Vol. 137, No. 1 — January 1, 2003

Registration
SOR/2003-2 12 December, 2002

CANADIAN ENVIRONMENTAL PROTECTION ACT, 1999

On-Road Vehicle and Engine Emission Regulations

P.C. 2002-2164 12 December, 2002

Whereas, pursuant to subsection 332(1) of the Canadian Environmental Protection Act, 1999 (see footnote a) , the Minister of the Environment published in the Canada Gazette, Part I, on March 30, 2002, a copy of the proposed On-Road Vehicle and Engine Emission Regulations, substantially in the annexed form, and persons were given an opportunity to file comments with respect to the Regulations or a notice of objection requesting that a board of review be established and stating the reasons for the objection;

Therefore, Her Excellency the Governor General in Council, on the recommendation of the Minister of the Environment, pursuant to section 160 of the Canadian Environmental Protection Act, 1999 (see footnote b) , hereby makes the annexed On-Road Vehicle and Engine Emission Regulations.

ON-ROAD VEHICLE AND ENGINE EMISSION REGULATIONS

INTERPRETATION

1. (1) The following definitions apply in these Regulations.

"Act" means the Canadian Environmental Protection Act, 1999. (Loi)

"approach angle" means the smallest angle, in a plan side view of a vehicle, formed by the level surface on which the vehicle is standing and a line tangent to the front tire static loaded radius arc and touching the underside of the vehicle forward of the front tire. (angle d'approche)

"auxiliary emission control device" means any element of design that senses temperature, vehicle speed, engine RPM, transmission gear, manifold vacuum, or any other parameter for the purpose of activating, modulating, delaying, or deactivating the operation of any part of an emission control system. (dispositif antipollution auxiliaire)

"basic vehicle frontal area" means the area enclosed by the geometric projection of the basic vehicle, which includes tires but does not include mirrors or air deflectors, along the longitudinal axis of the vehicle onto a plane perpendicular to that axis. (surface frontale du véhicule de base)

"break-over angle" means the supplement of the largest angle, in the plan side view of a vehicle, that can be formed by two lines tangent to the front and rear static loaded radii arcs and intersecting at a point on the underside of the vehicle. (angle de rampe)

"CFR" means Title 40, chapter I, subchapter C, part 86, of the Code of Federal Regulations of the United States as amended from time to time. (CFR)

"complete heavy-duty vehicle" means a heavy-duty vehicle having a GVWR of 6350 kg (14,000 pounds) or less that is powered by an Otto-cycle engine and that has a primary load carrying device or container attached at the time the vehicle leaves the control of the manufacturer of the engine. (véhicule lourd complet)

"crankcase emissions" means substances that cause air pollution and that are emitted to the atmosphere from any portion of the engine crankcase ventilation or lubrication systems. (émissions du carter)

"curb weight" means the actual or manufacturer's estimated weight of a vehicle in operational status with all standard equipment and weight of fuel at nominal tank capacity and the weight of optional equipment. (masse en état de marche)

"departure angle" means the smallest angle, in a plan side view of a vehicle, formed by the level surface on which the vehicle is standing and a line tangent to the rear tire static loaded radius arc and touching the underside of the vehicle rearward of the rear tire. (angle de sortie)

"diesel engine" means a type of engine that has operating characteristics significantly similar to those of the theoretical Diesel combustion cycle. The non-use of a throttle during normal operation is indicative of a diesel engine. (moteur diesel)

"diesel heavy-duty vehicle" means a heavy-duty vehicle that is powered by a diesel engine. (véhicule lourd diesel)

"element of design" means, in respect of a vehicle or engine,

• (a) any control system, including computer software, electronic control systems and computer logic;
  (b) any control system calibrations;
  (c) the results of systems interaction; or
  (d) any hardware items. (élément de conception)

"emission control system" means a unique group of emission control devices, auxiliary emission control devices, engine modifications and strategies, and other elements of design used to control exhaust emissions from a vehicle. (système antipollution)

"EPA" means the United States Environmental Protection Agency. (EPA)

"EPA certificate" means a certificate of conformity to U.S. federal standards issued by the EPA. (certificat de l'EPA)

"evaporative emissions" means hydrocarbons emitted into the atmosphere from a vehicle, other than exhaust emissions and crankcase emissions. (émissions de gaz d'évaporation)

"exhaust emissions" means substances emitted into the atmosphere from any opening downstream from the exhaust port of a vehicle's engine. (émissions de gaz d'échappement)

"Federal Test Procedure" means the test procedure as described in subsections 130(a) through (d) and (f) of Subpart B of the CFR which is designed to measure urban driving exhaust and evaporative emissions over the Urban Dynamometer Driving Schedule set out in Appendix I of the CFR. (Federal Test Procedure)

"full useful life emission bin" means the set of exhaust emission standards, measured using the Federal Test Procedure, that is set out in a horizontal row in Table S04-1 in section 1811, subpart S, of the CFR. (série d'émissions de durée de vie totale)

"GVWR" means the gross vehicle weight rating specified by a manufacturer as the maximum design loaded weight of a single vehicle. (PNBV)

"heavy-duty engine" means an engine designed to be used for motive power in a heavy-duty vehicle, other than a medium-duty passenger vehicle or a complete heavy-duty vehicle. (moteur de véhicule lourd)

"heavy-duty vehicle" means an on-road vehicle that has a GVWR of more than 3,856 kg (8,500 pounds), a curb weight of more than 2,722 kg (6,000 pounds) or a basic vehicle frontal area in excess of 4.2 m² (45 square feet). (véhicule lourd)

"heavy light-duty truck" means a light-duty truck having a GVWR of more than 2,722 kg (6,000 pounds). (camionnette lourde)

"light-duty truck" means an on-road vehicle that has a GVWR of 3,856 kg (8,500 pounds) or less, a curb weight of 2,722 kg (6,000 pounds) or less and a basic vehicle frontal area of 4.2 m² (45 square feet) or less and that

• (a) is designed primarily for the transportation of property or that is a derivative of a vehicle that is designed for that purpose;
  (b) is designed primarily for the transportation of persons and has a designated seating capacity of more than 12 persons; or
  (c) is available with special features that enable it to be operated and used off-road, the special features being four-wheel drive and at least four of the following characteristics, that are calculated when the vehicle is at curb weight and on a level surface with the front wheels parallel to the vehicle's longitudinal centreline and the tires are inflated to the manufacturer's recommended pressure, namely,
  • (i) an approach angle of not less than 28 degrees,
    (ii) a break-over angle of not less than 14 degrees,
    (iii) a departure angle of not less than 20 degrees,
    (iv) ground clearances of not less than 17.8 cm (7 inches) under the front and rear axles, and
    (v) a ground clearance of not less than 20.3 cm (8 inches) under any point other than the front or rear axle. (camionnette)

"light-duty vehicle" means an on-road vehicle that is designed primarily for the transportation of persons and has a designated seating capacity of not more than 12 persons. (véhicule léger)

"light light-duty truck" means a light-duty truck that has a GVWR of 2,722 kg (6,000 pounds) or less. (camionnette légère)

"medium-duty passenger vehicle" means a heavy-duty vehicle that has a GVWR of less than 4,536 kg (10,000 pounds) and that is designed primarily for the transportation of persons but does not include any vehicle that

• (a) is a truck that is incomplete because it does not have a primary load carrying device or container attached;
  (b) has a seating capacity of more than 12 persons;
  (c) is designed to seat more than 9 persons behind the driver; or
  (d) is equipped with an open cargo area (for example, a pick-up truck box or bed) of 183 cm (72.0 inches) in interior length or more or with a covered box not readily accessible from the passenger compartment. (véhicule moyen à passagers)

"model year" means the year, as determined under section 5, that is used by a manufacturer to designate a model of vehicle or engine. (année de modèle)

"motorcycle" means an on-road vehicle with a headlight, taillight and stoplight that has two or three wheels and a curb weight of 793 kg (1,749 pounds) or less, but does not mean a vehicle that has an engine displacement of less than 50 cm³ (3.1 cubic inches), or that, with an 80 kg (176 pound) driver

• (a) cannot start from a dead stop using only the engine; or
  (b) cannot exceed a speed of 40 km/h (25 miles per hour) on a level paved surface. (motocyclette)

"nominal fuel tank capacity" means the volume of the fuel tank specified by the manufacturer to the nearest three eighths of a litre (one tenth of a U.S. gallon). (capacité nominale du réservoir à carburant)

"NOx" means oxides of nitrogen, which is the sum of nitric oxide and nitrogen dioxide contained in a gas sample as if the nitric oxide were in the form of nitrogen dioxide. (NOx)

"on-road vehicle" means a self-propelled vehicle designed for or capable of transporting persons, property, material or permanently or temporarily affixed apparatus on a highway, but does not mean a vehicle that

• (a) cannot exceed a speed of 40 km/h (25 miles per hour) on a level paved surface;
  (b) lacks features customarily associated with safe and practical highway use such as a reverse gear, unless the vehicle is a motorcycle, a differential, or safety features required by federal or provincial laws;
  (c) exhibits features that render its use on a highway unsafe, impractical, or highly unlikely, such as tracked road contact means or inordinate size; or
  (d) is a military vehicle designed for use in combat or combat support. (véhicule routier)

"Otto-cycle engine" means a type of engine that has operating characteristics that are significantly similar to those of the theoretical Otto combustion cycle. The use of a throttle during normal operation is indicative of an Otto-cycle engine. (moteur à cycle Otto)

"Otto-cycle heavy-duty vehicle" means a heavy-duty vehicle that is powered by an Otto-cycle engine. (véhicule lourd à cycle Otto)

"rounded" means rounded in accordance with method ASTM-E29-93a of the American Society for Testing and Materials. (arrondir)

"static loaded radius arc" means a portion of a circle whose centre is the centre of a standard tire-rim combination of a vehicle and whose radius is the distance from that centre to the level surface on which the vehicle is standing, measured with the vehicle at curb weight, the wheel parallel to the vehicle's longitudinal centreline, and the tire inflated to the manufacturer's recommended pressure. (arc du rayon sous charge)

"useful life" means the period of time or use, whether full or intermediate, in respect of which an emission standard applies to a vehicle or engine, as set out in the CFR. (durée de vie utile)

(2) Standards that are incorporated by reference in these Regulations from the CFR are those expressly set out in the CFR and shall be read as excluding

• (a) references to the EPA or the Administrator of the EPA exercising discretion in any way;
  (b) alternative standards related to fleet averages, other averages, emission credits, small volume manufacturers, or financial hardship; and
  (c) standards or evidence of conformity of any authority other than the EPA.

PURPOSE

2. The purpose of these Regulations is to

• (a) reduce emissions of hydrocarbons, carbon monoxide, oxides of nitrogen, formaldehyde and particulate matter from on-road vehicles and engines by establishing emission limits for those substances;
  (b) reduce emissions of the toxic substances 1-3 butadiene, acetaldehyde, acrolein and benzene through the establishment of emission limits for hydrocarbons from on-road vehicles and engines; and
  (c) establish emission standards and test procedures for on-road vehicles and engines that are aligned with those of the EPA.

