on the Canadian industry imposed by the U.S. Regulations would be equally difficult to discern.

Consumers

Consumers are expected to be impacted by paying higher prices for their motor vehicle purchases. The average cost increase per car has been estimated at $1,057 and $1,419 per truck for model year 2016 over the baseline model year 2008 vehicles, for an average cost increase per vehicle of $1,195. At an average cost per vehicle of $25,000 in 2008, this represents an approximate 5% increase over the model year 2008 prices. In reality, relative changes in vehicle prices and performance may impact consumer choice; however, it is not within the capacity of OMEGA to model consumer choice.

Government

Costs to the Government of Canada of the Regulations fall into four principal categories: enforcement costs, compliance promotion costs, regulatory administration and vehicle testing. These incremental costs are presented in the following table.

Table 2: Incremental Cost to Government (2010 – 2016), (2009 $M) (see footnote 25)

2011

2012

2013

2014

2015

2016

6 - Year Total

Compliance Promotion

0.30

0.02

0.02

0.02

0.02

0.02

0.40

Enforcement

0.05

0.07

0.07

0.07

0.07

0.07

0.41

Regulatory Administration

0.67

0.74

0.60

0.60

0.60

0.60

3.82

Vehicle Emission Testing

0.68

1.54

1.20

1.20

1.15

1.15

6.93

Total

1.71

2.37

1.90

1.90

1.85

1.85

11.56

The cost of enforcement, compliance promotion, regulatory administration and vehicle emission testing costs is estimated to be in the order of $11.56 million over the 2011–2016 period.

Compliance promotion: Costs are estimated at approximately $303,000 the first year the Regulations come into force. Initial proactive compliance promotion activities to support the Regulations include approximately $250,000 for training enforcement officers as well as training for manufacturers relating to fleet averaging requirements and electronic submission of data. This complements the approach used with the automotive industry relating to oxides of nitrogen (NOx) fleet averaging requirements under the On-Road Vehicle and Engine Emission Regulations. In subsequent years, the costs will be lower (<$20,000 per year) and will mostly be related to annual compliance strategy development, data collection and organization.

Enforcement: Costs in the first year are estimated to be about $54,000 for inspections, investigation of alleged violations, and measures to deal with alleged violations, etc. For subsequent years, the enforcement costs are estimated to be about $72,000 per year. Enforcement costs are due to the relatively small number of regulated firms, the expected compliance level and the training investment made in the first year of the Regulations, as noted above for compliance promotion.

Regulatory administration: Costs in the first year are estimated to be about $670,000, which includes salaries, operation and maintenance. Operation and maintenance includes approximately $600,000 over the first two years of the regulation to develop and maintain an electronic reporting system to enable companies to submit data related to their fleet average emissions and related credits or deficits for each model year fleet.

Vehicle emission testing: Costs in the first year are estimated to be about $680,000, which includes salaries, operation and maintenance (including an upgrade to the testing facilities and associated equipment to accommodate the increase in volume of testing), and will be a ramp up period for the testing and emissions verification program. The program will be fully implemented by the third year. At full implementation, it is estimated that the Regulations would result in an incremental cost of approximately $1.15 million per year to deliver and administer the testing and emissions verification program, including associated laboratory costs.

Canadians

Accidents, congestion, and noise: Some additional accidents and casualties, increased congestion, and additional noise can be expected to result from more stringent standards, due to the rebound effect, compared to the baseline vehicle-kilometres. For the Canadian evaluation, the central value for safety costs (accidents) is assumed to be 0.64¢ per vehicle-km, (see footnote 26) the cost estimated for time delays due to congestion is 2.2¢ per vehicle-km, (see footnote 27) and the value of increased noise is 0.1¢ per vehicle-km. (see footnote 28)

Together, the present value of costs to Canadians of increased accidents, congestion, and noise due to the Regulations has been estimated at $488 million over the lifetime of the 2011–2016 fleets.

Benefits

Increases in vehicle fuel efficiency can offer environmental benefits stemming from a reduction in GHG and CAC emissions, increased driving due to the rebound effect, and savings in fuel costs.

Emissions of greenhouse gases

Meeting the Regulations will result in an incremental reduction in air pollution associated with GHG emissions of 92 Mt over the lifetime of the 2011–2016 fleets, due to reductions in oil extraction, petroleum refining and retailing, and the combustion of motor gasoline. Of the total reductions, approximately 77% come from modifications to vehicles and approximately 23% come from oil extraction, petroleum refining and retailing. Of the reductions from vehicles, approximately 85% come from fuel consumption technology improvements and approximately 15% come from air conditioning modifications, with 63% coming from trucks and 37% coming from cars.

Although impacts on the Canadian industries are uncertain, it is assumed in this analysis that all of the reductions of GHG emissions from the oil extraction, petroleum refining and retailing industries occur in Canada. In any case, GHG reductions can be expected due to reduced oil extraction and petroleum refining, wherever it occurs.

The present value of GHG emission reduction benefits is estimated to be $1 billion, with a plausible range of $408 million to $4 billion, based on the range of CO2e estimates discussed above. Expected benefits from reductions in GHG emissions as a result of the Regulations, in addition to those from other initiatives, would contribute towards reducing the impacts and costs of climate change.

