Canada unveils ‘aggressive’ vehicle emission rules

The federal government introduced Thursday the country’s first mandatory emission rules for cars and trucks, harmonizing the standards with the United States in a move expected to result in higher vehicle sticker prices.

Environment Minister Jim Prentice announced the new rules at a media conference, held at an Ottawa Ford dealer. The new measures will force each automaker to achieve a combined average fuel economy for all the models it sells of 35.5 miles per gallon by 2016. That is equivalent in Canada to about 6.6 litres of gasoline usage for every 100 kilometres driven.

"We are pleased to be taking this step to further harmonize our climate change action with the Obama administration — a step that will protect our environment and ensure a level playing field for the automotive industry," he said.

The rules apply to any company that either builds or sells cars in Canada.

Starting with the 2011 model year, automobiles 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. Car makers that can’t meet these standards for 2011 model year would be required to buy credits from Ottawa, at a cost of $20 per tonne of carbon dioxide.

Greenhouse-gas emission standards would become more stringent with each new model year from 2012 to 2016. Further, there would also be separate limits for other tailpipe emissions, such as nitrous oxide and methane.

"I wouldn’t use the word ‘happy’ to describe how we feel about this," said Mark Nantais, president of the Canadian Vehicle Manufacturers’ Association, which represents General Motors Corp., Ford Motor Co., and Chrysler Group LLC in Canada. "These are really aggressive standards. But it does give us the clarity we need for the next five years and allows us to properly put the resources where we need them to deliver the technologies needed to comply."

Automakers are relieved that the two countries are adopting one continental standard, which they say will allow less costly vehicle development.

Last year, Washington introduced plans that analysts said would add US$600 to the cost of producing a U.S. car and improve fuel efficiency by an average 5% per year starting in 2012.

But the Obama administration has since toughened those initial rules. The standard is the same as the one California was lobbying for itself. It pushes forward by four years the previous 2020 target eyed by the administration of former president George Bush.

It was not immediately clear if the provinces of Quebec and British Columbia would adhere to the new federal standard. Both provinces have signalled they intend to regulate vehicle emissions themselves.

The U.S. Environmental Protection Agency, which set out the same regulations last month, has estimated they will boost the price of cars and trucks by an average of US$1,300 per vehicle. It said that would be offset by about US$2,800 in fuel costs over the life of the car or truck. Other estimates on the cost are two or three times higher.

"Everyone agrees there’s going to be a cost implication to this," said David Adams, president of the Association of International Automobile Manufacturers of Canada, which represents Honda Motor Co. and other overseas-based companies. "This is one of the most important announcements for our industry in a long time."

Manufacturers are not likely to stop making fuel-thirsty vehicles like pickup trucks, which are top-sellers in both Canada and the United States and represent a much larger profit margin for automakers than smaller vehicles. Rather, they will search for fuel savings through newer technology like dual-clutch automatic transmissions. And they may offer more electric-gasoline engine hybrid technology in more vehicle models.

Burning less gasoline will save the 1.8 billion barrels of oil during the 2012 to 2016 period, according to EPA estimates.

These are the first mandatory rules for vehicle emissions in Canada. There were guidelines in the past but adhering to them was voluntary.

Mr. Prentice had already signalled in May of last year that he was moving toward a continental standard on vehicle efficiency. He pledged he would closely work with Washington to ensure the Canada’s rules governing auto emissions matched whatever the Obama administration had in store.

The Minister said the harmonized car emissions is part of the Conservative government’s plan to reduce its greenhouse gas emissions by 17% from 2005 levels by 2020.