APPLICATION

3. Subject to section 9 and subsection 24(7), these Regulations apply to vehicles and engines that are manufactured in Canada, or imported into Canada, on or after January 1, 2004.

GENERAL

4. In these Regulations, a vehicle or engine is deemed to be covered by an EPA certificate if it

• (a) is equivalent to a vehicle or engine that is covered by an EPA certificate in that both vehicles or engines, as the case may be, share all of the features described in the CFR that are used by the EPA to classify vehicles or engines into test groups, and vehicles into evaporative and refuelling families; and
  (b) has no features that could cause it to have a higher level of emissions than the vehicles or engines tested for the issuance of the EPA certificate.

MODEL YEAR

5. (1) A year that is used by a manufacturer as a model year shall

• (a) if the period of production of a model of vehicle or engine does not include January 1 of a calendar year, correspond to the calendar year during which the period of production falls; or
  (b) if the period of production of a model of vehicle or engine includes January 1 of a calendar year, correspond to that calendar year.

(2) The period of production of a model of vehicle or engine shall include only one January 1.

PRESCRIBED CLASSES OF VEHICLES AND ENGINES

6. (1) In these Regulations, subject to subsection (3), the following classes of vehicles are prescribed for the purposes of the definition "vehicle" in section 149 of the Act:

• (a) light-duty vehicles;
  (b) light-duty trucks, namely, light light-duty trucks and heavy light-duty trucks;
  (c) medium-duty passenger vehicles;
  (d) complete heavy-duty vehicles;
  (e) heavy-duty vehicles; and
  (f) motorcycles.

(2) In these Regulations, subject to subsection (3), heavy-duty engines are prescribed for the purposes of the definition "engine" in section 149 of the Act.

(3) The prescribed classes of vehicles and engines referred to in subsections (1) and (2) do not include

• (a) any vehicle that was manufactured 15 years or more before the date of its importation into Canada; or
  (b) any vehicle or engine that is being exported and that is accompanied by written evidence establishing that it will not be sold or used in Canada.

(4) For the purpose of section 152 of the Act, the prescribed vehicles and engines are the classes of vehicles and engines referred to in subsections (1) and (2) that are manufactured in Canada, except

• (a) any vehicle or engine that will be used in Canada solely for purposes of exhibition, demonstration, evaluation or testing;
  (b) any engine that is to be installed in a heavy-duty vehicle before the first retail sale of the vehicle; and
  (c) any engine that is to be installed as a replacement in a heavy-duty vehicle that has a national emissions mark applied to it if the replacement engine
  • (i) is of the same model year as the original engine, and
    (ii) is identical to the original engine in all respects material to emissions.

APPLICATION FOR AUTHORIZATION TO APPLY NATIONAL EMISSIONS MARK

7. (1) Any company that intends to apply a national emissions mark to a vehicle or engine shall apply to the Minister to obtain an authorization in the form set out in Schedule 1.

(2) The application to apply a national emissions mark shall be signed by a person who is authorized to act on behalf of the company and shall include

• (a) the name and street address of the head office of the company and, if different, its mailing address;
  (b) the classes of vehicles or engines for which the authorization is requested;
  (c) the street address of the location at which the national emissions mark will be applied to the vehicles or engines;
  (d) the street address where records referred to in section 38 will be maintained; and
  (e) information to show that the company is capable of verifying compliance with the standards set out in these Regulations.

NATIONAL EMISSIONS MARK

8. (1) The national emissions mark is the mark set out in Schedule 2.

(2) The national emissions mark shall be at least 7 mm in height and 10 mm in width.

(3) The national emissions mark shall be located

• (a) on or immediately beside the U.S. information label referred to in paragraph 35(1)(d); or
  (b) on or immediately beside the compliance label applied in accordance with the Motor Vehicle Safety Regulations.

(4) The national emissions mark shall be on a label that

• (a) is permanently applied to the vehicle or engine;
  (b) is resistant to or protected against any weather condition; and
  (c) bears inscriptions that are legible, indelible and that are indented, embossed or in a colour that contrasts with the background of the label.

(5) Subject to subsection (6), a company that has been authorized to apply the national emissions mark shall display the identification number assigned by the Minister in figures that are at least 2 mm in height, immediately below or to the right of the national emissions mark.

(6) A company is not required to display its identification number pursuant to subsection (5) if

• (a) the company is authorized by the Minister of Transport to apply the national safety mark in accordance with the Motor Vehicle Safety Act;
  (b) the company applies both the national emissions mark and the national safety mark to the vehicle; and
  (c) the national emissions mark is on the same label as the national safety mark.

9. A company may apply the national emissions mark to a vehicle or engine that is manufactured before January 1, 2004, if

• (a) the vehicle or engine conforms to the standards set out in these Regulations for vehicles or engines of the 2004 model year; and
  (b) the company meets the requirements of these Regulations in respect of that vehicle or engine.

STANDARDS FOR IMPORTED VEHICLES AND ENGINES MANUFACTURED BEFORE 2004

10. A vehicle or engine that is to be imported and that was manufactured before January 1, 2004 shall conform to the emission standards applicable to the model year of that vehicle or engine that were in effect at the time of its manufacture and that were set out in Schedule V to the Motor Vehicle Safety Regulations.

STANDARDS FOR 2004 AND LATER MODEL YEAR VEHICLES AND ENGINES

Emission Control Systems

11. (1) An emission control system that is installed in a vehicle or engine to enable it to conform to the standards set out in these Regulations shall not

• (a) release, in its operation or function, a substance that causes air pollution and that would not have been released if the system were not installed; or
  (b) in its operation, function or malfunction make the vehicle unsafe or endanger persons or property in or near the vehicle.

(2) No vehicle or engine shall be equipped with a defeat device.

(3) Subject to subsection (4), a defeat device is an auxiliary emission control device that reduces the effectiveness of the emission control system under conditions that may reasonably be expected to be encountered in normal vehicle operation and use.

(4) An auxiliary emission control device is not a defeat device if

• (a) the conditions referred to in subsection (3) are substantially included in the emission test procedures referred to in subsection 18(1);
  (b) it is needed to protect the vehicle against damage or accident; or
  (c) its use does not go beyond the requirements of engine starting.

Light-duty Vehicles, Light-duty Trucks and Medium-duty Passenger Vehicles

12. Subject to section 19, a light-duty vehicle, light-duty truck or medium-duty passenger vehicle of a specific model year shall

• (a) conform to the exhaust and evaporative emission standards applicable to vehicles of that model year set out in section 1811, subpart S, of the CFR;
  (b) be equipped with an on-board diagnostic system that conforms to the standards applicable to vehicles of that model year set out in section 1806, subpart S, of the CFR; and
  (c) not release any crankcase emissions.

Complete Heavy-duty Vehicles

13. Subject to section 19, a complete heavy-duty vehicle of the 2005 or later model year, other than a medium-duty passenger vehicle, shall

• (a) conform to the exhaust and evaporative emission standards applicable to complete heavy-duty vehicles of that model year set out in section 1816, subpart S, of the CFR;
  (b) be equipped with an on-board diagnostic system that conforms to the standards applicable to vehicles of that model year set out in section 1806, subpart S, of the CFR; and
  (c) not release any crankcase emissions.

Heavy-duty Vehicles

14. Subject to section 19, an Otto-cycle heavy-duty vehicle of a specific model year, other than a medium-duty passenger vehicle or a complete heavy-duty vehicle, shall

• (a) be equipped with a heavy-duty engine that meets the requirements of these Regulations; and
  (b) conform to the evaporative emission standards applicable to Otto-cycle heavy-duty vehicles of that model year set out in section 10, subpart A, of the CFR.

15. (1) Subject to subsection (2) and section 19, a diesel heavy-duty vehicle of a specific model year, other than a medium-duty passenger vehicle, shall

• (a) be equipped with a heavy-duty engine that meets the requirements of these Regulations; and
  (b) conform to the evaporative emission standards applicable to diesel heavy-duty vehicles of that model year set out in section 11, subpart A, of the CFR.

(2) A vehicle referred to in subsection (1) that has a GVWR of 6,350 kg (14,000 pounds) or less may conform to the standards set out for that model year in section 1863, subpart S, of the CFR instead of the standards described in subsection (1).

Heavy-duty Engines

16. (1) Subject to section 19, Otto-cycle heavy-duty engines of a specific model year shall conform to the exhaust and crankcase emission standards applicable to Otto-cycle heavy-duty engines of that model year set out in section 10, subpart A, of the CFR.

(2) Subject to section 19, diesel heavy-duty engines of a specific model year shall conform to the exhaust and crankcase emission standards applicable to diesel heavy-duty engines of that model year set out in section 11, subpart A, of the CFR.

(3) Subject to section 19, heavy-duty engines of a specific model year used or intended for use in heavy-duty vehicles that have a GVWR of 6,350 kg (14,000 pounds) or less shall be equipped with an on-board diagnostic system that conforms to the standards applicable to engines of that model year set out in section 17, subpart A, of the CFR.

Motorcycles

17. Subject to section 19, motorcycles of a specific model year shall

• (a) conform to the exhaust and evaporative emission standards applicable to motorcycles of that model year set out in section 410, subpart E, of the CFR; and
  (b) not release any crankcase emissions.

Interpretation of Standards

18. (1) The standards referred to in sections 11 to 17 are the certification and in-use standards set out in the CFR, at the applicable useful life, and include the test procedures, fuels and calculation methods set out in the CFR for those standards.

(2) In the case of a standard that is set out in the CFR to be phased in over a period of time for a class of vehicle or engine, the standard comes into effect for the purposes of these Regulations in the model year for which the CFR specifies that the standard applies to 100% of that class, and continues to apply until another standard comes into effect that applies to 100% of that class.

Vehicles or Engines Covered by an EPA Certificate

19. (1) Every vehicle or engine of a specific model year that is covered by an EPA certificate and that is sold concurrently in Canada and the United States shall conform to, instead of the standards set out in sections 11 to 17, the certification and in-use standards referred to in the EPA certificate.

(2) For the purposes of subsection 153(3) of the Act, the provisions of the CFR that are applicable to a vehicle or engine referred to in subsection (1) pursuant to the EPA certificate correspond to the certification and in-use standards referred to in subsection (1).

(3) For the purposes of subsection 153(3) of the Act, the EPA is the prescribed agency.

FLEET AVERAGING REQUIREMENTS

General

20. In sections 21 to 32, "fleet" refers only to vehicles of a specific model year that a company manufactures in Canada, or imports into Canada, for the purpose of sale of those vehicles to the first retail purchaser.

Fleet Average NOx Standards

21. Subject to sections 24 to 31, the average NOx value for a company's fleet that is composed of all of its light-duty vehicles and light light-duty trucks of a model year set out in column 1 of the table to this section shall not exceed the applicable fleet average NOx standard set out in column 2.

TABLE

LIGHT-DUTY VEHICLES AND LIGHT LIGHT-DUTY TRUCKS

Item	Column 1 Model Year	Column 2 Fleet Average NOx Standard in grams/mile
1.	2004	0.25
2.	2005	0.19
3.	2006	0.13
4.	2007	0.07
5.	2008	0.07

22. Subject to sections 24 to 31, the average NOx value for a company's fleet that is composed of all of its heavy light-duty trucks and medium-duty passenger vehicles of a model year set out in column 1 of the table to this section shall not exceed the applicable fleet average NOx standard set out in column 2.

