Canada Gazette, Part I, Volume 156, Number 30: ORDERS IN COUNCIL

July 23, 2022

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. 2022-880 July 14, 2022

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 Passenger Automobile and Light Truck Greenhouse Gas Emission Regulations, made by the Minister of the Environment on July 4, 2022.

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 third Interim Order) made by the Minister of the Environment (the Minister) on July 4, 2022. This is the third Interim Order issued by the Minister, correcting the multiplier formula used to determine carbon dioxide (CO₂) equivalent emission credits for advanced technology vehicles.

Objective

The objective of this third Interim Order is to ensure that companies receive the correct number of emissions credits for advanced technology vehicles under the Passenger Automobile and Light Truck Greenhouse Gas Emission Regulations (the Regulations) for an additional year, while the Department of the Environment (the Department) develops a regulatory amendment that is needed to permanently correct the formula.

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. The Regulations are aligned with those of the United States Environmental Protection Agency (U.S. EPA). The Regulations include provisions that establish compliance flexibility measures designed to provide appropriate lead time for technological improvements and a smooth transition to a more stringent regulatory regime. These flexibility measures include a system for obtaining, banking and transferring emission credits that can be used to offset emission deficits.

The 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 the Regulations rather than incorporated by reference. This is the case for the provisions of the Regulations that authorize companies to elect to multiply the total number of advanced technology vehicles in their fleets (which can consist of 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. These provisions are intended to incentivize 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 Regulations do not incorporate the U.S. EPA formula by reference, a regulatory amendment is needed to correct this error in Canada and to maintain alignment.

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 another country’s corresponding requirements. Pursuant to subsection 163(1) of CEPA, the Minister can issue an interim order to maintain alignment with the U.S. EPA requirements.

On October 13, 2020, the Minister issued the first 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.

On July 30, 2021, the Minister issued the second 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 August 11, 2021. This second Interim Order will cease to have effect on July 30, 2022.

A third 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 is developing the regulatory amendment that will correct this error, change other provisions of the Regulations and implement the Government of Canada’s commitment to develop regulatory requirements for zero-emission vehicles. The Department anticipates that this amendment could be in place by 2023. Without this third Interim Order, companies would not receive the intended level of credit for each advanced technology vehicle sold.

Implications

Under CEPA, an interim order issued by the Minister ceases to have effect 14 days after it is made unless approved by the Governor in Council. This Governor in Council Order approves the Minister’s third Interim Order to correct the formula in the Regulations. The Interim Order remains in effect for up to a year from the date that it was made unless it is repealed or if the Regulations are amended or repealed to give effect to the Interim Order, whichever is earlier.

Correcting the formula used to calculate credits for advanced technology 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 and second Interim Orders, the third Interim Order will be retroactive to the 2017 model year. The first and second Interim Orders provided flexibility for companies to optionally calculate credits from advanced technology vehicles using the corrected approach or continue using the uncorrected formula for the 2017 to 2021 model years. This third Interim Order will continue to give companies the flexibility to recalculate their credits for the 2017 to 2021 model years using their preferred approach, but for the model years 2022 and beyond it will be mandatory for companies to use the corrected formula. The third Interim Order 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 associations as well as non-governmental organizations) on this issue requesting that the same correction be made to the Regulations.

The Department began consultations with all stakeholders in February 2021. These consultations are ongoing and the Department is also seeking feedback on additional regulatory changes related to other aspects of the Regulations and the Government’s commitment to develop regulatory requirements for zero-emission vehicles. The Department will continue to thoroughly consider any relevant issues raised, and will 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, Québec
K1A 0H3
Telephone: 613‑864‑2911
Email: Stephane.Couroux@ec.gc.ca