Emissions of Criteria Air Contaminants

Meeting the Regulations will result in an incremental reduction in air pollution associated with CAC emissions due to reductions in oil extraction, petroleum refining and retailing. These emissions reductions are expected to contribute to health and environmental benefits.

Although impacts on Canadian industries are uncertain, it is assumed in this analysis that all of the reductions of CAC emissions from the oil extraction, petroleum refining and retailing industries occur in Canada.

The values used in this analysis to monetize reductions in CACs are based on a study conducted for Transport Canada. (see footnote 29)The present value of CAC emission reductions is estimated at $325 million.

Fuel savings

Meeting the Regulations will result in savings of fuel costs for purchasers of new automobiles. Twenty-eight billion litres of fuel are expected to be saved over the lifetime of the 2011–2016 fleets. The present value of benefits of reduced fuel consumption to vehicle purchasers is estimated to be $9.6 billion, (see footnote 30) with a payback period averaging less than 1.5 years for the average vehicle (see Table 2). The fuel price assumptions are considered conservative because the price of oil on which they are based is on the low end of current estimates. The Energy Information Administration’s estimates used for the U.S. EPA analysis are for US$130 per barrel by 2030, while Natural Resources Canada has estimated US$110 per barrel. The National Energy Board estimates, which are used in this analysis, are for US$90 per barrel by 2030. Fuel prices used in the analysis are pre-tax, so consumers could expect higher savings than those resulting from this analysis. (see footnote 31)

Table 3: Average technology cost versus fuel savings per vehicle, by model year (2009 $)

2011

2012

2013

2014

2015

2016

Car

Average cost per vehicle

46

205

386

506

643

1,057

Discounted 3-year fuel saving

310

573

960

1,335

1,834

2,326

Discounted 5-year fuel saving

471

865

1,447

2,010

2,763

3,513

Truck

Average cost per vehicle

154

173

339

580

944

1,419

Discounted 3-year fuel saving

854

941

1,284

1,612

2,090

2,501

Discounted 5-year fuel saving

1,274

1,400

1,908

2,395

3,109

3,722

Users’ value of additional mobility

The rebound effect consists of an increase in mobility, which is valuable to the users concerned. This value is estimated as half of the difference between the original and final operating costs of the vehicles analyzed. (see footnote 32) The present value of additional mobility due to the Regulations is estimated to be $1.7 billion over the lifetime of the 2011–2016 fleets.

Travel time

The value of travel time is an estimate of the benefits in reduced time devoted by vehicle users to refuelling. The value for this analysis is estimated to be $22 per vehicle hour. (see footnote 33) Using this value, the present value of benefits of increased travel due to the Regulations is $535 million. Calculations are net of the rebound effect.

Sensitivity analysis

Sensitivity analysis was conducted by varying the value of several key parameters in order to examine the effects on net benefits of changes in several key assumptions. The variable that has the largest impact on net benefits is the discount rate. At 8%, net benefits were $9 billion, while at 3%, net benefits were $16 billion, and undiscounted net benefits were $23 billion. It should be noted that a portion of GHG (23%) and CAC emissions reductions in the analysis come from oil extraction, refining and retailing, for which the reductions may or may not occur within Canada. In any case, it was not considered necessary to do a more wide-ranging sensitivity analysis, such as a full Monte Carlo analysis, as even setting all benefits other than fuel savings equal to zero still results in a present value of net benefits of over $5 billion, and a benefit to cost ratio of over 2:1.

Distributional impacts

The automotive manufacturing sector is highly concentrated within Canada, notably in Ontario. However, the Regulations are not expected to have any incremental impacts on production. Vehicle manufacturers will be impacted differently, depending on the GHG emissions performance of their vehicles before the Regulations. Costs to consumers are expected to be passed on throughout Canada. The types of vehicles purchased vary from region to region; however, it is not expected that there will be significantly different impacts on any region within Canada.

Competitiveness impacts

Canadian and U.S. regulatory standards for 2011 to 2016 model year vehicles will be aligned in order to mitigate any negative impacts on the Canadian industry. Further, compliance mechanisms through the early years of the Regulations are expected to provide ample flexibility for manufacturers to meet the standards in the most cost-effective way. The Canadian standards will ensure that the GHG reductions will occur across the entire Canadian fleet, and that there will be a level playing field for all manufacturers and importers in the Canadian market.

The Regulations provide regulatory certainty for the automotive sector and help to ensure that the Canadian automotive manufacturing and distribution industry remain competitive in the North American and world markets, particularly in countries that have stringent environmental standards. Additionally, the standards will compel manufacturers selling vehicles in Canada to develop and implement emission reduction technologies which benefit the environment, human health and Canadian consumers. The design of the Regulations achieves these objectives while minimizing the regulatory compliance burden on Canadian industry.

Minimal impacts to the automotive industry are expected because of the harmonized approach to regulating and compliance mechanisms.

Rationale

The Regulations achieve the Government of Canada’s objective to reduce GHG emissions from passenger automobiles and light trucks by establishing mandatory emission standards for new vehicles of the 2011 and later model years that are aligned with the national standards of the United States. The implementation of these comprehensive and stringent national standards for regulating GHG emissions from new vehicles requires significant technological improvements to new vehicles, provides regulatory certainty, sets a level playing field for the automotive sector and minimizes the regulatory compliance burden on Canadian industry. The present value to vehicle purchasers of reduced fuel consumption benefits alone is estimated to be $9.6 billion.

