Backgrounder

Key Features of Canada’s Proposed Passenger Automobile and Light Truck Greenhouse Gas Emission Regulations

The proposed Regulations would apply to companies that manufacture or import new passenger automobiles and light trucks of the 2011 and subsequent model years for the purpose of sale in Canada.

2011 Model Year

The proposed regulations would establish fleet average greenhouse gas emission standards aligned with applicable standards under the U.S. national fuel economy program.

• Companies would be required to comply with“unique” fleet average GHG emission standards for passenger automobiles and light trucks aligned with applicable U.S. fuel economy standards for the 2011 model year.
• A company’s “unique” fleet average standard would be determined based on the size (i.e. footprint) and the number of vehicles it sells in the 2011 model year.
• For the 2011 model year, companies would be required to include only vehicles manufactured after the coming into force date of the regulations in calculating their fleet average GHG performance.
• Companies could purchase credits from the Receiver General at a rate of $20 per Mg of CO2_eq emissions to offset a deficit incurred for the 2011 model year.

2012 and Later Model Years

The proposed regulations would establish a comprehensive regulatory program for reducing GHG emissions aligned with the GHG-based program that has been proposed by the U.S. Environmental Protection Agency (EPA) under the Clean Air Act.

• Companies would be required to comply with“unique” fleet average GHG emission standards for passenger automobiles and light trucks for each model year.
• A company’s “unique” fleet average standard would be determined based on the size (i.e. footprint) and the number of vehicles it sells in a given model year.
• The fleet average GHG emission standards would become progressively more stringent with each new model year from 2012-2016.
• The regulations would also establish separate limits for other tailpipe GHG emissions such as nitrous oxide (N₂O) and methane (CH₄).

Emission Credit System: Providing Compliance Flexibility

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

• Credits would be granted for companiesdoing better than the applicable fleet average standard for a given model year.
• Deficits would be incurred for not achieving the applicable fleet average standard in a given model year.
• Emission credits would have a lifespan of five model years and could be traded between companies.
• Emission deficits incurred in a given model year would have to be offset with an equivalent number of emission credits within the subsequent three model years.

Provisions for Non-Conventional GHG-Reducing Technologies

The proposed regulations include provisions that recognize vehicle design improvements which reduce GHG emissions through approaches other than directly reducing tailpipe CO₂ emissions, including:

• technologies that reduce the impact of air conditioning system refrigerant leakage (e.g., hydrofluorocarbons);
• technologies that improve the efficiency of air conditioning systems; and
• other innovative technologies that reduce GHG emissions under conditions that are not captured by conventional emission testing procedures,

The beneficial effects of the above technologies would be accounted for by subtracting their GHG-reducing impacts from the average CO₂ tailpipe emissions of a company’s fleet.  This approach provides companies with additional flexibility in complying with the GHG emission standards and also provides an incentive to introduce these technologies. The net credits/deficits generated in a given model year would be the same as under U.S. provisions.  

Provisions for Advanced Technology Vehicles (ATVs)

The proposed regulations provide an incentive for companies to market “advanced technology vehicles”, including electric vehicles, plug-in hybrid electric vehicles and fuel cells vehicles.

• Through to the 2016 model year, a company would be credited with selling two times the number of advanced technology vehicles than it actually sold in the calculation of its fleet average GHG emission performance.  Doing so provides an incentive for the marketing of these vehicles since it will result in a lower calculated fleet average GHG emission value for the company’s fleet.

Other Compliance Flexibilities

The proposed regulations include other provisions to ease the transition towards compliance with stringent emission standards and achieve the overall environmental objectives in a manner that provides the regulated industry with maximum compliance flexibility:

• Companies would be able to generate GHG emission credits for the 2008-2010 period if their average GHG performance exceeds specified emission levels that are based on U.S. regulatory requirements for those model years to recognize early actions to reduce GHG emissions.
• Credits earned over the 2008-2010 period could be used to comply with the 2011 model year GHG emission standards; adjusted credits earned over the 2009-2011 period could be used to comply with the GHG emission standards for the 2012 and later model year to align with the proposed U.S. EPA program.
• Provisionsrecognizing the introduction of advanced technology vehicles and non-conventional GHG-reducing technologies would be extended to apply in respect of compliance with GHG emission standards for the 2011 model year.
• Companies selling smaller-volumes of vehicles would have the option of subjecting a limited portion of their fleets to a temporary less stringent fleet average standard during the 2012 through 2015 model years, subject to specified restrictions on the generation and usage of emission credits.
• The treatment of dual-fuel vehicle, including flexible-fuel vehicles (FFVs) would be consistent with U.S. regulatory programs.

Mandatory Annual Reporting

The proposed regulations include mandatory annual reporting of a company’s fleet average GHG performance and related vehicle model information. They also include specific information relating to emission credits and deficits and emission trading between companies.