TABLE

HEAVY LIGHT-DUTY TRUCKS AND MEDIUM-DUTY PASSENGER VEHICLES

Item	Column 1 Model Year	Column 2 Fleet Average Nox Standard in grams/mile
1.	2004	0.53
2.	2005	0.43
3.	2006	0.33
4.	2007	0.20
5.	2008	0.14

23. Subject to sections 24 to 31, the average NOx value for a company's fleet that is composed of all of its light-duty vehicles, light-duty trucks and medium-duty passenger vehicles of the 2009 and later model years shall not exceed 0.07 grams per mile.

Calculation of Fleet Average NOx Values

24. (1) Subject to section 25, for each of its fleets referred to in sections 21 to 23, a company shall calculate the average NOx value in accordance with the following formula:

[Σ (A x B)]/C

where

A is the NOx emission standard for each full useful life emission bin,

B is the number of vehicles in the fleet that conform to that NOx emission standard, and

C is the total number of vehicles in the fleet.

(2) The average NOx value for the fleet shall be rounded to the same number of significant figures that are contained in the total number of vehicles in the fleet in the denominator in subsection (1), but to at least three decimal places.

(3) If a company's fleet includes any hybrid electric vehicle that is covered by an EPA certificate, the average NOx value calculated under subsection (1) may be lowered by applying one or more hybrid electric vehicle NOx contribution factors as long as

• (a) each factor has been approved by the EPA in accordance with the provisions of the CFR;
  (b) each factor is applied in the same manner as it is applied by the EPA; and
  (c) evidence of the EPA approval is provided to the Minister in the end of model year report referred to in section 32.

(4) Subject to subsection (5), in respect of any of its vehicles that conform to a NOx emission standard for an extended useful life of 15 years or 240,000 km (150,000 miles), a company may, in the equation in subsection (1), replace that standard, for each of those vehicles, with that standard multiplied by 0.85, rounded to at least three decimal places.

(5) A company may only replace a NOx emission standard as described in subsection (4) if the vehicle complies with any standards that may be applicable at the intermediate useful life.

(6) In respect of the 2004 and 2005 model years, a company may multiply by 2 the number of vehicles that conform to full useful life emission bin 1, and multiply by 1.5 the number of vehicles that conform to full useful life emission bin 2, when calculating one of the following:

• (a) the denominator in subsection (1); or
  (b) "total number of vehicles in the fleet" in the equation for calculating credits in subsection 26(2).

(7) When calculating the average NOx value under subsection (1) for a fleet of the 2004 model year, a company may include all vehicles of that model year, including those manufactured before January 1, 2004.

25. (1) A company may elect not to calculate an average NOx value for a fleet of a specific model year if every vehicle in that fleet conforms to a full useful life emission bin that has a NOx standard equal to or less than the applicable fleet average NOx standard for that model year that is set out in section 21, 22 or 23.

(2) For the purposes of section 26 and paragraphs 32(2)(b) and 37(1)(c), the average NOx emission value in respect of a fleet in a model year when a company makes an election under subsection (1) shall be deemed to be the fleet average NOx standard applicable to the fleet for which the election was made.

NOx Emission Credits

26. (1) For the purposes of subparagraph 162(1)(b)(i) of the Act, a company shall obtain NOx emission credits if the average NOx value in respect of a fleet of a specific model year is lower than the fleet average NOx standard for that model year and the company reports the credits under paragraph 32(2)(e).

(2) NOx emission credits, expressed in units of vehicle-grams per mile, shall be calculated using the following formula, rounding the result to the nearest whole number:

(A - B) x C

where

A is the fleet average NOx standard

B is the average NOx value in respect of the fleet, and

C is the total number of vehicles in the fleet.

(3) The NOx emission credits for a specific model year are credited on the last day of that model year.

27. NOx emission credits obtained in a specific model year shall be used by the company to offset any outstanding NOx emission deficit described in section 28, and any remaining credits may be used to offset a future deficit or may be transferred to another company.

NOx Emission Deficits

28. Subject to subsection 31(2), if a company's average NOx value in respect of a fleet of a specific model year is higher than the fleet average NOx standard for that model year, the company shall calculate the negative number that is the value of a NOx emission deficit incurred in that model year using the formula set out in subsection 26(2).

29. (1) A company shall offset a NOx emission deficit no later than the date on which the company submits the end of model year report under section 32 for the third model year after the model year in which the deficit was incurred.

(2) Subject to subsection (3), a company may offset a NOx emission deficit with an equivalent number of NOx emission credits obtained in accordance with section 26 or obtained from another company.

(3) If any part of a NOx emission deficit for a specific model year is outstanding following the submission of the end of model year report for the second model year after the model year in which the deficit was incurred, the number of NOx emission credits required to offset that outstanding deficit in the next model year is 120% of the deficit.

30. (1) A company that purchases another company or that results from the merger of companies is responsible for offsetting, in accordance with section 29, any outstanding NOx emission deficits of the purchased or merged companies.

(2) In the case of a company that ceases to manufacture, import or sell light-duty vehicles, light-duty trucks and medium-duty passenger vehicles, the company shall, no later than three calendar years after submitting its last end of model year report, offset all NOx emission deficits that are outstanding at the time that it ceases those activities.

Election for Vehicles Covered by an EPA Certificate

31. (1) Subject to subsections (2), (3) and (8), a company may elect to exclude the group of vehicles in a fleet that are covered by an EPA certificate and that are sold concurrently in Canada and the United States from the requirement to meet the standards set out in sections 21, 22 or 23, as the case may be, and from the average NOx value calculations in respect of a fleet under section 28.

(2) For greater certainty and subject to subsection (3), a company shall include in the group referred to in subsection (1) all of the vehicles of a fleet that are covered by an EPA certificate and that are sold concurrently in Canada and the United States.

(3) A company shall not include in the group referred to in subsection (1) any vehicle that is covered by an EPA certificate and

• (a) in respect of which the total number of units sold in Canada exceeds the total number of units sold in the United States that are covered by the same EPA certificate; and
  (b) that conforms to a full useful life emission bin having a NOx standard that is greater than the applicable fleet average NOx standard for the model year in respect of which the election is made.

(4) Subject to subsection (5), if a company makes an election under subsection (1), it shall calculate an average NOx value in accordance with section 24, with the necessary modifications, in respect of

• (a) the group that is subject to the election; and
  (b) the vehicles in the fleet that are not part of the group referred to in paragraph (a), if any.

(5) A company may elect not to make the calculations referred to in subsection (4) for a group of vehicles described in paragraph (4)(a) or (b) if every vehicle in the group conforms to a full useful life emission bin having a NOx standard equal to or less than the fleet average NOx standard that would otherwise apply under section 21, 22 or 23, as the case may be.

(6) If a company makes an election under subsection (5) the average NOx emission value for the group of vehicles of a fleet for which the election was made shall be the applicable fleet average NOx standard.

(7) If a company makes the election referred to in subsection (1) and the average NOx value for the group that is subject to the election, calculated under paragraph (4)(a)exceeds the fleet average NOx standard that would otherwise apply under section 21, 22 or 23, as the case may be, the company shall

• (a) forfeit any NOx emission credits obtained in previous model years; and
  (b) not obtain any NOx emission credits in the model year in respect of which the election was made.

(8) A company may not make the election referred to in subsection (1) in respect of a model year in which it has transferred NOx emission credits to another company if the average NOx value calculated under paragraph (4)(a) for the group that is subject to the election exceeds the fleet average NOx standard that would otherwise apply under section 21, 22 or 23, as the case may be.

End of Model Year Reports

32. (1) A company shall submit to the Minister an end of model year report, signed by a person who is authorized to act on behalf of the company, no later than May 1 after the end of each model year.

(2) The end of model year report shall contain the following information for each of its fleets described in sections 21 to 23:

• (a) the applicable fleet average NOx standard;
  (b) the average NOx value achieved under section 24 or 25;
  (c) for each model of vehicle, the values used in calculating the average NOx value achieved in respect of the fleet;
  (d) the total number of vehicles in the fleet;
  (e) the NOx emission credits calculated in accordance with subsection 26(2) in that model year, if any
  (f) the NOx emission deficits incurred in that model year, if any; and
  (g) the balance of credits or deficits at the end of the model year.

(3) The end of model year report must also contain the following information on each credit transfer to or from the company since the submission of the previous end of model year report:

• (a) the name, street address and, if different, the mailing address of the company that transferred the credits and the model year in which that company obtained those credits;
  (b) the name, street address and, if different, the mailing address of the company that received the credits;
  (c) the date of the transfer; and
  (d) the quantity of credits transferred.

(4) The company shall include in the end of model year report, if applicable, for any of its fleets described in sections 21 to 23, a statement that

• (a) it has made the election under section 25;
  (b) it has made the election under subsection 31(1); and
  (c) it has made an election under subsection 31(5) in respect of a group of vehicles described in paragraph 31(4)(a) or (b).

(5) A company that makes an election under subsection 31(1) in respect of a group of vehicles in a fleet shall include in the end of model year report

• (a) the average NOx values, determined under subsection 31(4) or (6) as the case may be;
  (b) the values used in calculating the fleet average NOx values referred to in paragraph (a); and
  (c) information demonstrating compliance with subsection 31(3).

EMISSION-RELATED MAINTENANCE INSTRUCTIONS

33. (1) Every company shall ensure that written instructions respecting emission-related maintenance are provided to the first retail purchaser of every vehicle and that the instructions are consistent with the maintenance instructions set out for

• (a) light-duty vehicles, light-duty trucks, medium-duty passenger vehicles and complete heavy-duty vehicles in section 1808, subpart S, of the CFR for the applicable model year;
  (b) motorcycles in section 411, subpart E, of the CFR for the applicable model year; and
  (c) heavy-duty vehicles, in section 38, subpart A, of the CFR for the applicable model year.

(2) The instructions referred to in this section shall be provided in English, French or both official languages, as requested by the purchaser.

EMISSION-RELATED INFORMATION LABELS

34. (1) In the case of a model of vehicle or engine in respect of which the Governor in Council has, by order, granted an exemption under section 156 of the Act:

• (a) a label shall be securely applied to the windshield or side window of every vehicle of that model or every vehicle equipped with the engine of that model; and
  (b) a label shall be permanently applied immediately beside the national emissions mark, or if there is no national emissions mark, in a location described in subsection 8(3) that is resistant to or protected against any weather conditions.

(2) The labels referred to in subsection (1) shall set out, in both official languages, the standard for which the exemption has been granted, as well as the title and date of the order.

