Canada Gazette, Part I, Volume 156, Number 20: ORDERS IN COUNCIL
May 14, 2022
DEPARTMENT OF THE ENVIRONMENT
CANADIAN ENVIRONMENTAL PROTECTION ACT, 1999
Order Approving the Interim Order Modifying the Operation of the Heavy-duty Vehicle and Engine Greenhouse Gas Emission Regulations (Trailer Standards)
P.C. 2022-451 April 29, 2022
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, 1999footnote a, approves the Interim Order Modifying the Operation of the Heavy-duty Vehicle and Engine Greenhouse Gas Emission Regulations (Trailer Standards) made by the Minister of the Environment on April 19, 2022.
(This note is not part of the Order.)
Pursuant to subsection 163(3) of the Canadian Environmental Protection Act, 1999 (CEPA), this Order approves the Interim Order Modifying the Operation of the Heavy-duty Vehicle and Engine Greenhouse Gas Emission Regulations (Trailer Standards) [the fourth Interim Order], made by the Minister of the Environment (the Minister) on April 19, 2022. This fourth Interim Order issued by the Minister, and approved by the Governor in Council, serves to extend for one year the suspension of the greenhouse gas (GHG) trailer emission standards found in the Heavy-duty Vehicle and Engine Greenhouse Gas Emission Regulations in Canada, until April 19, 2023.
The purpose of this fourth Interim Order is to extend the suspension of the application of the trailer GHG emission standards by up to another year in Canada to ensure continued alignment with the United States.
The Heavy-duty Vehicle and Engine Greenhouse Gas Emission Regulations (the Regulations), made under CEPA, were published in the Canada Gazette, Part II, on March 13, 2013. The GHG emission standards in the Regulations apply to vehicles and engines of the 2014 model year and subsequent model years, and reach full stringency with model year 2018. Given the integration of the North American vehicle manufacturing sector, these standards are aligned with those of the United States.
On May 30, 2018, the Regulations Amending the Heavy-duty Vehicle and Engine Greenhouse Gas Emission Regulations and Other Regulations Made Under the Canadian Environmental Protection Act, 1999 (the Amendments) were published in the Canada Gazette, Part II. The Amendments established more stringent GHG emission standards that begin with the 2021 model year for on-road heavy-duty vehicles and engines. The Amendments introduced new GHG emission standards that apply to trailers hauled by on-road transport tractors for which the manufacture is completed on or after January 1, 2020. The Amendments are aligned with the corresponding standards and test procedures set out in the United States in the Final Rule entitled Greenhouse Gas Emissions and Fuel Efficiency Standards for Medium- and Heavy-Duty Engines and Vehicles—Phase 2 that was published in October 2016. The Regulations apply to companies that manufacture or import new on-road heavy-duty vehicles, engines and trailers for sale in Canada.
In making the decision to include the GHG emission standards for trailers in the Amendments to the Regulations, Canada intended to monitor U.S. developments and to assess whether any future amendments were needed to the applicable Canadian Regulations depending upon the outcome of the U.S. rulemaking and legal processes.
Trailer emission standards in the United States
On October 25, 2016, the U.S. Environmental Protection Agency (U.S. EPA) and the National Highway Traffic Safety Administration (NHTSA) published the final rule concerning a second phase of GHG emission and fuel efficiency standards for heavy-duty vehicles, engines and trailers (referred to as Phase 2). The Phase 2 standards, which increase in stringency up to model year 2027, build upon the existing standards that were established for model years 2014 to 2018. In addition, the U.S. Phase 2 final rule introduced new standards for trailers hauled by on-road transport tractors, as trailer design has an impact on the GHG emissions and fuel consumption of the vehicles hauling them.
In December 2016, the Truck Trailer Manufacturers Association (TTMA), which represents the trailer industry in the United States, filed a petition for the review of the Phase 2 trailer standards in the U.S. Court of Appeals for the D.C. Circuit on the grounds that the U.S. EPA and NHTSA lacked the authority to regulate trailers. Throughout 2017, the TTMA also sent Petitions for Reconsideration, made under the U.S. rulemaking process, asking that the U.S. EPA reconsider the implementation of the GHG emission standards for trailers scheduled to come into force in the United States on January 1, 2018.
In response, on August 17, 2017, the U.S. EPA announced it would begin a rulemaking process to amend its Phase 2 trailer provisions. Further, on October 27, 2017, the U.S. Court of Appeals stayed the implementation of the U.S. EPA Phase 2 trailer provisions. The U.S. EPA has since not implemented its Phase 2 trailer provisions.
California also has GHG standards for trailers, at the state level, aligned with the federal standards of the U.S. EPA. In December 2019, the California Air Resources Board published an advisory notice to suspend the enforcement of its GHG trailer standards until at least January 1, 2022, in light of the regulatory uncertainty of the court case and legal stay on the U.S. EPA’s trailer standards. This advisory also indicated that California would provide regulated entities with at least six months written notice before starting enforcing the GHG trailer standards.
In September 2020, the U.S. Court of Appeals for the D.C. Circuit also stayed the implementation of the NHTSA trailer fuel efficiency standards. The NHTSA standards were to come into effect in January 2021.
