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Could Canada stay on course if the U.S. pulls a U-turn on vehicle fuel efficiency?

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By Amin Assadolahi, March 16, 2017

Roughly a quarter of Canada’s greenhouse gas (GHG) emissions originate from the transportation sector. In Ontario and Québec, that number soars to a third, and for these provinces in particular transportation remains one of the most difficult sources of GHGs to tackle.

Provinces do have some levers to reduce emissions from the sector, such as potentially mandating zero-emission vehicles (ZEVs), as California has done. They could build their rapid-charging infrastructures around such mandates and become leaders in clean transportation.

However, a piecemeal set of policies can increase costs, both in terms of compliance but also in costs passed down to consumers. To make matters even more difficult, the Canadian automobile sector cannot be taken in isolation from its U.S. and Mexican counterparts. North American vehicle manufacturing is heavily integrated, and regulations can have cross-border implications. The three countries can introduce their own requirements (e.g., daytime running lights) but significant differences (e.g., fuel economy standards) are hard to imagine. If anything, demand and requirements in the United States effectively drive the vision for the sector.

Today, the Trump Administration threw a wrench in the mix by reopening the mid-term review of the Corporate Average Fuel Economy (CAFE) standards, which would have seen vehicle fleet efficiency rise more than 50 miles per gallon by 2025. The review was scheduled to end by April 2018, but the Environmental Protection Agency (EPA) wrapped it up before the new administration took power. In response, the auto industry called for its reopening. Alongside these rules are also state-level ZEV requirements, which can interact with federal fuel efficiency rules, and it remains uncertain how the two levels of government will navigate the road ahead. As Resources for the Future rightly notes, when it comes to designing vehicle fuel regulations it makes sense to take time to get it right. In this time of uncertainty, regulatory review and any changes to the regulations in the United States will have far-reaching consequences and will significantly affect the Canadian vehicle manufacturing sector.

Canada has passenger automobile and light truck GHG regulations that extend from 2017 to 2025. Canadian regulations do not include a mid-term review; however, they reference U.S. requirements for the 2022 to 2025 model years. In other words, by default, the results of the U.S. mid-term review affect Canadian vehicle regulations. Although Canada could make an amendment to remove this reference, this would be quite unlikely. Instead, Environment and Climate Change Canada can continue with its commitment to collaborate with its U.S. counterpart when informing the mid-term review.

While the sector again puts its case before the government, a few reminders are in order. Confronted with an increasingly changing climate and commitments under the Paris Agreement, governments will face increasing pressures to reduce emissions and strengthen their climate obligations. Getting ahead of the regulatory curve could result in increased economic opportunities and competitiveness. Regarding the Paris Agreement, some of the major players in the sector declared their commitment to “catalyze combined action and initiatives from the automotive industry sector” to maximize the benefits of mobility while mitigating its environmental impacts. It would be important to see this vision reflected in the mid-term review process, and to have the sector champion more ambitious targets rather than undoing progress already made.

More fuel-efficient vehicles mean more miles for less fuel, which could translate into saving for consumers in a future of higher oil prices. The electric vehicle revolution could also result in savings and lower pollution. Although it is important to improve the fuel efficiency of vehicles, solutions to the transportation sector’s emissions are often closer to home.

At the centre of emissions from the transportation sector lies the challenge of transportation itself. We have built and modified our cities around the car, with ever-expanding suburbs. Our large city centres, in a country as big as Canada, are far from one another and connected through a network of roads designed to accommodate vehicles. Canada and its subnational governments can still tackle the transportation emissions challenge irrespective of the outcomes of the mid-term review. To this end, sustainable solutions to the movement of people and goods—combined with integrating sustainability considerations more deeply into city planning—will be critical to any climate action plan and have far-reaching impacts as we build the cities of the future.