Explanatory Note

(This note is not part of the Order.)

The Passenger Automobile and Light Truck Greenhouse Gas Emission Regulations (the Regulations), which came into force in September 2010, establish common greenhouse gas (GHG) emission requirements in Canada and the United Stated (U.S.) for companies that manufacture or import new passenger automobiles and light trucks (hereinafter referred to as light-duty vehicles) of the 2011 and later model years. The Regulations establish progressively more stringent GHG emission standards for new light-duty vehicles for the 2011 to 2016 model years.

Since September 2010, the U.S. Environmental Protection Agency (EPA), which is the U.S. agency responsible for regulating light-duty vehicle GHG emissions, has amended its regulations. While the vast majority of these amendments have been designed to serve as a post-model year 2016 regulatory regime, with progressively more stringent GHG emission standards for the 2017 to 2025 model years, some of these amendments impact the operation of the pre-2017 model year period.

The purpose of the Interim Order Modifying the Operation of the Passenger Automobile and Light Truck Greenhouse Gas Emission Regulations (the Interim Order), made pursuant to subsection 163(1) of the Canadian Environmental Protection Act, 1999 (CEPA 1999), is to maintain alignment of Canada’s regulations with those of the U.S. with respect to the treatment of emergency vehicles^Footnote1 and the options for complying with the emission standards for nitrous oxide (N₂O) and methane (CH₄). This order, which is a renewal of a previous order made by the Minister on April 12, 2013, will address this issue on a temporary basis until the amendments are finalized through publication in the Canada Gazette, Part II.

In December 2012, the proposed Regulations Amending the Passenger Automobile and Light Truck Greenhouse Gas Emission Regulations were published in the Canada Gazette, Part I^Footnote2. The vast majority of this regulatory proposal would establish common GHG emission requirements in Canada and the U.S. for the 2017 and later model years; however, it also includes amendments to align with the U.S. EPA treatment of emergency vehicles and the options for demonstrating compliance with the emission standards for N₂O and CH₄.

The Regulations Amending the Passenger Automobile and Light Truck Greenhouse Gas Emission Regulations are targeted for publication in the Canada Gazette, Part II in spring 2014. Once published, there will be common Canada-U.S. requirements for light-duty vehicles for all future model years and will be established on a permanent basis.

The U.S. EPA’s Final Rule for light-duty vehicle GHG emissions for the 2017 and later model years - published in October 2012^Footnote3 - amended provisions related to the treatment of emergency vehicles for all model years following the publication. As amended, the U.S. EPA regulations provide regulated manufacturers of light-duty vehicles with the option of excluding emergency vehicles from calculations of both the fleet average carbon dioxide-equivalent (CO₂e) emission standards and fleet average carbon-related emission values. These vehicles are also not subject to the prescribed emission standards for N₂O and CH₄. The Interim Order provides Canadian companies that manufacture or import new light-duty vehicles with the same options related to the treatment of emergency vehicles.

The U.S. EPA’s Final Rule for heavy-duty vehicle GHG emissions for the 2014 and later model years – published in September 2011^Footnote4 – amended provisions related to the light-duty vehicle emission standards for N₂O and CH₄. As amended, the U.S. EPA regulations provide regulated manufacturers of light-duty vehicles with the option of certifying vehicle test groups to emission levels that are higher (i.e., less stringent) than the prescribed standards. However, manufacturers that use this option must account for the higher emissions through the calculation of CO₂e emission deficits, which must be included in calculations of fleet average emission performance. The Interim Order provides Canadian companies that manufacture or import new light-duty vehicles with the option to report, for test groups, N₂O and/or CH₄ emission values that are higher than the prescribed standard(s). However, companies that use this option must account for the higher emissions. This is consistent with the approach prescribed in the U.S. EPA regulations.

The Interim Order will, in accordance with subsection 163(3) of the CEPA 1999, cease to have effect 14 days after it is made unless it is approved by the Governor in Council within that 14-day period. If approved, the Interim Order will, in accordance with subsection 163(5) of the CEPA 1999, remain in force for a period of up to one year. It will cease to have effect when it is repealed or when the regulations are amended to give effect to the order, or one year after the Interim Order is made, whichever is earlier.

The primary objective of the Interim Order is to maintain alignment of Canada’s light-duty vehicle GHG emission regulations with those of the U.S. Environment Canada believes that aligning these regulations with those of the U.S. EPA provides significant environmental and economic benefits while enhancing the competitiveness of the Canadian auto industry. Canada-U.S. regulatory alignment with respect to light-duty vehicle GHG emission is consistent with the objectives of the Canada-U.S. Regulatory Cooperation Council. It is anticipated that the Interim Order will have a negligible impact on the environmental outcomes of the Regulations; however, it will avoid unintended consequences of imposing different requirements on Canadian and U.S. companies.