RECORDS

Evidence of Conformity

35. (1) In the case of a vehicle or engine that is covered by an EPA certificate and that is sold concurrently in Canada and the United States, evidence of conformity for the purpose of paragraph 153(1)(b) of the Act in respect of a company shall consist of

• (a) a copy of the EPA certificate covering the vehicle or engine;
  (b) a document demonstrating that vehicles or engines covered by the EPA certificate are sold concurrently in Canada and the United States;
  (c) a copy of the records submitted to the EPA in support of the application for the issuance of the EPA certificate in respect of the vehicle or engine; and
  (d) a U.S. emission control information label, or in the case of a heavy-duty engine a U.S. engine information label, that is permanently affixed to the vehicle or engine in the form and location set out in
  • (i) section 1807, subpart S, of the CFR, for the applicable model year of light-duty vehicle, light-duty truck, medium-duty passenger vehicle or complete heavy-duty vehicle,
    (ii) section 413, subpart E, of the CFR for the applicable model year of the motorcycle,
    (iii) section 35, subpart A, of the CFR for the applicable model year of heavy-duty vehicle, and
    (iv) section 35, subpart A, of the CFR for the applicable model year of heavy-duty engine.

(2) For the purpose of subsection (1), the U.S. emission control information label may be affixed to the vehicle or engine in any other form and location that may be specified in the CFR.

36. In the case of a vehicle or engine other than those referred to in section 35, evidence of conformity required under paragraph 153(1)(b) of the Act shall be obtained and produced by a company in a form and manner satisfactory to the Minister instead of that specified in section 35.

Fleet Average NOx Records

37. (1) A company shall maintain records containing the following information for each of its fleets described in sections 21 to 23:

• (a) the model year;
  (b) the applicable fleet average NOx standard;
  (c) the average NOx value achieved under section 24 or 25; and
  (d) all values used in calculating the average NOx value achieved.

(2) For each vehicle in a fleet described in subsection (1), the company shall maintain records containing the following information:

• (a) the model and model year;
  (b) the applicable fleet average NOx standard;
  (c) in the case of a vehicle covered by an EPA certificate, the applicable test group described in subpart S of the CFR;
  (d) the name and street address of the plant where the vehicle was assembled;
  (e) the vehicle identification number;
  (f) the NOx emission standard to which the vehicle is certified; and
  (g) the name and street or mailing address of the first purchaser of the vehicle in Canada.

Maintenance and Submission of Records

38. (1) A company shall maintain, in writing or in a readily readable electronic or optical form

• (a) the evidence of conformity referred to in paragraphs 35(1)(a) to (c) and section 36 and records referred to in paragraph 153(1)(g) of the Act for a period of
  • (i) at least eight years after the date of manufacture, for engines and vehicles, other than motorcycles, and
    (ii) at least six years after the date of manufacture, for motorcycles; and
  (b) in respect of each model year, the records referred to in section 37 and a copy of the end of model year report referred to in section 32 for that model year shall be maintained for a period of eight years after the end of the model year.

(2) If the evidence of conformity and records referred to in subsection (1) are maintained on behalf of a company, the company shall keep a record of the name and street address and, if different, the mailing address of the person who maintains those records.

(3) If the Minister makes a written request for the evidence of conformity or the records referred to in subsections (1) and (2), or a summary of any of them, the company shall provide the Minister with the evidence of conformity, records or summary, in either official language, within

• (a) 40 days after the request is delivered to the company; or
  (b) if the evidence of conformity or records referred to in section 35 or 36 must be translated from a language other than French or English, 60 days after the request is delivered to the company.

IMPORTATION REQUIREMENTS AND DOCUMENTS

General Provisions

39. (1) Subject to subsection (2), any person importing a vehicle into Canada shall submit a declaration at a customs office, signed by that person or their duly authorized representative, that contains the following information:

• (a) the name and street address and, if different, the mailing address of the importer;
  (b) the name of the manufacturer of the vehicle;
  (c) the date on which the vehicle is imported;
  (d) the class, make, model, model year, and identification number of the vehicle;
  (e) in the case of a company, a statement that the vehicle bears the national emissions mark or that the company has the evidence of conformity referred to in section 35 or 36; and
  (f) in the case of a person that is not a company,
  • (i) a statement from the person that the vehicle bears
    • (A) the national emissions mark,
      (B) the U.S. emission control information label referred to in paragraph 35(1)(d) showing that the vehicle conformed to the EPA emission standards in effect at the time of its manufacture, or
      (C) a label showing that the vehicle conformed to the emission standards of the California Air Resources Board in effect at the time of its manufacture, or
    (ii) a statement from the manufacturer or its duly authorized representative that the vehicle conformed to the standards set out in these Regulations, or to the standards referred to in clause (i)(B) or (C), at the time of its manufacture.

(2) For the purposes of paragraph 153(1)(b) of the Act, any company that imports more than 2,500 vehicles into Canada in a calendar year may provide the information referred to in subsection (1) in another form and manner that is satisfactory to the Minister.

40. (1) Any person importing an engine into Canada shall provide the following information to a customs office in writing or in electronic form:

• (a) the name and street address and, if different, the mailing address of the importer;
  (b) the name of the manufacturer of the engine;
  (c) the date on which the engine is imported; and
  (d) a description of the engine.

(2) Any engine that is imported into Canada by a person that is not a company shall

• (a) bear the national emissions mark;
  (b) bear the U.S. engine information label referred to in paragraph 35(1)(d) showing that the engine conformed to the EPA emission standards in effect at the time of its manufacture;
  (c) bear a label showing that the engine conformed to the emission standards of the California Air Resources Board in effect at the time of its manufacture; or
  (d) be the subject of a statement from the manufacturer or its duly authorized representative that the engine conformed to the standards set out in these Regulations, or to the standards referred to in paragraph (b) or (c), at the time of its manufacture.

41. (1) The declaration referred to in paragraph 155(1)(a) of the Act shall be signed by the person referred to in that paragraph or their duly authorized representative, and shall contain

• (a) the information described in paragraphs 39(1)(a) to (d) or 40(1)(a) to (d), as applicable;
  (b) a statement that the vehicle or engine will be used in Canada solely for purposes of exhibition, demonstration, evaluation or testing; and
  (c) the date on which the vehicle or engine will be removed from Canada or destroyed.

(2) The declaration shall be filed with the Minister

• (a) prior to the import of the vehicle or engine; or
  (b) in the case of a company whose world production of vehicles or engines is 2,500 or more a year, as described in paragraph (a) or quarterly.

42. A company that imports a vehicle or engine in reliance on subsection 153(2) of the Act shall submit a declaration at a customs office, signed by its duly authorized representative, that contains the information described in paragraphs 39(1)(a) to (e) or 40(1)(a) to (d), as the case may be and, in addition,

• (a) a statement from the manufacturer of the vehicle or engine that the vehicle or engine will, when completed in accordance with instructions provided by the manufacturer, conform to the standards prescribed under these Regulations; and
  (b) a statement that the vehicle or engine will be completed in accordance with the instructions referred to in paragraph (a).

RENTAL RATE

43. The annual rental rate to be paid to a company by the Minister under subsection 159(1) of the Act, prorated on a daily basis for each day that a vehicle or engine is made available, is 21% of the manufacturer's suggested retail price of the vehicle or engine.

APPLICATION FOR EXEMPTION

44. (1) A company applying under section 156 of the Act for an exemption from conformity with any standard prescribed under these Regulations shall submit in writing to the Minister

• (a) its name, street address and, if different, its mailing address;
  (b) the province or country under the laws of which it is established;
  (c) the section number, title and text or substance of the standards from which an exemption is sought;
  (d) the duration requested for the exemption;
  (e) the reason for requesting an exemption;
  (f) if the company is requesting that the information submitted be treated as confidential under section 313 of the Act, the reasons for the request; and
  (g) the reasons why the granting of the exemption by the Governor in Council would be in the public interest and consistent with the objectives of the Act.

(2) If the basis of an application for an exemption is substantial financial hardship, the company shall include in the submission to the Minister

• (a) the world production of vehicles or engines manufactured by the company or by the manufacturer of the model that is the subject of the application in the 12 month period beginning two years before the beginning of the period in respect of which the exemption is applied for;
  (b) the total number of vehicles or engines manufactured for, or imported into, the Canadian market in the 12 month period beginning two years before the beginning of the period in respect of which the exemption is applied for;
  (c) technical and financial information demonstrating in detail why conformity to the standards referred to in paragraph (1)(c) would create substantial financial hardship, including
  • (i) a list of each of the items that would have to be altered in order to achieve conformity,
    (ii) an itemized and detailed description of the estimated cost to make the alterations referred to in subparagraph (i)
    • (A) at the end of one year after the day on which the application is submitted, if the duration of the requested exemption is for a period of one year or more but less than two years,
      (B) at the end of two years after the day on which the application is submitted, if the duration of the requested exemption is for a period of two years or more but less than three years, or
      (C) at the end of three years after the day on which the application is submitted, if the duration of the requested exemption is for a period of three years,
    (iii) the estimated price increase per vehicle or engine to counter the total costs incurred pursuant to subparagraph (ii) and a statement of the anticipated effect of each such price increase,
    (iv) corporate balance sheets and income statements for the three fiscal years immediately preceding the filing of the application, and
    (v) any other relevant information; and
  (d) a description of the company's efforts to conform to the standards from which the exemption is sought, including
  • (i) a description of any other means of achieving conformity that were considered and the reasons for rejecting each of them, and
    (ii) a description of the steps to be taken while the exemption is in effect and the estimated date by which conformity will be achieved through design changes or the termination of the production of non-conforming vehicles or engines.

(3) If the basis of an application for exemption is the development of new emission monitoring or emission control features that are equivalent or superior to those that conform to the prescribed standards, the company shall include in the submission to the Minister

• (a) a description of the new features;
  (b) a copy of the research, development and testing documentation establishing the innovative nature of the new features;
  (c) an analysis of how the level of performance of the new features is equivalent or superior to the level of performance established by the prescribed standards, including
  • (i) a detailed description of how a vehicle or engine equipped with the new features would, if exempted, differ from a vehicle or engine that conforms to the prescribed standards, and
    (ii) the results of tests conducted on the new features that demonstrate a level of performance that is equivalent or superior to that required by the prescribed standards;
  (d) evidence that an exemption would facilitate the development or the field evaluation of the vehicle or engine; and
  (e) a statement as to whether the company intends, at the end of the exemption period,
  • (i) to conform to the prescribed standards,
    (ii) to apply for a further exemption, or
    (iii) to request that the prescribed standards be amended to incorporate the new features.

(4) If the basis of an application for exemption is the development of new kinds of vehicles, engines or vehicle or engine systems or components, the company shall include in the submission to the Minister

• (a) a copy of the research, development and testing documentation establishing that an exemption would not substantially diminish the control of emissions of the vehicle or engine, including
  • (i) a detailed description of how the vehicle or engine equipped with the new kinds of vehicle systems or components would, if exempted, differ from one that conforms to the prescribed standards,
    (ii) the reasons why not conforming to the prescribed standards does not substantially diminish the control of emissions of the vehicle or engine, and
    (iii) a description of other means of achieving conformity that were considered and the reasons for rejecting each of them;
  (b) evidence that an exemption would facilitate the development or the field evaluation of the vehicle or engine; and
  (c) a statement as to whether the company intends, at the end of the exemption period, to conform to the standards prescribed by these Regulations.

(5) If a company wishes to obtain a new exemption to take effect after the expiration of an exemption referred to in subsection (3) or (4), the company shall submit, in writing, to the Minister

• (a) the information required under subsection (3) or (4), as the case may be; and
  (b) a statement of the total number of vehicles or engines sold in Canada under the expiring exemption.