Consultation

Consultations before the publication of proposed Regulations in the Canada Gazette, Part I

The Government of Canada first announced its commitment to take regulatory action to reduce GHG emissions from 2011 and later model year passenger automobiles and light trucks in the Notice of intent to develop and implement regulations and other measures to reduce air emissions published in the Canada Gazette, Part I, on October 21, 2006. (see footnote 34) This commitment was confirmed in the subsequent Regulatory Framework for Air Emissions, released in April 2007. The Government intended to establish regulated vehicle fuel consumption standards under the Motor Vehicle Fuel Consumption Standards Act beginning with the 2011 model year. In January 2008, Transport Canada released a discussion document to identify issues relating to the development of Canadian fuel consumption regulations. During 2008, stakeholder workshops and bilateral meetings were held to seek stakeholder input in this regard, particularly on the planned analytical approach to assess potential standards.

On April 4, 2009, the Government published the Notice of intent to develop regulations limiting carbon dioxide emissions from new cars and light-duty trucks in the Canada Gazette, Part I, (see footnote 35) to inform Canadians of a new regulatory approach to achieve its policy objective of reducing GHG emissions from new vehicles. The Government announced that it was proceeding with the immediate development of regulations under CEPA 1999 to limit emissions of GHGs from new passenger automobiles and light-duty trucks to take effect beginning with the 2011 model year. This approach ensured that the Government had the flexibility to align with U.S. national standards for the 2011 model year and with future U.S. national standards as they emerged, which is crucial to achieving an aligned approach that takes both our environment and economy into account.

After the publication of the notice of intent, EC sought the views of interested parties through various mechanisms. In May 2009, EC briefed the provinces and territories on the plan to develop national vehicle GHG regulations under CEPA 1999 at a meeting of CEPA’s National Advisory Committee. (see footnote 36) Provinces and territories were invited to provide their views on the proposed national approach to align with U.S. emission standards, and EC welcomed interest to meet bilaterally to discuss issues relating to the development of proposed Regulations. In addition, bilateral meetings were held with a working group representing members of the Canadian Vehicle Manufacturers’ Association and the Association of International Automobile Manufacturers of Canada to discuss technical issues relating to the development of proposed Regulations. A bilateral meeting was also held with Pollution Probe, a leading non-governmental environmental organization on vehicle fuel efficiency and GHG emission issues.

The views of stakeholders provided during the above early consultations were taken into account in developing draft regulations. On December 7, 2009, EC publicly released for consultation a draft of proposed Regulations to seek comments from interested parties. The draft Regulations were posted on EC’s CEPA Environmental Registry Web site to make it broadly available to interested parties. (see footnote 37) On December 8, 2009, EC sent a letter to members of the CEPA National Advisory Committee to inform the members of the release of the draft Regulations and of the opportunity to submit written comments. Similarly, EC distributed an email to a broad range of interested parties to inform them of the consultation process. Interested parties were requested to submit their written comments by January 15, 2010.

In early January 2010, EC held bilateral meetings with representatives of various provinces, vehicle industry associations and non-governmental environmental organizations to provide an overview of the draft Regulations to better inform possible written submissions.

Following the consultation, EC received 12 written submissions from a range of stakeholders, including a province, the automotive industry, environmental and health-related non-governmental organizations, and a foreign government body. Comments addressed a wide range of issues including the applicability of the planned Regulations to vehicles of the 2011 model year; provisions to purchase credits from the Receiver General; compliance flexibilities for small-volume companies; standards for N2O and CH4 emissions; applicability of the Regulations to “nearly new” vehicles imported into Canada; provisions for various emission credits; and the modelling analysis conducted to support the planned Regulations. EC took these comments into account in developing proposed Regulations. The key issues raised by interested parties on the consultation draft of the Regulations and the manner in which they were addressed were summarized in the publication of the proposed Regulations in the Canada Gazette, Part I, on April 17, 2010. (see footnote 38)

Consultations after the publication of the proposed Regulations in the Canada Gazette, Part I

Pre-publication of the proposed Passenger Automobile and Light Truck Greenhouse Gas Emission Regulations in the Canada Gazette, Part I, on April 17, 2010, initiated a 60-day consultation period where interested parties were invited to submit their written views on the proposed Regulations. The proposed Regulations were posted on EC’s CEPA Environmental Registry Web site to make them broadly available to interested parties. EC sent a letter to members of the CEPA National Advisory Committee to inform the members of the release of the proposed Regulations and of the opportunity to submit written comments. Similarly, EC distributed an email to a broad range of interested parties to inform them of the formal consultation process. During the consultation period, EC held meetings with representatives of the provinces and territories, vehicle industry associations and non-governmental environmental organizations to provide an overview of the proposed Regulations, and answer questions to better inform possible written submissions.

The Department received 16 written submissions from a range of commenters, including provinces, the automotive industry, environmental non-governmental organizations, and other interested parties. EC has taken these views into account in developing the Regulations. Commenters were generally supportive of the overall approach set out in the proposed Regulations and many of the comments received from stakeholders related to ensuring that Canada’s final Regulations account for changes between the U.S. proposed and final rule. However, some commenters expressed concerns with some elements of the proposed Regulations and recommended adjustments to address what were viewed as unique Canadian considerations. The following paragraphs summarize the major issues raised by interested parties on the proposed Regulations and the Department’s analysis leading to the development of the final Regulations.

