Canada Gazette, Part I, Volume 158, Number 11: ORDERS IN COUNCIL
March 16, 2024
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. 2024-197 March 1, 2024
Her Excellency the Governor General in Council, on the recommendation of the Minister of the Environment, under subsection 163(3) of the Canadian Environmental Protection Act, 1999 footnote 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 February 19, 2024.
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 Heavy-duty Vehicle and Engine Greenhouse Gas Emission Regulations (Trailer Standards) [the sixth Interim Order], made by the Minister of the Environment (the Minister) on February 19, 2024. This sixth Interim Order issued by the Minister, and approved by the Governor in Council, serves to extend 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 one year after the order is made.
Objective
The objective of this sixth 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.
Background
The Regulations
The Heavy-duty Vehicle and Engine Greenhouse Gas Emission Regulations (the Regulations), set GHG emission standards that apply to vehicles and engines beginning with the 2014 model year and to trailers for which the manufacture is completed on or after January 1, 2020. The Regulations apply to companies that manufacture or import new on-road heavy-duty vehicles, engines and trailers for sale in Canada.
The Regulations were amended in 2018 to, among other regulatory changes, introduce new GHG emission standards for trailers hauled by on-road transport tractors. Given the integration of the North American vehicle manufacturing sector, these standards were aligned with corresponding standards and test procedures set out in the United States in the Final Rule: Greenhouse Gas Emissions and Fuel Efficiency Standards for Medium- and Heavy-Duty Engines and Vehicles—Phase 2 (referred to as Phase 2). However, following the conclusion of a legal challenge, the Phase 2 GHG emission standards for trailers have not been implemented in the United States, creating misalignment with the GHG emission standards for trailers set out in the Regulations. To ensure continued alignment with the United States, a series of interim orders have been made that suspend the GHG emission standards for trailers in Canada since 2019.
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 Phase 2 under the authority of the Clean Air Act. 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, Phase 2 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, 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.
Following this legal challenge, on October 27, 2017, the U.S. Court of Appeals stayed the implementation of the U.S. EPA 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 and are equivalent to the U.S. EPA’s GHG emission standards.
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.
In September 2022, a notice of proposed rulemaking was released, where the NHTSA is proposing to remove the trailer provisions from its regulations. To address the Court’s decision, the U.S. EPA proposed to repeal its trailer standards and related provisions in a proposal released in April 2023 (which proposed to introduce more stringent “Phase 3” GHG standards for heavy-duty vehicles of model year 2027 and later).
Interim orders
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 not being implemented by the U.S. EPA and requested a suspension in the implementation until further analysis was conducted by the Department.
The trailer manufacturing industry in Canada, located predominantly in Quebec, Ontario, and the Prairies, is composed of small businesses that manufacture specialty trailers and several larger manufacturers that mainly manufacture box van trailers. Canadian trailer manufacturers are concerned that much larger U.S. trailer manufacturers that serve the Canadian market could more easily absorb the incremental cost of implementing the new technologies required to meet the more stringent standards.
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.
Since 2019, five interim orders covering the period from May 2019 to March 2024, 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 suspending the application of the standards for trailers, such that the trailer standards have never come into force in Canada. Those interim orders responded to the concerns raised by the trailer manufacturers and the need to assess the economic implications of Canada proceeding with the implementation of the standards for trailers in the Regulations while the standards are not in effect in the United States. The fifth interim order was made on March 13, 2023, and is set to expire on March 13, 2024.
The Department’s analysis indicates that Canadian companies would be at a competitive disadvantage if the trailer standards were introduced only in Canada. Most Canadian trailer manufacturers and trucking businesses are small relative to those in the United States and 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.
Without this sixth Interim Order, companies subject to the Regulations would be required to meet the trailer standards outlined in the Regulations, which apply to certain trailersfootnote 1 whose manufacture was completed on or after January 1, 2020.
Implications
The Minister’s sixth 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 sixth 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. The sixth 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.
The fifth interim order will expire on March 13, 2024. Given the integrated nature of the North American market, issuing another interim order is necessary to continue to maintain regulatory alignment with the United States in the short term.
Suspending the implementation of the GHG emission standards for trailers in Canada by another model year would decrease the estimated GHG emission reductions of the 2018 amendments to the Regulations by 0.4 megatonnes (Mt) of carbon dioxide equivalent (CO2e) over the lifetime operation of trailers of model year 2025. For trailers of model years 2020 to 2025 combined, delaying the trailer standards by another model year with a sixth interim order would decrease the estimated GHG emission reductions attributable to the 2018 amendments by approximately 2.4 Mt CO2e in total.
While the sixth 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.
Consultation
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 sixth Interim Order.
Now that the U.S. EPA has proposed repealing the federal trailer provisions, amendments to the Regulations will be needed in Canada to maintain alignment. Over the course of the next year, the Department intends to initiate a regulatory process to repeal the GHG emission standards for trailers in Canada to resolve the misalignment with the U.S. provisions.
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.
Contact
Stéphane Couroux
Director
Transportation Division
Environment and Climate Change Canada
351 Saint-Joseph Boulevard, 12th Floor
Gatineau, Québec
K1A 0H3
Telephone: 819‑420‑8020
Email: infovehiculeetmoteur-vehicleandengineinfo@ec.gc.ca