In November 2021, the U.S. Court of Appeals concluded that trailers are not subject to regulation under the Clean Air Act, and rescinded the trailer standards established by the U.S. EPA and NHTSA. They have not yet amended their regulations. California also has not yet issued a notice mentioning whether it will enforce its GHG trailer standards.
In January 2019, the Canadian trailer manufacturing and trucking industry reached out to the Department of the Environment (the Department) expressing concerns that they could face adverse economic impacts if Canada implemented the trailer standards while they were stayed in the United States and requested a suspension in the implementation until further analysis was conducted by the Department.
The trailer manufacturing industry in Canada is mainly composed of small businesses with less than 100 employees that manufacture specialty trailers and of several larger manufacturers that manufacture mainly box van trailers and a variety of more specialized trailers.
Primary concerns raised by the Canadian industry include increased compliance costs, more limited availability of emission-reducing technology for trailers than anticipated due to reduced production in the United States, and a significant competitive disadvantage for Canada’s trailer manufacturers relative to larger U.S. manufacturers. Canadian trailer manufacturers are concerned that much larger U.S. trailer manufacturers could more easily absorb the incremental costs of implementing new technologies across a much larger market share.
CEPA provides the authority for an interim order to suspend or modify the operation of regulations governing emissions from vehicles, engines, and equipment for a period of up to one year to respond to a decision of a foreign court where the regulations in Canada are aligned with those in the other country. Pursuant to subsection 163(1) of CEPA, the Minister can issue an interim order to maintain alignment.
Three interim orders, all entitled Interim Order Modifying the Operation of the Heavy-duty Vehicle and Engine Greenhouse Gas Emission Regulations (Trailer Standards), were successively made by the Minister, the first on May 27, 2019, the second on May 18, 2020, and the third on May 3, 2021. These interim orders were subsequently approved by the Governor in Council on June 9, 2019, June 6, 2020, and May 14, 2021, respectively, suspending the application of the standards for trailers in Canada for up to a year after the interim orders were made by the Minister. The third interim order temporarily suspended the application of the GHG trailer emission standards found in the Regulations until May 3, 2022.
The purpose of these interim orders was to allow the Department to assess the economic impacts of implementing trailer standards in Canada without the standards of the U.S. EPA being in force, while also waiting for more certainty on the path forward in the United States.
The Departmental analysis completed last year indicated that most Canadian trailer manufacturers would be at an economic disadvantage if trailer standards were only introduced in Canada. The main reason is that most Canadian trailer manufacturers and trucking businesses are small relative to those in the United States and also have a lower share of the North American trailer market. These smaller companies have fewer opportunities to spread the costs of compliance with trailer standards across their operations. The companies would benefit from more time to adapt operations to produce and procure more GHG-reducing technologies without a regulatory framework in the United States.
Without this fourth Interim Order, companies subject to the Regulations would be required to meet the trailer standards outlined in subsections 16.1(1) or 33.1(1) or (2) of the Regulations, as the case may be. These standards are aligned with those of the U.S. EPA. The Regulations apply to certain trailers,footnote 1 as defined by the Regulations, whose manufacture was completed on or after January 1, 2020.
Under subsection 163(3) of CEPA, the Minister’s fourth Interim Order would cease to have effect 14 days after it was made unless approved by the Governor in Council. This Order of the Governor in Council approves the fourth Interim Order to suspend the application of GHG emission standards for trailers in Canada for up to another year from the date that it is made by the Minister. Under subsection 163(5) of CEPA, the fourth 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 order before that date.
As the current Interim Order expired on May 3, 2022, and given the integrated nature of the North American market, a fourth interim order is necessary to maintain alignment. Issuing another interim order is warranted in this situation considering the uncertainties regarding the trailer standards in the United States and to allow for further consultation with key stakeholders on the path forward on trailers in Canada. An interim order is the most appropriate tool to address this type of regulatory uncertainty and to maintain regulatory alignment until the status of the trailer standards is clarified in the United States. The fourth Interim Order does not affect any provisions related to the vehicle and engine standards of the Regulations.
Suspending the application of the standards for trailers for model year 2023 would decrease the estimated GHG reductions from the Regulations by about 0.4 megatonnes (Mt) of carbon dioxide equivalent (CO2e) over the lifetime of operation of the trailers for that model year. Relative to an estimated 73 Mt of CO2e emission reductions for the 2018 Amendments as a whole for model years 2020 to 2029, suspending the trailer standards for another model year with this fourth Interim Order will decrease the estimated GHG emission reductions by approximately 1.6 Mt of CO2e from trailers of model years 2020, 2021, 2022 and 2023 combined.
While the fourth Interim Order is in place, the industry would benefit from cost savings (such as compliance costs and investment costs in new technologies), but would also not realize the fuel-saving benefits associated with adopting the technologies required to meet the standards. These expected cost savings would be less than the reduction in benefits associated with fuel savings.
The Department continues to engage with the Canadian trailer manufacturing and trucking industry on a regular basis. It is expected that the Canadian industry will support the fourth Interim Order.
Over the course of the next year, the Department will continue to monitor the situation in the United States and will undertake consultations on regulatory options to determine the path forward for the trailer standards in Canada.
The Department is committed to ongoing consultation with all stakeholders, thoroughly considering the relevant issues raised, and communicating decisions with respect to the trailer standards in a timely manner.
Environment and Climate Change Canada
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