Canada Gazette, Part I, Volume 155, Number 34: ORDERS IN COUNCIL

August 21, 2021

DEPARTMENT OF THE ENVIRONMENT

CANADIAN ENVIRONMENTAL PROTECTION ACT, 1999

Order Approving the Interim Order Modifying the Operation of the Passenger Automobile and Light Truck Greenhouse Gas Emission Regulations

P.C. 2021-875 August 11, 2021

Her Excellency the Governor General in Council, on the recommendation of the Minister of the Environment, pursuant to subsection 163(3) of the Canadian Environmental Protection Act, 1999 ^{footnote a}, approves the Interim Order Modifying the Operation of the Passenger Automobile and Light Truck Greenhouse Gas Emission Regulations, made by the Minister of the Environment on July 30, 2021.

EXPLANATORY NOTE

(This note is not part of the Order.)

Proposal

Pursuant to subsection 163(3) of the Canadian Environmental Protection Act, 1999 (CEPA), this Order approves the Interim Order Modifying the Operation of the Passenger Automobile and Light Truck Greenhouse Gas Emission Regulations (the second Interim Order), made by the Minister of the Environment (the Minister) on July 30, 2021. This is the second Interim Order issued by the Minister, and approved by the Governor in Council, correcting the multiplier formula used to determine carbon dioxide (CO₂) equivalent emission credits for advanced technology vehicles.

Objective

The purpose of this second Interim Order is to correct the multiplier formula used to determine CO₂ equivalent emission credits for advanced technology vehicles found in the Passenger Automobile and Light Truck Greenhouse Gas Emission Regulations (the Regulations) for an additional year to provide time for the Department of the Environment (the Department) to complete the development of a regulatory amendment that is needed to permanently correct the formula in the longer term.

Background

The Regulations

The Regulations establish progressively more stringent greenhouse gas (GHG) emission standards for new light-duty on-road vehicles offered for sale in Canada beginning with model year 2011. The Regulations require importers and manufacturers of new vehicles to meet increasingly stringent fleet average GHG emission standards over the 2011–2026 model years through a CO₂ equivalent emission credits system. Canada’s Regulations are aligned with those of the United States Environmental Protection Agency (U.S. EPA). The Regulations include provisions that establish compliance flexibilities designed to provide appropriate lead time for technological improvements and a smooth transition to a more stringent regulatory regime. These flexibilities include a system for obtaining, banking and transferring emission credits that can be used to offset emission deficits incurred.

Canada’s Regulations were established in a manner that is consistent with the authorities under CEPA. The differing authorities provided by U.S. and Canadian enabling legislation required some provisions of the U.S. EPA’s regulations to be replicated in Canada’s regulations rather than incorporated by reference. This is the case for the provisions in Canada’s Regulations that authorize companies to elect to multiply the total number of advanced technology vehicles in their fleets (which can consist of battery-electric vehicles, plug-in hybrid electric vehicles and fuel-cell vehicles, as well as natural gas dual fuel vehicles and dedicated natural gas vehicles) by a prescribed factor. This provision is intended to create an incentive to support the deployment of these technologies by enabling companies to obtain additional credits through the use of technology-specific multipliers.

On April 23, 2020, the U.S. EPA published the Light-duty Vehicle Greenhouse Gas Program Technical Amendments (PDF) correcting the error. This correction applies retroactively beginning with the 2017 model year. Since the U.S. EPA formula is not incorporated by reference in Canada’s Regulations, a regulatory amendment is required to correct this error in Canada and to maintain alignment.

The Interim Order

CEPA provides the authority for an Interim Order to modify the operation of regulations governing emissions from vehicles for a period of up to one year in order to maintain alignment with those in the other country. Pursuant to subsection 163(1) of CEPA, the Minister can issue an interim order to maintain alignment.

On October 13, 2020, the Minister issued the Interim Order Modifying the Operation of the Passenger Automobile and Light Truck Greenhouse Gas Emission Regulations, which was subsequently approved by the Governor in Council on October 23, 2020. This temporarily corrected the multiplier formula used to determine CO₂ equivalent emission credits for advanced technology vehicles found in the Regulations until October 13, 2021.

The purpose of this first Interim Order was to correct the formula in the near term and quickly allow companies to obtain the intended number of credits for advanced technology vehicles sold in the country, as well as to continue supporting the deployment of these vehicles in Canada. The correction also serves to support the federal government’s commitment to promoting advanced technology vehicles as a method of reducing GHG emissions as part of Canada’s plan to becoming carbon neutral by 2050.

At this time, a second Interim Order is required to allow the Department to complete the development of an amendment to the Regulations. Subject to Governor in Council approval, the Department anticipates that this amendment could be in place by 2022. Without this second Interim Order, companies would not receive the intended level of credit for each advanced technology vehicle sold.

Implications

Under CEPA, the Minister’s Interim Order would cease to have effect 14 days after it is made unless approved by the Governor in Council. This Governor in Council Interim Order approves the Minister’s second Interim Order to correct the formula in the Regulations for up to a year from the date that it is made by the Minister. Under subsection 163(5) of CEPA, the second Interim Order could cease to have effect earlier than one year if it is repealed or if the Regulations are amended or repealed to give effect to the Interim Order, whichever is earlier.

Correcting in the Regulations the formula used to calculate credits for advanced technology vehicles, as well as natural gas dual fuel vehicles and dedicated natural gas vehicles, ensures that companies receive the intended level of credit for each vehicle sold. This correction will increase the number of earned credits for companies whose sales substantially or entirely consist of advanced technology vehicles.

As in the U.S. EPA regulations and the first Interim Order, the second Interim Order will be retroactive to the 2017 model year. Furthermore, like the first Interim Order, the second Interim Order will provide the option for companies to calculate credits from advanced technology vehicles using the corrected approach or the existing approach and it does not affect any other provisions of the Regulations.

Consultation

Following the publication of the regulatory amendment by the U.S. EPA on April 23, 2020, the Department received several letters from stakeholders (e.g. automobile manufacturers and their industry associations as well as non-government organizations) on the issue requesting that the same correction be made to the Canadian Regulations.

The Department began consultations with all stakeholders in February 2021. These consultations are ongoing and the Department will continue to thoroughly consider any relevant issues raised, and communicate decisions in a timely manner throughout the development process for the anticipated regulatory amendment.

Contact

Stéphane Couroux
Director
Transportation Division
Environment and Climate Change Canada
351 Saint-Joseph Boulevard, 13th Floor
Gatineau, Quebec
K1A 0H3
Telephone: 613‑864‑2911
Email: Stephane.Couroux@ec.gc.ca