Speech

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Thank you for that kind introduction, and for this opportunity to speak to the Economic Club of Canada. Over the years, you have gathered a very distinguished roster of speakers who have addressed some of the key issues of our time. 

I’m very pleased to join you today to talk about a major announcement in the Government of Canada’s plan to reduce greenhouse gas emissions and their contribution to climate change.

The Government of Canada must pursue its climate change agenda on three different fronts:  domestic, continental, international.

Domestic, because even as your kids will tell you, you have to think globally, but act locally.

Continental, because not only do we have an integrated economy in North America, but of course we have an integrated environment too.

And international, because your kids are right. While we act locally, we have responsibilities in a global arena for a global problem. In fact, this year we approach a threshold for international efforts to reduce greenhouse gas emissions. World leaders will meet in Copenhagen in December to turn the page on the Kyoto Protocol and hopefully adopt a new binding agreement that will apply to all major emitters.

Let me set the domestic challenge before you as starkly as I can.

Canada produced 721 megatonnes of greenhouse gases in 2006. This represents a significant environmental challenge. 

But it should come as no surprise. We are a northern country with cold winters and hot summers. We are spread out across vast distances that require longer transportation routes. And the economy that creates our wealth, sustains a high quality of life, and gives us the capacity to solve our environment problems and those of lesser developed countries too…well, that economy is driven by energy intensive industries.

So where do our greenhouse gas emissions come from? From what I have just said, this should come as no surprise:

• 35 percent comes from fossil fuel production, industrial processing and manufacturing – and oil and gas production account for more than half of that.
• 22 percent comes from services, residential, waste and agriculture
• 16 percent comes from electricity and heat generation.
• And the remaining 27 percent comes from transportation – about half of that from cars and light trucks.

As I say, transportation is a big issue for Canadians. We travel great distances because we are spread out over wide spaces.  And much of the transportation we do as Canadians requires heavier vehicles. You cannot load up your kids and your neighbour’s kids and all their hockey gear into a subcompact car and head off to tournament in the next town. Think of those weekend hockey tournaments in central Ontario towns like Orillia or Bobcaygeon. Or the distances residents of Saskatchewan must travel, to get to places like Asquith and North Battleford so they can watch their kids can compete. Similarly, you cannot load bales of hay or stacks of lumber onto a smaller vehicle.

Canada has a different kind of economy and a different culture than California, for example, and what would be a workable solution for one place would not necessarily fit the other. Certainly there is an avid market for the most fuel-efficient vehicles in our country. But they do not solve everyone’s transportation needs.

But what we can do is make sure that all new vehicles sold in Canada meet a higher standard – one that would see fewer greenhouse gases emitted for the distance you travel.

Some people may say that this is the worst possible time to introduce new automobile emission standards. The economy is shrinking.  People are uncertain about the future, and they’re staying out of the automobile showrooms. Two of the major North American automakers have requested government support.

Wouldn’t new emissions standards provide one more straw on that poor camel’s back?

I would argue the opposite. I believe that, to survive and to thrive, the North American automakers must build the cars of the future – cars that leave less of a carbon footprint. That is the way forward for the North American automotive industry.

And we had better start working on that right now. If North Americans wait for better economic times before taking the painful but necessary steps to produce greener vehicles, the rest of the world won’t wait.  Someone else will move ahead to build the greener car. We need to be at the forefront. As we look for ways to revitalize the North American industry, we need to build vehicles that have better fuel efficiency and lower greenhouse gas emissions.

And while the economy – and the automotive industry in particular – have been hit so hard by the current economic turmoil, there are other developments that tell us that now is the time to act boldly on standards that will lead to more energy efficient vehicles.

One of those developments is the new and strong emphasis on an environmental agenda developed by our neighbours south of the border.

Among President Obama’s first actions on becoming President were two directives that set environmental issues as a high priority in his administration:

• First, he requested that the Environmental Protection Agency reconsider the previous administration’s rejection of the right of states to set mandatory standards to limit greenhouse gas emissions from new vehicles.
• Second, he requested that the Department of Transportation issue regulations that will raise Corporate Average Fuel Economy standards for passenger cars and light-duty trucks – called the CAFE standard.

Let me put this in context. First, I should point out that CAFÉ standards are based on the average fuel economy of new vehicles sold in a given model year. The CAFE standards also distinguish between what is required for cars, and what is required for light-duty trucks.

When CAFE was introduced in the 1970s, the fuel consumption standard for passenger cars was 18 miles per gallon.

Since 1989, the CAFE standard for passenger cars has been set at 27.5 miles per gallon.

Last week, President Obama announced he would raise fuel economy standards for cars to achieve an average of 30.2 miles per gallon for the 2011 model year. In the case of light-duty trucks, the new standards are projected to achieve an average of 24.1 miles per gallon. Taken together, these new standards are expected to achieve an average fuel economy performance of 27.3 miles per gallon for the combined fleet of new 2011 model year cars and light-duty trucks.

