Canada Gazette, Part I, Volume 159, Number 8: ORDERS IN COUNCIL

February 22, 2025

DEPARTMENT OF THE ENVIRONMENT

CANADIAN ENVIRONMENTAL PROTECTION ACT, 1999

Order Approving the Interim Order Modifying the Operation of Certain Regulations Made Under the Canadian Environmental Protection Act, 1999

P.C. 2025-90 February 14, 2025

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, 1999footnote a, approves the Interim Order Modifying the Operation of Certain Regulations Made Under the Canadian Environmental Protection Act, 1999, made by the Minister of the Environment on January 31, 2025.

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 Certain Regulations Made Under the Canadian Environmental Protection Act, 1999 [the Interim Order], made by the Minister of the Environment (the Minister) on January 31, 2025. The Interim Order extends the suspension of the greenhouse gas (GHG) emission standards for trailers found in the Heavy-duty Vehicle and Engine Greenhouse Gas Emission Regulations in Canada, updates the light-duty plug-in hybrid electric vehicle calculation reference found in the Passenger Automobile and Light Truck Greenhouse Gas Emission Regulations, and revises the “medium-duty passenger vehicle” definition found in the On-Road Vehicle and Engine Emission Regulations. This Order extends the Interim Order for a period of up to one year from the date the Interim Order was made by the Minister.

Objective

The objective of this proposal is to extend the Interim Order made by the Minister for a period of up to one year to ensure continued alignment with the United States (U.S.) on various Canadian emission regulations following recent amendments to the corresponding provisions of U.S. regulations.

Background

The Heavy-duty Vehicle and Engine Greenhouse Gas Emission Regulations

The Heavy-duty Vehicle and Engine Greenhouse Gas Emission Regulations set GHG emission standards for heavy-duty vehicles and engines beginning with the 2014 model year and for trailers manufactured on or after January 1, 2020. These regulations apply to companies that manufacture or import new on-road heavy-duty vehicles, engines and trailers for sale in Canada.

The Heavy-duty Vehicle and Engine Greenhouse Gas Emission 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 U.S. 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 a legal challenge, the Phase 2 GHG emission standards for trailers were never implemented in the United States, and following the publication of the Final Rule titled Greenhouse Gas Emissions Standards for Heavy-Duty Vehicles—Phase 3 in April 2024, the Phase 2 GHG emission standards for trailers were repealed.

Since 2019, six interim orders covering the period from May 2019 to February 2025, 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 trailer manufacturers and the need to assess the economic implications of Canada proceeding with the implementation of the standards for trailers in the Heavy-duty Vehicle and Engine Greenhouse Gas Emission Regulations while the standards were not in effect in the United States. The sixth interim order to suspend trailer standards was made on February 19, 2024, and is set to expire on February 19, 2025.

The Department of the Environment (Department) 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 the Interim Order, companies subject to the Heavy-duty Vehicle and Engine Greenhouse Gas Emission Regulations would be required to meet the trailer standards outlined in these regulations, which apply to certain trailersfootnote 1 whose manufacture was completed on or after January 1, 2020.

The On-Road Vehicle and Engine Emission Regulations and the Passenger Automobile and Light Truck Greenhouse Gas Emission Regulations

The On-Road Vehicle and Engine Emission Regulations set air pollutant emission standards for both heavy-duty and light-duty vehicles beginning with the 2004 model year. The Passenger Automobile and Light Truck Greenhouse Gas Emission Regulations set GHG emission standards for light-duty vehicles beginning with the 2011 model year. These regulations are aligned with corresponding standards and test procedures in the United States. In April 2024, the U.S. Environmental Protection Agency (EPA) published the Final Rule titled Multi-Pollutant Emissions Standards for Model Years 2027 and Later Light-Duty and Medium-Duty Vehicles, which introduced more stringent GHG and air pollutant standards for light-duty vehicles of model years 2027 to 2032. In addition, this Final Rule included two changes that created misalignment with the Canadian regulations.