DEFECT INFORMATION

45. (1) The notice of defect referred to in subsections 157(1) and (4) of the Act shall be given in writing and shall contain the following information:

• (a) the name of the company giving the notice;
  (b) the identifying classification of each vehicle and engine in respect of which the notice is given, including in the case of a vehicle its make, model, model year, vehicle identification number and the period during which it was manufactured;
  (c) the estimated percentage of the potentially affected vehicles or engines that contain the defect;
  (d) a description of the defect;
  (e) an evaluation of the pollution risk arising from the defect; and
  (f) a statement of the measures to be taken to correct the defect.

(2) A company shall, within 60 days after giving a notice of defect, submit to the Minister the initial report referred to in subsection 157(7) of the Act containing

• (a) the information referred to in subsection (1);
  (b) the total number of vehicles or engines in respect of which the notice of defect has been issued and the number of vehicles or engines in each identifying classification;
  (c) a chronology of all principal events that led to the determination of the existence of the defect; and
  (d) copies of all notices, bulletins and other circulars issued by the company in respect of the defect, including a detailed description of the nature and physical location of the defect with diagrams and other illustrations as necessary.

(3) If a company submits an initial report under subsection (2), it shall submit, within 45 days after the end of each quarter, quarterly reports to the Minister respecting the defect and its correction that contain the following information:

• (a) the number, title or other identification assigned by the company to the notice of defect;
  (b) the number of vehicles or engines in respect of which the notice of defect has been issued;
  (c) the date that notices of defect were given to the current owners of the affected vehicles or engines; and
  (d) the total number or percentage of vehicles or engines repaired, including vehicles or engines requiring inspection only.

CONSEQUENTIAL AMENDMENTS

Motor Vehicle Safety Regulations

46. (1) Paragraph 5(2)(b) of the Motor Vehicle Safety Regulations (see footnote 1)  is repealed.

(2) Subsection 5(2.1) of the Regulations is repealed.

47. Paragraph 11(1)(f.1) of the Regulations is repealed.

48. Schedule V to the Regulations is repealed.

COMING INTO FORCE

49. (1) Subject to subsection (2), these Regulations come into force on January 1, 2004.

(2) Sections 7 to 9 come into force on the day on which these Regulations are registered.

SCHEDULE 1
(Subsection 7(1))

MINISTERIAL AUTHORIZATION

Department of the Environment

Canadian Environmental Protection Act, 1999

On-Road Vehicle and Engine Emission Regulations

Identification Number ________

Pursuant to the Canadian Environmental Protection Act, 1999, I, ________, the Minister of the Environment, hereby authorize (name and address) to use and apply at its premises located at (location) the national emissions mark and this identification number on the following classes of prescribed vehicles or engines, provided that the vehicles or engines conform to all applicable emission standards: (list classes)

This authorization expires on ___________, ____.

Issued on _____________

____________________________
for the Minister of the Environment

SCHEDULE 2
(Subsection 8(1))

NATIONAL EMISSIONS MARK

REGULATORY IMPACT ANALYSIS STATEMENT
(This statement is not part of the Regulations.)

Description

The On-Road Vehicle and Engine Emission Regulations (hereinafter referred to as "the Regulations") introduce more stringent national emission standards for on-road vehicles and engines and a new regulatory framework under the Canadian Environmental Protection Act, 1999 (CEPA 1999). The Regulations will come into effect on January 1, 2004, with the exception that provisions addressing the authorization to use the national emissions mark come into force on the date of registration of the Regulations.

Since 1971, progressively more stringent emission standards have been promulgated for on-road vehicles under the Motor Vehicle Safety Act, which is administered by Transport Canada. On March 31, 2000, the legislative authority for controlling on-road vehicle emissions was transferred from the Motor Vehicle Safety Act to Environment Canada under the provisions of Part 7, Division 5 of CEPA 1999. The Regulations will therefore replace the emission regulations previously adopted under the Motor Vehicle Safety Act.

The Regulations continue the past approach of aligning with the federal emission standards of the United States Environmental Protection Agency (U.S. EPA), which are generally recognized as the most stringent national emission standards in the world. This approach provides Canadians with significant emission reductions from on-road vehicles and engines at a low additional cost. For most vehicle classes and on a per-vehicle basis, the targeted standards represent an average reduction in the allowable levels of smog-forming emissions of about 90 percent relative to current regulated limits.

The combustion of fuels to power vehicles and engines contributes significantly to air pollution, which has major adverse impacts on the environment and on the health of Canadians. The Regulations will reduce emissions of volatile organic compounds (VOCs), carbon monoxide (CO), oxides of nitrogen (NOx), particulate matter (PM) and of certain air pollutants that have been listed as "toxic substances" in Schedule 1 to CEPA 1999 (i.e., benzene, 1,3-butadiene, acetaldehyde, acrolein and respirable particulate matter less than or equal to 10 micrometers or "PM₁₀") from on-road vehicles and engines and will thereby protect our environment and health. The Regulations will also reduce emissions of formaldehyde, a substance proposed for addition to that Schedule.

The Regulations apply to persons in the business of manufacturing, distributing or importing on-road vehicles and engines for sale in Canada. They also set requirements for on-road vehicles and engines being imported by individuals.

Contribution of On-Road Vehicles to Air Pollution in Canada

The use of on-road vehicles is a large contributor of various air pollutants including VOCs, NOx, PM, CO and sulphur oxides (SOx), which are collectively referred to as Criteria Air Contaminants (CACs). Table 1 summarizes the mass and percentage contribution of on-road vehicles to the 1995 national emissions inventory of those pollutants.

Table 1 — On-Road Vehicle Contribution of Criteria Air Contaminants (1995)

	Mass Contribution (kilotonnes)	Percentage Contribution to National Inventory1
NOx	787	35.0
VOCs	564	21.4
CO	5 427	54.1
PM	42	4.3
SOx	51	1.9

¹ Relative to all sources excluding open sources (e.g., prescribed burning, dust from paved/unpaved roads)

As the table indicates, on-road vehicles are major contributors of NOx and VOC emissions into the ambient air. Both NOx and VOCs are involved in a series of complex reactions that result in the formation of ground-level ozone, which is a respiratory irritant and one of the major components of smog. Smog is a noxious mixture of air pollutants, consisting primarily of ground-level ozone and PM that can often be seen as a haze over urban centres. While on-road vehicles remain major contributors of CO (54 percent), their overall emissions have been considerably reduced as a result of progressively more stringent emission standards such that ambient concentrations of CO are generally well below applicable air quality objectives.

It is important to recognize that the data presented in the above table are for the year 1995. Environment Canada is in the process of updating national emission inventories for the year 2000. The mass and percentage contributions of emissions from on-road vehicles in the year 2000 are expected to be lower than in 1995 due to improved vehicle emission performance. Nonetheless, on- road vehicles are expected to remain large contributors of smog-forming emissions in Canada.

On-road vehicles also emit substances that have been determined to be toxic under CEPA 1999. Respirable particulate matter less than or equal to 10 micrometers (PM₁₀), benzene, 1,3-butadiene, acetaldehyde and acrolein are on CEPA's List of Toxic Substances (i.e., Schedule 1) and it has been proposed that formaldehyde be added to the List. These compounds, with the exception of PM₁₀, are species of hydrocarbons that are emitted as a result of incomplete combustion and on-road vehicles have been identified as large contributors to their release into the ambient air. Formaldehyde, acetaldehyde and 1,3-butadiene, in addition to their direct harmful effects on human health, play a role along with other reactive VOCs, in the formation of ground-level ozone.

Policy Framework

Air pollution is a serious problem in Canada, and the combustion of fuels to power on-road vehicles is a major contributor to this problem, particularly in urban areas. Air pollution has major impacts on the environment and the health of Canadians. Health studies indicate that air pollution contributes to numerous adverse health impacts, including premature mortality. While emissions of some pollutants have declined over the past two decades, air pollution continues to be one of Canada's highest environmental priorities and challenges.

In recent years, in co-operation with provincial and territorial governments, the federal government has been putting a comprehensive program in place to reduce emissions from vehicles and engines. Federal actions to date include the current vehicle emission standards, the existing Diesel Fuel Regulations, Benzene in Gasoline Regulations, Sulphur in Gasoline Regulations, the Gasoline and Gasoline Blend Dispensing Flow Rate Regulations and the recently adopted Sulphur in Diesel Fuel Regulations which replace the former Diesel Fuel Regulations. Provincial initiatives include: gasoline and diesel fuel regulations in British Columbia; requirements to reduce Reid vapour pressure during summer months in Ontario, Quebec and the Lower Fraser Valley (British Columbia); and inspection and maintenance programs for in-use vehicles in areas of British Columbia and Ontario. While these actions have resulted in significant improvements to the emission performance of on-road vehicles, there is a need to continue taking strong actions to provide a healthier environment.

Consequently, in the spring of 2000, the Minister of the Environment announced the federal government's integrated clean air strategy and reaffirmed the strategy on February 19, 2001 by announcing that the Government will invest $120 million in new measures to accelerate action on clean air. A key component of this strategy is the Federal Agenda on Cleaner Vehicles, Engines and Fuels, which was published by the Minister in the Canada Gazette, Part I, on February 17, 2001. The Agenda sets out a series of measures and actions to be developed and implemented over the next decade to reduce emissions from a broad range of vehicles and engines. The Regulations are an important element of the Agenda.

The Regulations will fulfill one of Canada's commitments under the Ozone Annex to the 1991 Canada-United States Air Quality Agreement (December 7, 2000) to "develop and implement... emission regulations under the Canadian Environmental Protection Act, 1999 for new on-road vehicles and engines to align with future U.S. national standards beginning with the 2004 model year, including the U.S. Tier 2 program for new light-duty vehicles, light-duty trucks and medium-duty passenger vehicles, and Phase 1 and Phase 2 programs for new heavy-duty vehicles and engines". Actions under the Ozone Annex will reduce the transboundary flow of ground-level ozone and its precursors (NOx and VOCs) between the United States and Canada and result in health and environmental benefits in both countries.

In June 2000, the Government of Canada, the provinces and the territories, except Quebec, adopted the Canada-wide Standards for Particulate Matter and Ozone. The Canada-wide Standards set ambient air quality concentration targets for ground-level ozone and fine particulate matter for the year 2010. The Regulations will contribute to meeting the established targets.

The Federal Agenda on Cleaner Vehicles, Engines and Fuels recognizes that vehicles, engines and fuels must be considered as an integrated system in order to effectively reduce emissions. Low levels of sulphur in both gasoline and diesel fuels are necessary to ensure the effective operation of advanced emission control technologies that will be used to meet the more stringent exhaust emission standards in the Regulations. The Sulphur in Gasoline Regulations, published in the Canada Gazette, Part II, on June 23, 1999, require sulphur levels in Canadian gasoline to average no more than 30 parts per million (p.p.m.) with a maximum of 80 p.p.m. beginning in 2005. The Sulphur in Diesel Fuel Regulations published in the Canada Gazette, Part II, on July 31, 2002, will require that sulphur levels in Canadian on-road diesel fuel be reduced to a maximum of 15 p.p.m. by June 2006. Those Regulations will ensure that sulphur levels in Canadian on-road fuels will be consistent with future U.S. levels.