Raising the CAFE was a major step on the part of the U.S. Administration. However, it is important to note that it is just a first step. Pursuant to the direction of Congress, the U.S. Administration will continue working to progressively tighten fuel economy standards to achieve a level of 35 miles per gallon for the combined fleet of cars and light-duty trucks by the 2020 model year. That’s a 40 percent gain in fuel economy over the current standards.

These are ambitious targets. They represent the Obama Administration’s deep commitment to a green agenda.

The new U.S. fuel economy standards will have an impact across the North American automotive industry – especially Canada. We don’t trade vehicles with the Americans so much as we build vehicles together. In this relationship, Canada punches way above its weight. We produce between 15 and 20 percent of North America’s vehicles. Approximately 80% of new vehicles manufactured in our country are exported to the U.S.

For decades, Canadian manufacturers and importers have been guided by a voluntary standard that aligns closely with the U.S. CAFE. Today, I am pleased to announce that Canada will set mandatory standards that will reduce carbon dioxide emissions, the predominant greenhouse gas emitted by vehicles. Those standards will be consistent with the national fuel economy standards set by our largest trading partner. And those standards will be enforced through the Canadian Environmental Protection Act – or CEPA.

CEPA provides authority to establish federal regulations to limit greenhouse gas emissions from motor vehicles. CO₂is the predominant greenhouse gas emitted from vehicles and is directly related to the amount of fuel consumed by a vehicle. Accordingly, CO₂ emission regulations will be established under CEPA, 1999 that are equivalent to U.S. national fuel economy standards that have been announced in the U.S. for the 2011 model year. Even though our standards will be expressed using a different metric, that is in terms of grams of CO₂ per kilometre, they will be aligned with the U.S. fuel economy standards that will continue to be expressed in terms of miles per gallon, and we will ensure ongoing year-by-year alignment through CEPA regulations.

Some observers may be surprised to hear that we intend to develop these standards through the authority of the CEPA.  In the past, we have said we would regulate the fuel consumption of vehicles under the Motor Vehicle Fuel Consumption Standards Act. 

Proceeding under the MVFCSA would require significant changes to the Act. This could take more than a year to achieve. We do not have the luxury of time. Our automotive industry should not have to operate with that uncertainty. It is too important to Canada. Climate change is too important to Canadians. We cannot wait for legislation when we can act quickly through regulation.

CEPA is a modern piece of environmental legislation. It has the flexibility that will let us harmonize with the broad range of possible future actions from the U.S. government. As the U.S. Administration develops more stringent standards in future years, we will keep pace. CEPA has already proven its usefulness in regulating many environmental issues, including smog-forming air pollutant emission standards from vehicles. 

We are moving immediately on these measures. In the coming days, we will be publishing a Notice of Intent in the Canada Gazette, Part I, informing stakeholders of what our government is doing. We will then consult with interested parties so we can develop and publish our proposed regulations this fall.  At that time, stakeholders will have an opportunity to provide their views during a formal public review and comment period. We plan to publish the final regulations in Canada Gazette II next spring.

This is an ambitious timeline. We are moving fast. And we plan to have regulations in place in time for 2011 model-year vehicles.

I want to emphasize that we recognize that the standards for the 2011 model year are only a first, but important step in the path towards continued improvements in vehicle fuel efficiency and lower greenhouse gas emissions in the coming years. These new regulations will lay a solid regulatory foundation that will enable us to continue working closely with our U.S. colleagues on the continued implementation of common national standards.

Ladies and gentlemen, the development of Canada’s vehicle emission standards demonstrates how we can work simultaneously on both the domestic and the continental challenges of climate change. 

In Canada, transportation accounts for roughly a quarter of our total greenhouse gas emissions, with passenger cars and light-duty trucks accounting for almost 50% of transportation emissions.  That’s our domestic challenge. Our automotive industry is tightly integrated with a continental industry, and we must align our auto emission standards with our major trading partner.

I believe most Canadians understand this, and they appreciate the need to address complex challenges with a common approach. In recent months, we have seen an unprecedented spirit of good will and cooperation between two neighbours. Anyone who was in Ottawa for the President’s visit in February could sense that good will. 

On both sides of the border we understand that Canada and the U.S. face the challenge of climate change together. The problem is not going to stop at the border. And neither country can afford to have their solutions contribute to the thickening of the border. On the day that President Obama arrived in Ottawa, he and Prime Minister Harper began what has come to be known as a “Clean Energy Dialogue,” which looks to our common future from the perspective clean and renewable energy.

But while we look to the future, we take steps right now to ensure that the designs for the car of the future already take into account the need for a greener planet. 

We are taking action on each of the major sources of greenhouse gas emissions – starting today with automobile tailpipe emissions. We have legislation already in place that lets us move very fast.

Beginning with the 2011 model year, you will see cars and light trucks that produce less carbon dioxide emissions moving across Canada’s highways. With the coming years, the standards will change and transportation will reduce its impact on Canada’s greenhouse gas emissions.

In the coming months, you will also see us move decisively on the other major contributors – including electricity generation, and industrial production, including oil and gas.

But in the meantime, as the automotive industry designs the car of the future, you can be sure that this car will leave less of a carbon footprint.

Thank you.

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