First, this Final Rule moved the section of the U.S. Code of Federal Regulations that describes the calculation of the fleet average carbon-related exhaust emission value for light-duty plug-in hybrid electric vehicles. Second, this Final Rule amended the definition of “medium-duty passenger vehicle”. Previously, the definition included any heavy-duty vehicle that is designed primarily for the transportation of persons and that has a gross vehicle weight rating (GVWR) of more than 8,500 pounds and less than 10,000 pounds. The new definition increases the range of the GVWR to between 8,500 pounds and 14,000 pounds starting with model year 2027. Companies can elect to use this new definition of “medium-duty passenger vehicle” prior to model year 2027. This change allows certain vehicles, principally large battery-electric passenger vehicles that are significantly heavier because of large battery packs, to meet the requirements for light-duty vehicles under the U.S. Code of Federal Regulations.

Without the Interim Order, the Passenger Automobile and Light Truck Greenhouse Gas Emission Regulations would reference a section of the U.S. Code of Federal Regulations that no longer exists, which would prevent companies from being able to calculate emissions from light-duty plug-in hybrid electric vehicles.

Furthermore, companies would be unable to obtain carbon dioxide equivalent emission credits for certain vehicles for the 2024 model year under the Passenger Automobile and Light Truck Greenhouse Gas Emission Regulations due to the current definition of “medium-duty passenger vehicle” in the On-Road Vehicle and Engine Emission Regulations that is referenced in the Passenger Automobile and Light Truck Greenhouse Gas Emission Regulations. These vehicles would instead be considered heavy-duty vehicles and subject to the Heavy-duty Vehicle and Engine Greenhouse Gas Emission Regulations, placing an additional administrative burden on companies that do not currently report under these regulations.

Implications

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 an enactment of a foreign government that was amended 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.

In accordance with subsection 163(3) of CEPA, the Interim Order will 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 Interim Order to suspend the application of GHG emission standards for trailers in Canada, to update the light-duty plug-in hybrid electric vehicle calculation reference, and to revise the definition of “medium-duty passenger vehicle”. In accordance with subsection 163(5) of CEPA, the Interim Order will cease to have effect if it is repealed, if the regulations are amended or repealed to give effect to the Order, or one year after the Interim Order is made, whichever is earlier.

The sixth interim order to suspend the trailer standards will expire on February 19, 2025. 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 Heavy-duty Vehicle and Engine Greenhouse Gas Emission Regulations by 0.5 megatonnes (Mt) of carbon dioxide equivalent (CO2e) over the lifetime operation of trailers of model year 2026. For trailers of model years 2020 to 2026 combined, delaying the trailer standards by another model year with the Interim Order would decrease the estimated GHG emission reductions attributable to the 2018 amendments by approximately 3.1 Mt CO2e over the portion of their lifetime operation that occurs during the 2020–2050 period.

While the Interim Order is in place, the trailer 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 trailer standards. These expected cost savings would be less than the reduction in benefits associated with fuel savings.

In addition, the Interim Order would direct companies to the correct section in the U.S. Code of Federal Regulations, which prescribes how to calculate the carbon-related exhaust emission value for light-duty plug-in hybrid electric vehicles. As a result, more than half of the companies subject to the Passenger Automobile and Light Truck Greenhouse Gas Emission Regulations will continue to be able to calculate the carbon-related exhaust emission value for their plug-in hybrid electric vehicles and comply with the reporting requirements.

Finally, the revised definition of “medium-duty passenger vehicle” would enable companies to obtain credits for certain vehicles under the Passenger Automobile and Light Truck Greenhouse Gas Emission Regulations. These vehicles would otherwise be considered heavy-duty vehicles and subject to the Heavy-duty Vehicle and Engine Greenhouse Gas Emission Regulations. The revised definition therefore reduces the administrative burden on these companies and supports their compliance with the zero-emission vehicle requirements in the Regulations Amending the Passenger Automobile and Light Truck Greenhouse Gas Emission Regulations that were published in December 2023.

Consultation

The Department continues to engage with the Canadian trailer manufacturing and trucking industry, the automotive industry, and their associations on a regular basis. It is expected that the Canadian industry will support the Interim Order.

Now that the U.S. EPA has repealed the federal trailer provisions and introduced more stringent GHG and air pollutant emission standards for light-duty and heavy-duty vehicles and engines, amendments to the Heavy-duty Vehicle and Engine Greenhouse Gas Emission Regulations, Passenger Automobile and Light Truck Greenhouse Gas Emission Regulations, and On-Road Vehicle and Engine Emission Regulations will be needed in Canada to ensure continued alignment. Over the course of the next year, the Department intends to develop proposed amendments to these regulations 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 these regulations in a timely manner.