Alignment with U.S. National Emission Standards

Many commenters expressed support for national vehicle GHG emission regulations for new vehicles aligned with U.S. national standards. An industry association stated that by offering automobile manufacturers and importers similar flexibility mechanisms in Canada as in the U.S., the Department is helping to encourage a more stable environment in which its companies can build common products for Canada and the U.S. while developing company-specific plans to comply with this very challenging regulatory regime. Another industry association stated that the harmonized approach will allow for leveraging of North American economies of scale, which will provide Canadians with the greatest access to advanced vehicle technologies and their environmental benefits.

An environmental non-governmental organization (ENGO) expressed disappointment in the policy of harmonization and disagreed that the highly integrated nature of the Canada-U.S. auto industry was a suitable justification for an aligned approach given that the fleet average standards require that companies sell a low-emitting fleet, not create Canada-specific vehicles. Another ENGO argued that the decision to align with the U.S. standards should be a conclusion reached after a detailed assessment of what works best for Canada.

Response: We believe that aligning these Regulations with those of the U.S. EPA will provide significant environmental and economic benefits to Canada, and will enhance the competitiveness of the Canadian industry. A number of changes have been made to the proposed regulatory language to better align with corresponding U.S. EPA regulatory provisions.

Business as usual scenario

One ENGO submitted an analysis suggesting that EC’s business as usual (BAU) scenario does not reflect historical trends in fuel efficiency improvements in the Canadian light-duty vehicle fleet and suggested that the standards would not require any improvement over what would have occurred in absence of the Regulations.

Response: The ENGO’s analysis of the BAU was based on a comparison between data presented in the cost-benefit analysis of the proposed Regulations and publicly available data presented on Transport Canada’s Web site in support of the voluntary Company Average Fuel Consumption (CAFC) program, (see footnote 39) which contains information related to the annual fuel consumption performance of Canadian auto companies. According to this comparison, if historical trends are projected into the future, the average performance of the passenger car and light truck fleets would be better than the standards for most, if not all of the cohort of 2011–2016 vehicle fleets.

In considering this analysis, we note three factors that make the ENGO’s comparison inaccurate. First, although the data presented on Transport Canada’s Web site is based on the same data as EC’s analysis, it does not define the two vehicle classes — passenger automobiles and light trucks — in the same manner as the Regulations and the accompanying cost and benefits analysis. Second, the Regulations prescribe a maximum decrease in a company’s fleet average fuel efficiency that can be generated through the manufacture or import for sale of dual fuel vehicles, while the CAFC program does not. Third, the CAFC data can reflect changes toward the purchase of smaller vehicles, which under the Regulations would result in a tighter overall fleet standard because the standards are based on the footprint of the vehicle.

Early action credits

Two ENGOs and one provincial government expressed concern that the provision through which companies generate early action credits would provide too much flexibility for companies and diminish the GHG emission reduction benefits of the Regulations. One ENGO provided analysis arguing that the credits would result in a situation in which no carbon emission reductions are achieved. Alternately, an industry association advocated for the removal of certain restrictions on the use of early action credits, deeming the provision to be too restrictive.

Response: Early action credits provide an important flexibility for manufacturers that have implemented fuel efficient technologies in excess of their CAFE compliance obligations prior to the coming into force of the Regulations. (see footnote 40) More stringent and less flexible alternatives would give insufficient weight to economic practicability and related lead time concerns, given the current state of the industry.

Compliance credits by their nature have the potential to reduce the estimated benefits and costs of the Regulations. Although there could be some inter-firm trading of early action credits, our analysis is that not all of the credits available to companies will be used before their expiry. As such, the impacts of early action credits on benefits and costs are expected to be minimal, and the net benefits of the Regulations remain high.

In order to reinforce the achievement of this outcome, a restriction has now been imposed on the trading of early action credits earned by a company for the 2009 model year.

Treatment of advanced technology vehicles

Commentators presented divided views on whether to provide the same level of incentive in Canada as in the U.S. for advanced technology vehicles. One industry association, an ENGO and one provincial government indicated that if Canada wishes to harmonize its regulatory program with the U.S., it should also harmonize with this provision. Conversely, another industry association, an automotive importer, an ENGO and an interested party suggested that, given the cost of these vehicles and Canada’s cleaner electricity grid, the Regulations should provide a greater incentive for companies to market them in Canada.

Response: In recognition that Canada’s electricity grid produces less GHGs than that of the U.S., the Regulations provide a higher level of incentive for the introduction of advanced technology vehicles than the corresponding U.S. regulations. Whereas the U.S. EPA had originally proposed that companies could multiply the sales of advanced technology vehicles by a factor between 1.2 and 2 when calculating their fleet average GHG emissions (i.e. in combination with using a carbon-related exhaust emission value of zero grams/mile), the EPA eliminated the use of the multiplier in its final rule to lower the amount of credits that would be generated by these vehicles. We believe that lower GHG emissions associated with electricity generation in Canada makes a higher level of incentive for advanced technology vehicles appropriate. The Regulations therefore include provisions for the use of a multiplier, as well as the use of a carbon-related exhaust emission value of zero grams/mile (the latter for a limited number of vehicles), for advanced technology vehicles in a company’s fleets of the 2011–2016 model years. Nonetheless, the multiplier of 2 that had been specified in the proposed Regulations has been reduced to a value of 1.2 to ensure that this provision does not significantly affect the net benefits of the Regulations. It is anticipated that the impact of this provision will be relatively small based on the limited volumes of advanced technology vehicles expected during the 2011–2016 timeframe. Further, any potential for diminished emission reductions resulting from this provision in the short term would be offset by the potential for future emissions reductions that could be achieved through further promotion of advanced technology vehicles in Canada.