The Interim Order temporarily modifies the operation of the Regulations with respect to the treatment of emergency vehicles and the options for complying with the emission standards for N₂O and CH₄ in order to maintain alignment between the Canadian and U.S. regulations.

In accordance with the Regulations, regulated companies are required to subject any passenger automobiles or light trucks that meet the conditions of an emergency vehicle to the prescribed emission standards, starting with the 2012 model year. Given the unique role that emergency vehicles play, there are numerous characteristics (e.g., horsepower, high accessory load) that reduce the ability of manufacturers to reduce emissions without compromising the utility of these vehicles.

The objective of this modification, which would provide regulated companies with the option to exclude emergency vehicles from compliance obligations, is to avoid the unintended consequences of negatively impacting the performance or utility of emergency vehicles.

The emission standards for N₂O and CH₄established in the Regulations were set at a level intended to serve as a cap in order to prevent future increases in the emissions of these substances. These standards were not intended to lead to emission reductions or the application of new technologies.

In accordance with the Regulations, regulated companies have two compliance options: (1) demonstrate that all passenger automobiles and light trucks comprising their fleets emit lower than the prescribed emission levels for N₂O and CH₄^Footnote5; or, (2) convert the N₂O and CH₄ emissions from all passenger automobiles and light trucks comprising their fleets into CO₂e and adding the results to the carbon-related exhaust emission value. Certain regulated companies have noted that certain models of vehicles in their existing fleets are challenged to meet the prescribed emission levels for N₂O and CH₄ and there is no lead time to develop technological solutions. Therefore, they are required to comply using option (2), despite the fact that the vast majority of their vehicles meet the conditions of option (1). The use of option (2) is estimated to raise an affected company’s carbon-related exhaust emission value by 3 to 4 grams of CO₂e per mile^Footnote6.

The objective of this modification, which would provide regulated companies with the option to report, for individual test groups, N₂O and/or CH₄ emission values that are higher than the prescribed standard(s), is to avoid unintended increases in company carbon-related exhaust emission values as a result of having as few as one vehicle that is unable to comply with the prescribed emission standards.

On October 13, 2010, Canada published the Passenger Automobile and Light Truck Greenhouse Gas Emission Regulations, which established light-duty vehicle GHG emission standards in Canada, aligned with those in the U.S.

On September 15, 2011, the U.S. EPA published an amendment to its light-duty vehicle GHG emission regulations that modified the options available to regulated companies for complying with the emission standards for N₂O and CH_4.

On October 15, 2012, the U.S. EPA published an amendment to its light-duty vehicle GHG emission regulations that modified the treatment of emergency vehicles in compliance obligations for regulated companies.

By providing regulated companies with the option of excluding emergency vehicles from compliance obligations, it is anticipated that these vehicles will continue to be designed to meet the necessary performance criteria demanded by the role that these vehicles play. On a national scale, the volume of new light-duty emergency vehicles entering the fleet on an annual basis is minor when compared to the rest of the new vehicle fleet. It is not anticipated that this will negatively impact the GHG emission reduction outcomes of the Regulations.

By providing regulated companies with the option to comply with the N₂O and/or CH₄ emission requirements by reporting emission levels higher than the prescribed standard and accounting for the higher emissions as CO₂e, affected companies would avoid the unintended increase of 3-4 grams per mile in their carbon-related exhaust emission value. While this would lower the fleet average compliance obligation by this same amount, the N₂O and CH₄ emission standards were not intended to lead to reductions in the emissions of these substances. By requiring that companies convert higher emissions for individual model types into CO₂e and include it in their carbon-related exhaust emission values, companies are still accountable for these higher emissions. Alignment with the U.S. EPA on light duty vehicle emission regulations is a priority under the Canada-U.S. Regulatory Cooperation Council (RCC). This interim order is a commitment with the RCC workplan on light duty vehicles.

The two issues being addressed by this Interim Order were first communicated to Environment Canada by auto industry representatives through consultations related to the development of the proposed Regulations Amending the Passenger Automobile and Light Truck Greenhouse Gas Emission Regulations. Several meetings have taken place between Environment Canada and auto industry representatives in recent months to discuss the intent and content of this Interim Order. The auto industry is supportive of the modifications being made by this Interim Order as they maintain Canada-U.S. alignment.

On December 8, 2012, the proposed Regulations Amending the Passenger Automobile and Light Truck Greenhouse Gas Emission Regulations were published in the Canada Gazette, Part I. The proposal included amendments to align with the U.S. EPA with respect to the treatment of emergency vehicles and the options for complying with the emission standards for N₂O and CH₄.

Mark Cauchi
Director
Transportation Division
Environment Canada
351 Saint-Joseph Boulevard, 13^th Floor
Gatineau, Quebec
K1A 0H3
Telephone: 819-994-3706
Fax: 819-953-7815
Email: GHGRegDev_Vehicles@ec.gc.ca