The Canadian Motor Vehicle Industry

The automotive manufacturing industry is a key sector of the Canadian economy. It is the biggest contributor to Canada's manufacturing Gross Domestic Product (GDP) and the largest manufacturing employer. In 1999, it accounted for 15 percent of Canadian manufacturing GDP and directly employed 178,000 people. The industry produces light vehicles (including cars, vans, sport utility vehicles and pickup trucks); heavy-duty vehicles (including trucks, transit buses, school buses, inter-city buses and military vehicles); and a wide range of parts and systems used in the assembly of such vehicles.

The Canadian light vehicle assembly sector has 14 high-volume assembly plants and in 1999 produced 3 million vehicles or 19.7 percent of the total production of such vehicles under the North American Free Trade Agreement (NAFTA). It has shipments of $70.3 billion annually (1999) and exports about 90 percent of production. The light vehicle systems and parts manufacturing industry has more than 550 establishments with shipments of $33.3 billion and exports about 70 percent of production.

The heavy-duty vehicle sector has 13 relatively low-volume assembly plants producing buses, commercial trucks and truck conversions and produces 61,000 vehicles annually (1999). It has shipments of $2.9 billion annually (not including bus shipments) and exports 80 to 90 percent of its production. The vast majority of engines for use in heavy-duty vehicles are imported from the United States. There is one plant in Canada that manufactures heavy-duty engines for use in vehicles produced by the same company.

Taken as a whole, including manufacturing plants, vehicle dealerships and aftermarket retailing, the sector employs about 500,000 Canadians. The industry is also the largest in Canada in terms of investment, with new capital expenditures of $3.2 billion in 1999.

The Canadian automotive manufacturing sector is part of an integrated North American industry, originally nurtured by the 1965 Canada-United States Auto Pact and now operating under NAFTA. In 1996, 90 percent of Canadian automotive imports came from either the United States or Mexico while 97 percent of Canadian exports were directed to those two countries. Canada's automotive-related trade has steadily increased largely as a result of this continued integration.

The industry is globally competitive and in 1999, Canada ranked fourth in world vehicle production by volume. Canada maintains an overall automotive trade surplus with the rest of the world. In 1999, Canada exported $92.8 billion to the United States, the European Union, Mexico and Japan, and imported $72.1 billion from the same countries. Exports to other countries are increasing.

There are approximately 30,000 new on-road motorcycles sold annually in Canada, all manufactured in other countries. Some are manufactured in the United States, and large numbers are imported from Japan and Europe. Most motorcycle models are marketed in both Canada and the United States.

Canadian automotive manufacturing plays a major role in North American production. The Canadian vehicle market is similar to, but separate from, that of the United States and represents 8 percent of new vehicle sales in the two markets.

Harmonization

The U.S. EPA has led the world in establishing stringent national programs to control emissions from on-road vehicles and engines. Since 1988, Canada has aligned its national vehicle emission requirements with the U.S. EPA. This has been accomplished through a combination of regulations and memoranda of understanding with vehicle and engine manufacturers. Since Canadian/United States automotive manufacturing is highly integrated, harmonized vehicle emission standards have provided Canadians with major improvements in emission control at a low additional cost.

The emission certification process for on-road vehicles and engines is complex and requires significant resources on the part of manufacturers and government. Aligning Canada's emission standards and test procedures with those of the U.S. allows Canada to benefit from the U.S. EPA's emission certification program, and results in significant cost savings for Canadian companies, the federal government and Canadian consumers.

In 1996, Industry Canada prepared a report entitled "The Socio-Economic Impacts of Adopting Tighter Motor Vehicle Emission Standards and Fuel Requirements" for the Canadian Council of Ministers of the Environment's Task Force on Cleaner Vehicles and Fuels. This report states:

"It is extremely important to understand the relationship between a "harmonization with the U.S." scenario and a "disharmony" scenario. As a result of tighter requirements for enhanced vehicle emissions equipment in the United States, the costs of manufacturing new vehicles and their market price will increase in Canada. The production cost and price increase could be expected to be proportional on both sides of the border and will occur irrespective of actions taken in Canada. Harmonization with U.S. standards represents the least-cost alternative for Canada. If standards are established in Canada independent of changes in the United States, automobile manufacturers would be faced with relatively higher manufacturing costs to produce unique vehicles for the Canadian market. The costs of disharmony would arise from the disintegration of the North American automotive market that has developed since the signing of the Canada/U.S. Auto Pact 30 years ago. These costs fall into four categories: design and testing of specific models; plant logistics and scheduling; marketing and sales; and servicing. The higher costs would likely be passed on to consumers in the form of higher prices."

A New Regulatory Framework Under CEPA 1999

As noted earlier, the legislative authority for controlling on-road vehicle emissions was transferred from the Motor Vehicle Safety Act to CEPA 1999, effective March 31, 2000. Part 7, Division 5 of CEPA 1999, is based on the legislative scheme set out in the Motor Vehicle Safety Act. The Regulations establish a regulatory framework for on-road vehicle and engine emission standards under CEPA 1999 that have many administrative provisions similar to those of the Motor Vehicle Safety Regulations. This is designed to make the transition as straightforward as possible for the regulated industry. The following sections summarize the new regulatory framework under CEPA 1999.

National Emissions Mark

The provisions of Part 7, Division 5 of CEPA 1999 prohibit a company from applying a national emissions mark to a vehicle or engine or importing a vehicle or engine unless it complies with the applicable standards set out in the regulations. The Regulations establish the form of the national emissions mark, set out the manner of obtaining the Minister's authorization to use it and prescribe other related requirements. Companies are given the flexibility of affixing the mark on or adjacent to either the U.S. emission control information label or the statement of compliance label required under the Motor Vehicle Safety Regulations.

Prescribed Classes of Vehicles and Engines

The Regulations specify the classes of on-road vehicles and engines that are subject to the emission requirements. These classes are aligned with corresponding U.S. EPA rules and are "light-duty vehicles", "light-duty trucks", "heavy-duty vehicles" and "motorcycles", as in the past. Two new classes, "medium-duty passenger vehicles" and "complete heavy-duty vehicles" are added as part of the regulatory framework. Under the Regulations, heavy-duty engines will be directly regulated for the first time whereas under the Motor Vehicle Safety Act, these engines were regulated only when installed in heavy-duty vehicles.

The prescribed classes of vehicles and engines are summarized in Table 2. In the Regulations, vehicle classes are defined based on a number of characteristic features, with the primary one being "gross vehicle weight rating" (GVWR), which is the maximum design loaded weight of the vehicle.

Table 2 — Prescribed Classes of Vehicles and Engines

Class	GVWR, kg (lb.)
Motorcycle	<= 793 kg (1 749)
Light-Duty Vehicle	<= 3 856 (8 500)
Light-Duty Truck	<= 3 856 (8 500)
light light-duty truck	<= 2 722 (6 000)
heavy light-duty truck	>2 722 - 3 856 (>6 000 - 8 500)
Medium-Duty Passenger Vehicle	3 856 - <4 536 (8 500 - <10 000)
Complete Heavy-Duty Vehicle (Otto-cycle Only) (see footnote 2)	3 856 - 6 350 (8 500 - 14 000)
Heavy-Duty Vehicle/Heavy-Duty Engine	>3 856 (8 500)
light heavy-duty engine	<8 847 (19 500)
medium heavy-duty engine	8 847 - 1 4 971 (19 500 - 33 000)
heavy heavy-duty engine	>1 4 971 (33 000)

The new "medium-duty passenger vehicle" class is designed to subject heavier passenger-type vehicles, such as vans and sport utility vehicles, to the same set of emission standards as light-duty vehicles instead of the heavy-duty vehicle emission standards. "Complete heavy-duty vehicle" is similarly a new subclass of heavy-duty vehicle that will be subject to standards and testing procedures resembling those for light-duty vehicles. These types of vehicles are newly subject to chassis-based standards defined in terms of emissions per unit distance (g/km or g/mile) while heavy-duty engine-based standards are expressed in terms of emissions per unit of work (g/MJ or g/bhp-hr).

The Regulations do not apply to on-road vehicles and engines that are being exported outside of Canada; those that are solely for purposes of exhibition, demonstration, evaluation or testing, with the exception of a required declaration; or those that are 15 years old or older.

Technical Emission Standards

Canada's current regulated emission standards are specified in the Regulations Amending the Motor Vehicle Safety Regulations (Vehicle Emissions) published in the Canada Gazette, Part II, Vol. 131, No. 17, August 20, 1997. The following sections summarize the new technical standards for the various classes of vehicles and engines that will be implemented through the Regulations by aligning with updated U.S. emission standards for the 2004 and later model years. Accordingly, any reference to "standards" in the context of the Regulations refers to regulatory standards.

The Regulations set out technical standards for vehicles and engines respecting exhaust, evaporative and crankcase emissions, on-board diagnostic systems and other specifications related to emission control systems. These technical standards correspond to those of the U.S. EPA and sections of the U.S. Code of Federal Regulations (see footnote 3)  and are incorporated by reference to ensure that the specified standards are identical in both countries. This continues the past approach under the Motor Vehicle Safety Act.

The Regulations ensure that vehicles and engines meeting new more stringent exhaust emission standards will begin entering the Canadian market in the 2004 model year and will be phased-in over the 2004 to 2010 model year period. The phase-in schedules vary by standard and by vehicle class and can be summarized as follows: Tier 2 standards for light-duty vehicles and light light- duty trucks (2004-2007); Tier 2 standards for heavy light-duty trucks and medium-duty passenger vehicles (2004-2009); Phase 1 (2005) and Phase 2 (2008-2009) standards for complete heavy-duty vehicles; and Phase 1 (2004-2006) and Phase 2 (2007-2010) standards for heavy-duty engines.

During any phase-in period, every model of vehicle or engine that is certified by the U.S. EPA, and that is sold concurrently in Canada and the United States, is required to meet the same emission standards in Canada as in the United States. Canadian vehicles will therefore have progressively improved emission performance without specifying interim phase-in percentages in the Regulations. The final phased-in standards apply to all vehicles and engines sold in Canada, in the model year that they apply, to 100 percent of a class of vehicles or engines in the United States.

Vehicles and engines are required to comply with emission standards for a defined "full useful life". The full useful life is specified in years and as accumulated mileage, whichever comes first, and varies depending on the class or subclass of vehicles or engines. Under the Regulations, the full useful life for light-duty vehicles and light light-duty trucks is extended from the current 10 years/160 000 km to 10 years/192 000 km. The full useful life for the new classes of medium-duty passenger vehicles and complete heavy-duty vehicles is established to be 11 years/ 192 000 km, equivalent to the current requirement for heavy light-duty trucks.

The distance component of the full useful life remains the same for heavy duty vehicles and engines, except for heavy heavy-duty diesel engines where it is extended from 467 000 km to 700 000 km. While the time component for some heavy-duty emission standards is currently eight years, it will be set at ten years for all such standards. In the case of motorcycles, the full useful life remains at up to five years/30 000 km, depending on the motorcycle's engine displacement.