Expansion of compliance flexibilities for smaller-volume companies

One industry association, three companies and one consultant representing small volume manufacturers advocated that the Regulations be aligned with the expanded provisions for small volume manufacturers, as included in the U.S. final rule.

Response: In the RIAS published in the Canada Gazette, Part I, along with the proposed Regulations, we committed to review the U.S. final rule and make any necessary adjustments to the proposed Regulations to ensure that the Regulations remain aligned with those of the U.S. EPA. This review was conducted and the expansion of the provisions for small volume manufacturers was deemed to be an important change to reflect in the Regulations to ensure alignment with the U.S. EPA.

The temporary optional fleet standards have been amended to include a new category of small volume manufacturers, with proportional eligibility thresholds, which reflect the size of the Canadian new vehicle fleet. In addition, the fleet average GHG emission standards for the 2012 model years and following do not apply to companies that manufacture or import a total of passenger automobiles and light trucks that is less than the prescribed threshold.

Definition of volume thresholds for small volume manufacturer provisions

Comments were received concerning the Department’s assumption that any volume thresholds required for low volume manufacturer provisions aligned with the U.S. proposed rule would define them as being 10% of the values included in the U.S. The basis of this assumption was that, historically, the volume of Canada’s new vehicle fleet has been, on average, one tenth of that in the U.S. One commentator indicated that, in recent years, the ratio had changed and is currently closer to 15%, while other commentators indicated that the Department’s use of 10% to define the thresholds in the proposed Regulations was appropriate.

Response: We reviewed recent total sales volumes in Canada and the U.S. as published by Ward’s Automotive. This data confirmed the information included in this commentator’s submission. We agree that a value of 15% is a more accurate comparison of the size of the Canadian new vehicle fleet to that of the U.S., particularly since most of these provisions are based on the volume of vehicles imported or manufactured for sale in model year 2009. As a result, all provisions that include thresholds that have been calculated as a proportion of similar thresholds in the U.S. final rule have been modified using 15% as the adjustment factor.

Applicability to “nearly new” vehicles imported into Canada

For the purpose of the fleet averaging requirements of the Regulations, “fleet” is defined as all passenger automobiles or light trucks of a specific model year that a company manufactures in Canada or imports into Canada for the purposes of sale of those vehicles to the first retail purchaser. Under this definition, any passenger automobile or light truck for which the first retail sale occurs outside of Canada would not be subject to the Regulations.

An industry association expressed concerns that Canadian companies, in meeting the fleet averaging requirements, may have to limit availability of certain, high-emitting, new vehicle models in Canada (e.g. four-wheel drive vehicles), which could incite for-profit commercial entities to import nearly new vehicles of these models from the U.S. to satisfy the demand in Canada and could diminish the benefits of the Regulations. The association believes that the Canadian market is more vulnerable to this issue than the U.S., given the large supply of used vehicles that the U.S. market can offer Canadian consumers, all within a short drive of most major urban centres. The association recommended that the Regulations stipulate a mileage limit to define used vehicles and/or extend the applicability of the Regulations to address nearly new vehicles. Conversely, another industry association stated that there is no reason to extend the scope of the regulations beyond new vehicles.

Response: We recognize that the large supply of used vehicles in the U.S. will continue to provide opportunities for Canadian consumers and vehicle brokers to source vehicles across the border, particularly when the exchange rate is favourable. However, it is expected that the influence of the Regulations on the importation of nearly new vehicles for sale in Canada will be very limited. From an environmental perspective, it is important to note that any new vehicle that would be sold at the retail level in the United States would be included in the fleet average calculations and compliance programs of the corresponding U.S. national regulatory programs for GHG emissions and fuel economy. Accordingly, not including such vehicles in the Canadian fleet average GHG regulatory program is not expected to compromise the overall environmental objectives of the common North American standards. Further, establishing fleet average GHG emission standards for importers of used vehicles would present significant administrative and enforcement challenges. For these reasons, we are maintaining the approach that was set out in the proposed Regulations.

Payments to the Receiver General for the 2011 model year

With respect to the provision allowing companies to offset deficits for the 2011 model year by obtaining credits through payments to the Receiver General, one industry association presented its view that it is unreasonable to finalize this provision as it could force companies to pay large sums of money almost immediately upon publication of the Regulations. Additionally, one low volume auto manufacturer stated that payments to the Receiver General provide a viable option to companies to comply but advocated for the provision be extended beyond model year 2011 given that, despite the provisions related to credit trading, it is uncertain that credits will be made available for use during the regulatory period.

Both commentators expressed concern with the rate of $20 per megagram of CO2 emissions, since it is possible that this rate could lead to higher payments being made than would be in the U.S. under its CAFE program.

