Automobile production in Canada and implications for Canada’s 2025 passenger vehicle greenhouse gas standards
On vehicle efficiency standards, it’s time for Canada to chart its own course
On Thursday, the U.S. Environmental Protection Agency (EPA) and National Highway Traffic and Safety Administration (NHTSA) released a joint Notice of Proposed Rulemaking for revised fuel efficiency standards for passenger cars and light trucks. In the past few months, there has been a swirl of media reports about the extent to which the U.S. would weaken its standards. Now that the proposal is out, the full extent of the roll back and the significant implications for Canada are clear.
The main takeaway is that the U.S. EPA and NHTSA are proposing to freeze fuel efficiency requirements at 2020 levels. By eliminating the improvements for model year 2021 to 2025 vehicles, this proposal would drop the average fuel economy requirements for new vehicles in 2025 from 51 miles per gallon (mpg) to 37 mpg (4.6 liters per kilometer to 6.4 l/100 km). For many years, Canada and the U.S. have had virtually identical vehicle regulations, which makes sense given that vehicle manufacturing and markets are highly integrated across the two countries. The way Canada’s vehicle regulations are written, if Environment and Climate Change Canada (ECCC) does nothing, its 2025 standards will automatically adjust to maintain alignment with the final EPA rulemaking. Lawmakers in Canada face a decision: stay aligned with the Trump Administration or break ranks with the U.S. by maintaining Canada’s existing 2025 standards. With U.S. agencies expected to finalize the regulation by early 2019, Canada is now on the clock.
Two years ago, in the Paris Climate Accord, Canada committed to economy-wide GHG reductions of 30% by 2030 compared to a 2005 baseline. In criticizing President Trump’s decision last year to withdraw the U.S. from the Paris agreement, Prime Minister Trudeau said that the “future is still bright for those who have the courage to confront hard truths, and the confidence to stay the course.” A hard truth for Canada is that by remaining tied to the U.S., the country will virtually eliminate any chance of meeting its goal of reducing 15 million metric tonnes of carbon dioxide emissions from the transportation sector in 2030. If Canada fails to act and the U.S. finalizes its regulation as proposed, Canadian cars and light trucks would emit about 10 million more tonnes of CO2 in 2030—thus wiping out two-thirds of the GHG reductions that are needed for Canada to hit its climate obligations.
In addition to reasserting Canada’s commitment to combating global warming and building an economy centered around clean energy, maintaining the current vehicle efficiency standards would be a major boon to Canadian consumers. Compared to ECCC’s original incremental cost estimates when the rule was finalized in 2014, a new study that we will release in a few weeks shows that the total costs associated with achieving the 2025 GHG targets have fallen by roughly 30% (using EPA’s cost inputs) to 50% (using ICCT’s cost inputs). Over its lifetime, the average 2025 vehicle would provide a return on investment within about 2 years and save the Canadian consumer nearly $4,000 CAD ($3,000 USD) in fuel costs.
By maintaining the current passenger vehicle GHG standards until 2025, the results from our upcoming paper indicate that Canada can reap substantial environmental and economic benefits. Ongoing technology cost reductions—coupled with the emergence of technologies that were not considered in the original rulemaking process—make Canada’s current passenger vehicle GHG standards increasingly cost-effective.
The Trudeau Administration has been working hard to assert Canada as a global leader on climate action. If ever there was a time for leadership, it’s now.