(1) Exhaust Emission Standards

(a) Light-Duty Vehicles, Light-Duty Trucks and Medium-Duty Passenger Vehicles

The new exhaust emission standards using the conventional Federal Test Procedure align with the future U.S. standards, commonly referred to as the U.S. Tier 2 emission standards. Manufacturers certify every vehicle to one of eleven "bins", each of which contains standards for NOx, non-methane organic gases (NMOG), CO, formaldehyde and PM as presented in Table 3. Formaldehyde and NMOG are newly regulated under the Regulations, although NMOG limits effectively replace previous non-methane hydrocarbon (NMHC) standards. The manufacturers' choices of bin within which to certify each vehicle is limited by the obligation to comply with the fleet average NOx emissions standards described in the following section.

Table 3 — Light-duty Vehicle, Light-duty Truck and Medium-duty Passenger Vehicle Full Useful Life Exhaust Emission Standards, g/mile¹

Bin	NOx	NMOG	CO	Formaldehyde	PM
11	0.9	0.280	7.3	0.032	0.12
10	0.6	0.156/0.230	4.2/6.4	0.018/0.027	0.08
9	0.3	0.090/0.180	4.2	0.018	0.06
8	0.20	0.125/0.156	4.2	0.018	0.02
7	0.15	0.090	4.2	0.018	0.02
6	0.10	0.090	4.2	0.018	0.01
5	0.07	0.090	4.2	0.018	0.01
4	0.04	0.070	2.1	0.011	0.01
3	0.03	0.055	2.1	0.011	0.01
2	0.02	0.010	2.1	0.004	0.01
1	0.00	0.000	0.0	0.000	0.00

¹ The equivalent limits in units of g/km are obtained by multiplying the g/mile value by 0.621

Bins 9 and 10 are only available during the 2004 to 2006 model years for light-duty vehicles and light light-duty trucks and up to and including 2008 for heavy light-duty trucks and medium-duty passenger vehicles. Bins 8 through 10 contain additional temporary, less stringent standards for certain pollutants and for certain vehicles. Bin 11 is only for medium-duty passenger vehicles and is available up to and including the 2008 model year. Beginning in the 2009 model year, applicable standards are limited to bins 1 to 8 for all light-duty vehicles, light-duty trucks and medium-duty passenger vehicles.

Fleet Average NOx Emission Standards

The Regulations establish fleet average NOx emission standards for the 2004 and later model years. The objective of the fleet averaging provisions is to create a regulatory framework that will achieve a Canadian vehicle fleet emission performance comparable with the U.S.

Each new light-duty vehicle, light-duty truck and medium-duty passenger vehicle is required to be certified to a "bin" containing specific emission standards for NOx and other pollutants. Based on vehicle sales from each "bin", a company calculates a sales-weighted "fleet average NOx value" for each model year. The emission bins, fleet average NOx emission standards, timing of phase-ins and methods of calculating fleet average NOx values are consistent with the U.S. Tier 2 emission program.

When the standards are fully phased in (i.e., in 2009), a company's combined fleet of light-duty vehicles, light-duty trucks and medium-duty passenger vehicles will be subject to a single fleet average NOx emission standard of 0.07 g/mile, corresponding to the NOx standard in bin 5. A company can, in any model year, generate NOx emission credits by achieving a fleet average NOx value that is lower than the standard. These credits can be used in a subsequent model year to offset a NOx emissions deficit (the fleet average NOx value exceeds the standard). A deficit must be offset no later than the third model year following the year in which it is incurred. NOx emission credits may also be transferred to another company. There are provisions identical with the United States, to promote the early introduction of cleaner vehicles or more durable emission control systems. Additional NOx emission credits can be earned by, for example, certifying vehicles to bins 1 or 2 during the model years 2004 through 2005 or by certifying vehicles to an extended useful life of 15 years/ 240 000 km.

During the phase-in period leading up to the final fleet average NOx standard in the 2009 model year, the Regulations specify:

• (a) for light-duty vehicles and light light-duty trucks, a progressively tightening fleet average NOx standard based on the U.S. phase-in for model years 2004 to 2006 culminating in 2007 in the final fleet average standard specified above for 2009 (i.e., 0.07 g/mile); and
  (b) for heavy light-duty trucks and medium-duty passenger vehicles, a progressively tightening fleet average NOx standard based on the U.S. phase-in for model years 2004 to 2008 culminating in the final fleet average standard in 2009 (i.e., 0.07 g/mile).

Fleet Average Election — U.S. Certified Vehicles sold in Canada and the U.S.

Where a vehicle sold in Canada has an equivalent vehicle sold in the U.S., the Regulations require that the Canadian vehicle comply with the same emission standards as the equivalent vehicle sold in the U.S. Accordingly, a company's fleet average value in Canada and the U.S., in respect of the vehicles that it sells concurrently in both countries, will be similar but not identical. The Regulations provide that a company may elect to exclude from mandatory compliance with the fleet average standards its group of U.S-certified vehicles that are sold in Canada and the U.S. concurrently. Provisions are included to clarify the intent of the Regulations to accept U.S. certification as applying to a vehicle marketed in Canada with a different name or with slightly different specifications than an otherwise similar vehicle sold in the U.S.

A company that chooses to make the election described above in a model year is subject to the following restrictions:

1. The company cannot include vehicles in the excluded group if the total number of vehicles sold in Canada exceeds the total number of vehicles sold in the U.S. under the same certificate of conformity in that model year. However, this restriction does not apply to vehicles that conform to a full useful life emission bin having a NOx standard that is equal to or less than the applicable fleet average NOx standard for that model year.

2. The company must include all eligible vehicles in that group. Thus a company could not choose to exempt only a portion of its eligible vehicles while allowing others to remain in the portion of their fleet subject to the averaging requirements.

3. The company cannot generate any emission credits or transfer any emission credits to another company in that model year and forfeits any emission credits that it may have obtained in previous model years.

In all cases, the Regulations require companies to report their fleet averages and any emission credits or deficits at the end of each model year. Environment Canada intends to make a report available to the public concerning this information.

Other Exhaust Emission Standards

The Regulations include additional standards designed to control exhaust emissions from light-duty vehicles, light-duty trucks and medium-duty passenger vehicles under modes of operation that are not covered by the conventional Federal Test Procedure, such as:

•  aggressive driving (high rates of speed or acceleration), and the use of air conditioning during high ambient temperatures through the Supplemental Federal Test Procedures;

•  cold weather operation through the cold temperature carbon monoxide emission standard applicable to gasoline-fuelled vehicles;

•  highway driving conditions through the Highway NOx emissions standards for light-duty vehicles and light-duty trucks as measured over the Federal Highway Fuel Economy Test; and

•  conditions that may be encountered during the types of tests used in inspection and maintenance programs through the Certification Short Test exhaust emission standards for gasoline-fuelled light-duty vehicles, light-duty trucks and medium-duty passenger vehicles (i.e., this standard addresses the compatibility of emission control systems with the types of emission tests used in state or provincial vehicle inspection and maintenance programs).

(b) Complete Heavy-Duty Vehicles

The new chassis-based exhaust emission standards and phase-in schedules for complete heavy-duty vehicles are summarized in Table 4.

Table 4 — Complete Heavy-Duty Vehicle Exhaust Emission Standards, g/mile¹

	GVWR kg (lb.)	NOx	NMOG/ NMHC	formaldehyde	CO	PM
Phase 1 (2005)	3 856-4 536 (8 500-10 000)	0.9	0.2802	----	7.3	----
	4 536-6 350 (10 000-14 000)	1.0	0.3302	----	8.1	----
Phase 2 (2008-2009)	3 856-4 536 (8 500-10 000)	0.2	0.1953	0.032	7.3	0.02
	4 536-6 350 (10 000-14 000)	0.4	0.2303	0.040	8.1	0.02

¹ The equivalent limits in units of g/km are obtained by multiplying the g/mile value by 0.621

² Emission standard specified as NMOG. "Non-methane hydrocarbons" (NMHC) or "total hydrocarbons" (THC) measurements are also accepted

³ Emission standard specified as NMHC

(c) Heavy-Duty Engines

The new exhaust emission standards and phase-in schedules for diesel heavy-duty engines, other than those used in "medium-duty passenger vehicles", are summarized in Table 5.

Table 5 — Exhaust Emission Standards for Diesel Heavy-Duty Engines, g/bhp-hr (g/MJ)

	NOx	NMHC	NOx+NMHC	CO	PM
Phase 1 (2004)	-----	-----	2.4 (0.89)1	15.5 (5.77)	0.10 (0.037)2
Phase 2 (2007-2010)	0.2 (0.075)	0.14 (0.052)	-----	15.5 (5.77)	0.0037 (0.01)

¹ Emission standard can increase to 2.5 g/bhp-hr (0.93 g/MJ) if NMHC <= 0.5 g/bhp-hr (0. 19 g/MJ)

² For urban buses, the standard is 0.05 g/bhp-hr (0.019 g/MJ) for certification testing and 0.07 g/bhp-hr (0.026 g/MJ) for in-use testing

The new exhaust emission standards and phase-in schedules for Otto-cycle heavy-duty engines, other than those used in medium-duty passenger vehicles or complete heavy-duty vehicles are summarized in Table 6.

Table 6 — Exhaust Emission Standards for Otto-Cycle Heavy-Duty Engines, g/bhp-hr (g/MJ)

	GVWR kg (lb.)	NOx	NMHC	NOx+ NMHC	CO	PM
Current (2004)	<=6 350 (14 000)	4.0 (1.49)	1.1 (0.41) 1	------	14.4 (5.36)	------
	> 6 350 (14 000)	4.0 (1.49)	1.9 (0.71) 1	------	37.1 (13.8)
Phase 1 (2005-2006)	<= 6 350 (14 000)	-----	-----	1.0 (0.37)	14.4 (5.36)	------
	> 6 350 (14 000)	-----		1.0 (0.37)	37.1 (13.8)	------
Phase 2 (2008-2009)	> 3 856 (8 500)	0.2 (0.075)	0.14 (0.052)	-----	14.4 (5.36)	0.01 (0.0037)

¹ Emission standard specified in total hydrocarbons and is for engines fuelled with gasoline or liquefied petroleum gas

The Phase 1 and 2 programs will retain an engine-based approach for incomplete Otto-cycle vehicles with a GVWR of up to 6 350 kg (14 000 lb.) and all Otto-cycle vehicles with a GVWR above 6 350 kg (14 000 lb.). The Phase 2 Otto-cycle standards for NOx, NMHC and PM are identical to those for diesel-fuelled vehicles and engines shown in Table 5.

Other Exhaust Emission Standards for Heavy-Duty Engines

The Regulations include additional standards designed to control exhaust emissions under modes of operation not covered by the Federal Test Procedure for heavy-duty engines, such as:

•  for the opacity of smoke emitted from diesel heavy-duty engines during engine acceleration and lugging modes of operation; and

•  beginning in the 2007 model year, a steady-state "Supplemental Emission Test" and, for in-use engines, a "Not-to-Exceed" test procedure both designed to more closely represent the range of real-world driving conditions of diesel heavy-duty vehicles.