Response: The option to obtain credits through payments to the Receiver General is included in the Regulations in alignment with the penalty provisions for non-compliance with the fuel economy standards of the U.S. CAFE program in model year 2011. Since the U.S. EPA GHG emission regulations for model years 2012 to 2016 do not include an option for payment of penalties, the Regulations align with the U.S. joint national program by only allowing the acquisition of credits in this manner for deficits incurred in model year 2011.

Regarding the industry association’s concern that payments could be required as soon as the Regulations come into force, payments cannot be made until a deficit has been incurred, which occurs upon submission of the company’s end of model year report to the Minister. For model year 2011, this report must be submitted no later than May 1, 2012. If a deficit has been incurred in model year 2011, a company must offset this deficit no later than the day on which it submits the end of model year report for model year 2014, since credits generated in a given model year can be used to offset deficits incurred in any of the three consecutive preceding model years.

Regarding the rate of $20 per megagram of CO2 emissions, we recognize that this is not precisely the rate used in the U.S. CAFE program; however, it has been designed to be comparable. Because the conversion from miles per gallon to grams per mile leads to a non-linear relationship, it is impractical to specify a rate for the purchase of credits to offset an emission deficit that would always match the corresponding fine that would be paid under the CAFE program. In general, a rate of $20 per Mg of CO2e emissions would provide a reasonably comparable approach to the U.S. CAFE fine without resulting in a higher payment than would apply under the CAFE program.

Coming into force date of the Regulations

One low-volume manufacturer recommended that the Regulations first come into force for model year 2012 instead of 2011, since this would be harmonized with the regulatory period of the U.S. joint national program and its standards for model years 2012 through 2016.

Response: We recognize that there is a difference between the regulated model years of the Regulations and those of the final GHG regulations published by the U.S. EPA. However, it has always been the intention of the Government of Canada to develop and implement regulations to come into effect for model year 2011.

Methane and nitrous oxide emission standards

One industry association and one company expressed concerns with the provision related to methane (CH4) and nitrous oxide (N2O). The industry association questioned the justification for separate standards to address a relatively small proportion of the total GHG emissions from vehicles while potentially precluding the introduction of technologies such as gasoline direct injection, clean diesel and compressed natural gas. The low volume manufacturer argued that the costs associated with the purchase of specific analyzers to measure the emissions of N2O offset any benefits to be gained by limiting these emissions. Both advocated for a departure from the policy of alignment with the U.S. by removing these provisions from the Regulations.

Response: These standards are effectively intended to cap vehicle N2O and CH4 emissions at levels that are representative of existing new vehicles to ensure that levels do not increase with future vehicles. Following its consultation period, the U.S. EPA decided to finalize this provision with an amendment allowing companies to include these emissions as CO2-equivalent in their calculation of fleet average performance rather than meeting the individual standards. The Regulations include the same provision that was proposed, with a similar amendment to that included in the U.S. final rule.

As stated above, we believe that aligning these Regulations with those of the U.S. EPA will provide significant environmental and economic benefits to Canada and enhance the competitiveness of the Canadian industry.

Other changes

In response to comments, a number of technical changes were made to the Regulations to ensure alignment with final U.S. rules, including

  • Minor adjustments made to the calculations of CO2 emission target values;
  • Updated definitions of key elements of the Regulations (e.g. advanced technology vehicles);
  • Increased the precision of calculated values by modifying rounding rules;
  • Updated values used to define lifetime miles travelled for both classes of vehicles;
  • Updated values representing California’s standards in early action credit provisions;
  • Clarified the use of advanced technology vehicle flexibilities in the determination of early action credits;
  • Clarified certain reporting requirements; and
  • Added precision to the reporting requirements to ensure that the same level of testing by volume of total sales is required to represent the emission performance of each company.

Implementation, enforcement and service standards

Implementation

Environment Canada currently administers a comprehensive program to verify compliance with the On-Road Vehicle and Engine Emission Regulations under CEPA 1999, which establish federal emission standards for smog-forming emissions. The Regulations will be implemented and enforced in a similar manner. Manufacturers and importers will be responsible for ensuring that their products comply with the Regulations and will be required to produce and maintain evidence of such conformity. The program will include

  • Authorizing and monitoring the use of the national emissions mark;
  • Reviewing company evidence of conformity;
  • Monitoring data submission for compliance with the applicable fleet average GHG emission standards and the banking or trading of emission credits;
  • Registering company notices of defects affecting emission controls;
  • Inspections of test vehicles and engines and their emission-related components;
  • Laboratory emissions tests on a sample of new vehicles and engines that are representative of products offered for sale in Canada; and
  • Laboratory emissions tests on a sample of typical in-use vehicles.

Environment Canada plans to coordinate monitoring efforts with the U.S. EPA by sharing information to increase program efficiency and effectiveness.

In administering the Regulations, EC will respond to submissions and inquiries from the regulated community in a timely manner taking into account the complexity and completeness of the request.

Enforcement

Since the Regulations are made under CEPA 1999, enforcement officers will, when verifying compliance with the Regulations, apply the Compliance and Enforcement Policy implemented under the Act. The Policy sets out the range of possible responses to violations, including warnings, directions, environmental protection compliance orders, ticketing, ministerial orders, injunctions, prosecution, and environmental protection alternative measures (which are an alternative to a court trial after the laying of charges for a CEPA 1999 violation). In addition, the Policy explains when EC will resort to civil suits by the Crown for costs recovery.

