Fleet average NOx standards and reporting requirements for light-duty vehicles: chapter 6

Chapter 6: Election to Exclude a Group of Vehicles from the Requirement to Meet Fleet Average NOx Standards

• 6.1 Can a company elect to exclude a group of vehicles from compliance with the fleet average NO_x emission standards?
• 6.2 Which group of vehicles can a company elect to exclude from compliance with the fleet average NO_x standards under subsection 31(1) of the Regulations?
• 6.3 If a company makes the election under subsection 31(1), does it have to include all eligible vehicles in Group A?
• 6.4 If a company makes the election under subsection 31(1), are additional fleet average NO_x value calculations required?
• 6.5 Are there specific circumstances where a company is not required to calculate fleet average NO_x values for a fleet or group of vehicles?
• 6.6 If a company elects not to calculate an average NO_x value for a fleet or group of vehicles, will a fleet average NO_x value be assumed?
• 6.7 If a company makes the election under subsection 31(1), are there any consequences with respect of its NO_x emission credits?
• 6.8 Is there any restriction on a company's eligibility to exclude Group A from compliance with fleet average NO_x standards?
• 6.9 If a company makes an election to exclude Group A from compliance with fleet average NO_x standards, can that group of vehicles generate an emission deficit?

6.1 Can a company elect to exclude a group of vehicles from compliance with the fleet average NO_x emission standards?

Yes. Under subsection 31(1) of the Regulations, a company can elect to exclude a specified group of vehicles from compliance with the fleet average NO_x standards. Any company making this election is required to make a statement in the end-of-model-year report to that effect.

6.2 Which group of vehicles can a company elect to exclude from compliance with the fleet average NO_x standards under subsection 31(1) of the Regulations?

For the purpose of the fleet averaging requirements of the Regulations, a company's entire fleet can effectively be divided into two main groups. Figure 1 illustrates the two groups.

Figure 1: Illustration of the division of a company's entire fleet as per section 31.

For most companies subject to the fleet averaging requirements, the vast majority of their light-duty vehicles, light-duty trucks and medium-duty passenger vehicles offered in Canada have equivalent vehicles sold concurrently in the United States. This group is represented by Group A in Figure 1. Section 31 of the Regulations allows a company to elect to exclude the group of vehicles that are sold concurrently in Canada and in the United States from compliance with fleet average NO_x standard (i.e., Group A). This election is included in the Regulations on the presumption that the American program serves as an anchor towards ensuring that any variation in the environmental performance of this group of vehicles relative to the fleet average NO_x standards would be small. However, subsection 31(3) of the Regulations prohibits a company from including in Group A those vehicles that are sold concurrently in Canada and the United States and that

• are certified to a bin having a full useful life NO_x emission standard that is higher than the applicable fleet average NO_x standard for a given model year; and
• are sold in greater numbers in Canada than the total sales in the United States of vehicles that are covered by the same EPA certificate of conformity (i.e., same test group).

Group B consists of vehicles that do not meet the criteria for inclusion in Group A. Accordingly, Group B would consist of vehicles that are not concurrently sold in Canada and in the United States (i.e., unique Canadian models with no American equivalents), and vehicles that are sold concurrently in Canada and in the United States and that

• are certified to a bin having a full useful life NO_x emission standard that is higher than the applicable fleet average NO_x standard for a given model year, and
• have a greater number of sales in Canada than the total sales of vehicles in the United States covered by the same EPA certificate of conformity (i.e., same test group).

In the case where a company elects to exclude Group A from compliance with fleet average NO_x standards, the fleet average NO_x standards would apply only to the vehicles in its fleet that are part of Group B (if any).

6.3 If a company makes the election under subsection 31(1), does it have to include all eligible vehicles in Group A?

Yes. If a company elects to exclude Group A from compliance with the applicable fleet average NO_x standard, it must include all the vehicles meeting the criteria for that group, as set out in subsection 31(2) of the Regulations.

6.4 If a company makes the election under subsection 31(1), are additional fleet average NO_x value calculations required?

Yes. If a company makes the election under subsection 31(1), it is required to calculate separate fleet average NO_x values for its group of vehicles that are subject to the election (Group A) and for the vehicles in its fleet that are not part of the election (Group B), if any. The calculation of fleet average NO_x values for these groups is conducted using the same formula as for the entire fleet, but with the necessary modifications (i.e., variables apply to groups instead of fleets). This is set out in subsection 31(4) of the Regulations.

6.5 Are there specific circumstances where a company is not required to calculate fleet average NO_x values for a fleet or group of vehicles?

Yes. Subsection 25(1) allows a company to elect not to calculate the average NO_x value for a fleet of a given model year if every vehicle in the fleet conforms to a full useful life NO_x emission standard that is equal to or lower than the applicable fleet average NO_x standard.

Similarly, where a company has elected to exclude Group A from compliance with the applicable fleet average NO_x standard, the provisions of subsection 31(5) allow a company to elect not to calculate the average NO_x value for Group A and/or Group B, if every vehicle in the respective groups conforms to a full useful life NO_x emission standard that is equal to or lower than the applicable fleet average NO_x standard.

6.6 If a company elects not to calculate an average NO_x value for a fleet or group of vehicles, will a fleet average NO_x value be assumed?

Yes. If a company elects not to calculate the average NO_x value for a fleet or group of vehicles for a given model year under subsections 25(1) or 31(5) of the Regulations, the fleet average NO_x value for the fleet or group of vehicles is deemed by the company to be the applicable fleet average NO_x standard for that model year. This is set out in subsections 25(2) and 31(6) of the Regulations.

6.7 If a company makes the election under subsection 31(1), are there any consequences with respect of its NO_x emission credits?

Yes. If a company elects to exclude Group A from compliance with the applicable fleet average NO_x standard under subsection 31(1) of the Regulations and the fleet average NO_x value for that group is higher than the applicable fleet average NO_x standard, the company

• will forfeit any NO_x emission credits obtained in previous years; and
• cannot obtain any credits during the model year for which the election was made.

This is set out in subsection 31(7) of the Regulations.

6.8 Is there any restriction on a company's eligibility to exclude Group A from compliance with fleet average NO_x standards?

Yes. Subsection 31(8) of the Regulations prohibits a company from electing to exclude Group A from compliance with fleet average NO_x standards in any model year in which both of the following criteria are met:

• the company has transferred emission credits to another company; and
• the average NO_x value for Group A is higher than the applicable fleet average NO_x standard for that model year.

6.9 If a company makes an election to exclude Group A from compliance with fleet average NO_x standards, can that group of vehicles generate an emission deficit?

No. If a company makes the election to exclude Group A from compliance with fleet average NO_x standards pursuant to subsection 31(1), that group of vehicles would not generate an emission deficit, even if the average NO_x value for Group A exceeds the fleet average NO_x standard that would otherwise apply.

The company would generate an emission deficit if the average NO_x value for Group B exceeds the applicable fleet average NO_x standard for the applicable model year.