When, following an inspection or an investigation, an enforcement officer discovers an alleged violation, the officer will choose the appropriate enforcement action based on the following factors:

  • Nature of the alleged violation: This includes consideration of the damage, the intent of the alleged violator, whether it is a repeat violation, and whether an attempt has been made to conceal information or otherwise subvert the objectives and requirements of the Act.
  • Effectiveness in achieving the desired result with the alleged violator: The desired result is compliance within the shortest possible time and with no further repetition of the violation. Factors to be considered include the violator’s history of compliance with the Act, willingness to cooperate with enforcement officers, and evidence of corrective action already taken.
  • Consistency: Enforcement officers will consider how similar situations have been handled in determining the measures to be taken to enforce the Act.

Environment Canada will monitor the GHG emission performance of vehicles and vehicle fleets and compliance with the Regulations. In the situation where a vehicle model type is found to exceed applicable standards, the normal course of events would be to perform sufficient engineering assessment to determine if a notice of defect should be issued by the company to the owners of the particular model of vehicle. This may result in a product recall to fix the defect.

Performance measurement and evaluation

Measuring the performance of regulatory activities to ensure they continually meet their initial objectives is an important responsibility for the regulating department. With respect to the Regulations, the evaluation and reporting of performance will take place via several regular assessment activities. The objective of the Regulations is to reduce GHG emissions by requiring that companies that manufacture new vehicles in Canada, or import new vehicles into Canada, for sale in Canada comply with fleet-average GHG emission standards for a given model year. Individual vehicle models in a company’s fleet will also be subject to specific GHG emission standards. It is estimated that the Regulations will result in progressive GHG reductions beginning with the 2011 model year.

Through compliance with the Regulations, the Government intends to reduce GHG emissions by inciting vehicle manufacturers to incorporate GHG-reducing technologies such as fuel-saving technologies, technologies to improve vehicle air conditioning systems and other innovative technologies to reduce GHG emissions on new vehicles.

The Regulations intend to achieve the following immediate and long-term outcomes:

  • limit GHG emissions from individual vehicle models;
  • progressively reduce the fleet-average GHG emission performance of new vehicles of the 2011–2016 model years; and
  • achieve progressive GHG emission reductions from the fleet of vehicles in Canada.

Performance of the Regulations will be measured through a set of key indicators that reflect the activities that will be undertaken by the Government and regulated parties. These indicators will be evaluated to assess whether the immediate as well as long-term results have been achieved. The results will be measured on an annual basis using data submitted to EC by the regulated community and modeling to estimate GHG emission reductions.

A set of immediate outcomes will also help track the performance of the Regulations. For example, EC will measure

  • the awareness by the regulated community of the regulatory requirements;
  • the timely and accurate reporting of data; and
  • the compliance with the fleet average emission standards and with standards for individual vehicle models.

The key indicators to monitor the performance of the Regulations on these immediate outcomes would include

  • the percentage of known regulatees that are aware of the Regulations;
  • the percentage of known regulatees that are reporting on time and accurately;
  • the rate of compliance with emissions standards for individual vehicle models; and
  • the rate of compliance with fleet average emission standards.

The sources of data for the measurement of these indicators are the electronic reporting system (and submissions in paper format), which will capture the information directly submitted by companies as part of their annual reporting requirements under the Regulations; compliance promotion activity reports (attendance reports, reply cards, etc.); EC’s testing of a sample of individual vehicle models to verify conformance with the Regulations; and enforcement activity reports, in particular compliance rates provided through the National Enforcement and Emergency Management Information System (NEMESIS).

The outcomes identified above will be achieved via a series of activities related to the development and implementation of the Regulations. These include developing and implementing the Regulations; incorporating the Regulations into EC’s existing vehicle and engine compliance strategy; developing a compliance and promotion plan; identifying the Regulations under EC’s National Enforcement Plan; developing and operating an electronic reporting tool for regulatees; and preparing an annual report on the performance of the Regulations.

Contacts

Ed Crupi
Senior Regulatory Policy Advisor
Energy and Transportation Branch
Environment Canada
351 Saint-Joseph Boulevard, 10th Floor
Gatineau, Quebec
K1A 0H3
Telephone: 819-994-2230
Fax: 819-953-9547
Email: Ed.Crupi@ec.gc.ca

Luis Leigh
Director
Regulatory Analysis and Valuation Division
Environment Canada
10 Wellington Street, 24th Floor
Gatineau, Quebec
K1A 0H3
Telephone: 819-953-1170
Fax: 819-997-2769
Email: Luis.Leigh@ec.gc.ca

Footnote a
S.C. 2004, c. 15, s. 31

Footnote b
S.C. 1999, c. 33

Footnote c
S.C. 1999, c. 33

Footnote 1
Canada’s Action on Climate Change, http://climatechange.gc.ca/default.asp?lang=En&n=036D9756-1.

Footnote 2
Ibid.

Footnote 3
Greenhouse Gas Inventory, 2008, www.ec.gc.ca/ges-ghg/default.asp?lang=En&n=0590640B-1.

Footnote 4
Ibid.

Footnote 5
www.ec.gc.ca/CEPARegistry/the_act/.

Footnote 6
For the purpose of the Regulations, “fleet” is defined as all passenger automobiles or light trucks of a specific model year that a company manufactures in Canada or imports into Canada for the purposes of sale of those vehicles to the first retail purchaser.

Footnote 7
In the Regulations, the fleet average GHG emission standard is not based on actual vehicles sales, but on those vehicles manufactured in Canada and imported into Canada for sale to the first retail purchaser. When a sales-weighted average is referred to in this RIAS, it means a weighted average of vehicles manufactured and imported into Canada for sale to the first retail purchaser.

Footnote 8
The equation is provided in the Regulatory text.

Footnote 9
Page 25435 of Federal Register /Vol. 75, No. 88 / Friday, May 7, 2010 /Rules and Regulations

Footnote 10
www.ec.gc.ca/Ceparegistry/notices/noticedetail.cfm?intNotice=500

Footnote 11
The Regulation respecting greenhouse gas emissions from motor vehicles, Gazette officielle du Québec, December 30, 2009.

Footnote 12
A copy of the cost-benefit analysis, “Technical Report on Analysis of Proposed Regulation of Motor Vehicle Carbon Dioxide Emissions” by Cantran Enterprises Ltd and Lawson Economics Research Inc., prepared for EC, is available upon request.

Footnote 13
As of 2010, Suzuki no longer produces vehicles in Canada.

Footnote 14
Each calendar year fewer and fewer vehicles from each model year remain on the road. Costs and benefit estimates in this analysis have been adjusted to reflect this.

Footnote 15
The rebound effect refers to an increase in driving as it becomes relatively cheaper due to increased fuel efficiency.

Footnote 16
This analysis adopts a rate of 10% as the central rate for the rebound effect.

Footnote 17
www.epa.gov/oms/climate/models.htm

Footnote 18
2009 Reference Case Scenario: Canadian Energy Demand and Supply to 2020.

Footnote 19
ECX price of carbon of 15 euros was converted to Canadian dollars using an exchange rate of 1 euro = $1.58.

Footnote 20
These ranges represent carbon values for 2010 used in UK policy appraisal, based on estimated marginal abatement costs for emissions reductions in each sector. For details, see “Carbon Valuation in UK Policy Appraisal: A Revised Approach,” Department of Energy and Climate Change, July 2009.

Footnote 21
UK price of carbon range of £26 to £78 was converted to Canadian dollars using an exchange rate of £1 = $1.78 for 2009.

Footnote 22
See “The Social Cost of Carbon: Trends, Outliers and Catastrophes,” from Economics Discussion Papers, Discussion Paper 2007-44, September 19, 2007.

Footnote 23
These costs are also estimated in the OMEGA model.

Footnote 24
In reality, sales could be impacted; however, the direction and size of this impact is ambiguous.

Footnote 25
Note that costs to Government in Table 2 are undiscounted, while costs to Government in Table 1 are discounted. Totals may be slightly different due to rounding.

Footnote 26
Borer Blindenbacher, F and Karangwa, E: “Estimating the Total Costs of Accidents,” Full-Cost Investigation Project, Economic Analysis Directorate, Transport Canada, April 2007.

Footnote 27
iTRANS Consulting Inc.: Costs of Non-Recurrent Congestion in Canada Final Report, Transport Canada, Economic Analysis, 11 December 2006.

Footnote 28
Gillen, D: “Estimation of Noise Costs due to Road, Rail and Air Transportation in Canada,” Full-Cost Investigation Project, Economic Analysis Directorate, Transport Canada, March 2007.

Footnote 29
Marbek Resource Consultants and RWDI Inc.: “Evaluation of Total Cost of Air Pollution Due to Transportation in Canada,” final report submitted to Transport Canada, March 30, 2007.

Footnote 30
This is net of the rebound effect.

Footnote 31
Pre-tax fuel prices are used in this analysis because, for the purposes of cost-benefit analysis, a tax would be considered a monetary transfer rather than a resource cost.

Footnote 32
“Technical Report on Analysis of Proposed Regulation of Motor Vehicle Carbon Dioxide Emissions” by Cantran Enterprises Ltd and Lawson Economics Research Inc., prepared for EC.

Footnote 33
Transport Canada Guide to Benefit-Cost Analysis. Transport Canada.

Footnote 34
www.gazette.gc.ca/archives/p1/2006/2006-10-21/html/notice-avis-eng.html#i3.

Footnote 35
www.gazette.gc.ca/rp-pr/p1/2009/2009-04-04/html/notice-avis-eng.html#d110.

Footnote 36
The CEPA National Advisory Committee (CEPA NAC) is the committee established pursuant to CEPA 1999 and composed of one representative of each of the federal ministers of the Environment and Health and provides for a representative from each of the provinces and territories and up to six representatives of Aboriginal governments. The Committee advises the Ministers on actions taken under the Act, which enables national, cooperative action and avoids duplication in regulatory activity among governments.

Footnote 37
www.ec.gc.ca/CEPARegistry/documents/participation/ghg/default.cfm.

Footnote 38
www.gazette.gc.ca/rp-pr/p1/2010/2010-04-17/html/reg1-eng.html

Footnote 39
www.tc.gc.ca/eng/programs/environment-fcp-cafc-357.htm

Footnote 40
U.S. Federal Register, May 7, 2010.