(d) Motorcycles

The exhaust emission limits for total hydrocarbons and CO from motorcycles are 5.0 g/km (8.0 g/mile) and 12 g/km (19 g/mile), respectively, which are aligned with current U.S. federal rules. The Regulations transfer these standards from the Motor Vehicle Safety Act to the new regulatory framework under CEPA 1999. In August 2002, the U.S. EPA published a notice of proposed rulemaking to phase in more stringent emission standards for on-road motorcycles beginning in the 2006 model year. To the extent possible, the Regulations are structured to maintain alignment with the U.S. standards as they are updated. The Department plans to review the final U.S. rule and take any necessary steps to ensure appropriate alignment with U.S. standards. This could include proposing amendments to the Regulations.

(2) Evaporative Emission Standards

Evaporative emissions are hydrocarbon emissions resulting from the evaporation of fuel and consist of the following main elements: (1) "resting losses" which are the combination of diurnal emissions that occur as the fuel is heated with the temperature change that occurs over the course of a day and hot soak emissions that occur after a vehicle trip while the vehicle is still warm; (2) "running losses" which occur while the vehicle is running and result from the heating of fuel; (3) "refuelling losses" which occur as the fuel vapour in the fuel tank is displaced by the inflow of liquid fuel during the refuelling process; and (4) "fuel spitback" which occurs when liquid fuel spills from the filler inlet during refuelling process.

Under the Regulations, vehicles other than diesel heavy-duty vehicles will be required to meet more stringent standards for controlling diurnal and hot soak evaporative emissions. These new standards generally represent a 50 percent improvement in the control of these emissions relative to current standards and will be phased in over the 2004 to 2007 model years for light-duty vehicles and light light-duty trucks and over the 2008 to 2009 model years for heavy light-duty trucks, medium-duty passenger vehicles and Otto-cycle heavy-duty vehicles.

The Regulations will introduce new refuelling emission standards for medium-duty passenger vehicles and complete heavy-duty vehicles that are the same as those applicable to heavy light-duty trucks and which require a capture efficiency of about 95 percent. In the case of medium-duty passenger vehicles, the refuelling emission standards are phased in beginning in the 2004 model year with full compliance in the 2006 model year. For complete heavy-duty vehicles, the phase-in of refuelling emission standards begins in the 2005 model year with full compliance in 2006.

(3) Crankcase Emission Standards

The Regulations require that no crankcase emissions be discharged from most prescribed classes of vehicles and engines, consistent with the current regulations. Beginning in the 2007 model year, a long-standing exception applying to turbocharged heavy-duty diesel engines will be effectively removed. There is an allowance that crankcase emissions from turbocharged heavy-duty diesel engines may continue to be discharged to the atmosphere, but only if the combined total of the crankcase emissions and the other exhaust emissions are below the applicable exhaust emission standards. Despite this allowance, the U.S. EPA has indicated that manufacturers will likely have to close the crankcases of all of their engines by routing the crankcase emissions into the engine intake or into the exhaust upstream of the exhaust emission control devices in order to meet the stringent exhaust emission standards.

(4) Standards for On-board Diagnostic Systems

On-board diagnostic (OBD) systems are designed to monitor emission-related components for deterioration or malfunction that would cause emissions to increase beyond specified thresholds. They incorporate indicator lights to alert vehicle operators of deterioration or malfunction. The systems are required to store fault codes to assist service technicians in diagnosis and repair.

All light-duty vehicles and light-duty trucks are currently required to be equipped with OBD systems. The Regulations will phase in new OBD requirements for medium-duty passenger vehicles, complete heavy-duty vehicles and heavy-duty engines intended for use in vehicles with a GVWR of up to 6 350 kg (14 000 lb.). The implementation schedule for the new OBD requirements depends on the class of vehicle and engine and covers the 2004 to 2008 model year period.

(5) Standards for Emission Control Systems

There are general provisions in the Regulations concerning the performance of emission control systems, including a prohibition on the use of defeat devices. A defeat device is any element of design that reduces the effectiveness of the emission control system under conditions of normal vehicle operation that are not substantially covered by the certification tests. Strategies necessary to protect the vehicle against damage or to start the engine are not considered to be defeat devices.

Record-Keeping, Reporting and other Administrative Requirements

In addition to the technical standards described in the previous section, the Regulations include several administrative-type provisions that are necessary to operate and enforce the legislative scheme that is set out under Part 7, Division 5 of CEPA 1999. These include provisions that specify:

•  requirements in respect of the national emissions mark;

•  the form of the records and evidence of conformity that companies must maintain, the time the records must be retained and the deadlines for their submission if requested by the Minister;

•  the reporting requirements related to the fleet-average NOx emission standards, including associated notices of election;

•  the information to be submitted by a company in support of an application for exemption from compliance with applicable standards pursuant to section 156 of CEPA 1999;

•  the information to be included in a notice of defect issued by a company pursuant to section 157 of CEPA 1999 and in related reports to the Minister;

•  the written instructions respecting emission-related maintenance that must be furnished to the first retail purchaser of every vehicle;

•  the emission-related information that must be included on labels on vehicles or engines;

•  the information that must be provided when a person imports a prescribed vehicle or engine into Canada; and

•  the rental rate paid by the Minister to a company that makes available a test vehicle or engine in accordance with section 159 of CEPA 1999.

Alternatives

Status Quo

On-road vehicles and engines continue to be major contributors to air pollution despite the reductions in vehicle emissions achieved over the last three decades. Many Canadians live in areas where air pollution from vehicle use has adverse impacts on their health. The technology to make further gains in emission control exists or is in the final stages of development. The option of retaining the current standards does not take advantage of the opportunity for continued reductions in vehicle emissions aligned with the already announced U.S. programs.

Voluntary vs. Regulatory Approach

Non-regulatory emission control measures have been successfully used in the past in conjunction with a regulatory framework and in harmony with U.S. federal emission programs. Environment Canada has a Memorandum of Understanding in place with the Canadian Vehicle Manufacturers' Association (CVMA), the Association of International Automobile Manufacturers of Canada (AIAMC) and their member companies to provide for the sale of low-emission light-duty vehicles and light-duty trucks in the 2001 to 2003 model years. The vehicle industry supports voluntary harmonization of Canadian products with those of the U.S. through Memoranda of Understanding with the Canadian government.

Past and current memoranda of understanding were implemented as interim measures to expedite compliance with updated U.S. emission standards pending the development of appropriate Canadian legislation or regulations. Environment Canada believes these voluntary programs to be successful and expects that they may continue to play an important role as a complement to a regulatory framework.

While the potential benefits of industry's widespread and continuous voluntary offering of U.S. certified vehicles and engines in Canada is recognized, Canada has had emission regulations since 1971 and most industrialized countries now have regulations. Given the importance of environmental protection, Environment Canada believes that a regulatory framework continues to be appropriate for controlling emissions from on-road vehicles and engines.

The new regulatory program provides the flexibility necessary for manufacturers to operate in a competitive North American market together with enforceability that offers a high level of environmental protection for Canadians. The Regulations ensure that no single company is allowed to deviate from established standards and put other companies under competitive pressure to do likewise. Finally, the approach is more in line with the expectations of Canadians. A survey of public opinion on the environment indicated that 62 percent of Canadians have a high level of concern with air quality and that Canadians are more inclined to favour a regulatory approach to reducing pollution over other alternatives (Environics International Ltd., 2001).

Regulations with Unique Canadian Standards

In 1995, the Canadian Council of Ministers of the Environment (CCME) Task Force on Cleaner Vehicles and Fuels reviewed various options for a national approach to new vehicle emission standards in Canada, including the adoption of California emission standards. In its evaluation of possible control options for new vehicles, the Task Force found that continuing to align Canada's national vehicle emission standards with U.S. federal standards represented the preferred approach as it would provide Canada with the most effective available emission control technology to reduce emissions in a cost-effective way.

As noted above in the section "Harmonization", there is a strong rationale for Canada to continue aligning its emission standards for on-road vehicles and engines with those of the United States. Accordingly, the option of adopting standards that are different from U.S. federal emission standards was rejected.

Regulations Aligned with U.S. Rules

Implementing a complex U.S. regulatory scheme in an identical manner for the smaller Canadian market could result in unnecessary restrictions for the Canadian industry. Accordingly, alternative approaches are established for elements of the U.S. phase-in and fleet averaging standards.

Environment Canada believes that there is limited value in requiring compliance with all parts of the U.S. regulatory scheme that are designed to provide short-term flexibility during transition to compliance with tighter standards. The Regulations avoid prescribing exact phase-in percentages or optional averaging standards where they would have little effect on emission performance in Canada. The Regulations continue the current approach of requiring vehicles to meet the same emission standards to which they are certified for sale in the United States. This will result, during transition periods, in comparable emission performance on both sides of the border.

Light-duty vehicles, light-duty trucks and medium-duty passenger vehicles make up the majority of vehicles sold and used in Canada, and are supplied by global companies from plants all over the world. The U.S. Tier 2 program for these vehicles creates eight long-term and three temporary optional standards ("bins") that are controlled by a requirement for companies to meet an annual fleet average NOx emission standard. Given the very large numbers of light vehicles in Canada and that on-road vehicles are major contributors to air pollution, Environment Canada believes that an appropriate regulatory framework is necessary to remove the opportunity for individual companies to systematically sell a significant number of higher emitting vehicles in Canada than would be allowed in the United States. This is important to provide assurance that the long-term environmental performance of the Canadian fleet will be comparable with that of the United States. Environment Canada recognizes, however, that the Canadian market is not identical to the U.S. market and that a Canadian fleet average standard identical with the U.S. fleet average could present a more restrictive standard when applied to our smaller market.

The proposed On-Road Vehicle and Engine Emission Regulations published in the Canada Gazette, Part I, on March 30, 2002, included an option for companies to meet a Canadian fleet average NOx emission standard set at bin 6, rather than the U.S. bin 5 but without any banking or trading of emission credits and without the opportunity to carry forward an emissions deficit. When the final standards are in effect in 2009 this would have resulted in a regulated maximum Canadian fleet average Nox emission standard of 0.10 g/mile compared with the U.S. standard of 0.07 g/mile. All other emission standards (CO, NMOG, PM and formaldehyde) are the same in bins 5 and 6. Environment Canada believes that this option would have provided flexibility to provide for legitimate market differences without compromising the overall emission performance of the Canadian fleet.

As described in the "Consultation" section, the Department received several comments during the public consultation period expressing various concerns with the proposed unique Canadian fleet averaging option. Consequently, the Regulations implement a modified approach to achieving the objective of ensuring that the environmental performance of the Canadian fleet will be comparable with that of the United States.

The Regulations establish fleet average NOx standards aligned with those of the U.S. with corresponding provisions for credits, banking and trading beginning in the 2004 model year, as in the Regulations. For the 2009 and later model years, the fleet average NOx standard for a company's fleet of light-duty vehicles, light-duty trucks and medium-duty passenger vehicles is 0.07 g/mile. Instead of establishing a higher unique Canadian fleet average NOx standard of 0.10 g/mile to account for legitimate market differences as was proposed in the Canada Gazette, Part I, the Regulations specifically recognize U.S. certified vehicles that are sold concurrently in both countries. The Regulations allow companies to exclude these vehicles from the mandatory fleet average standard.

The vast majority of vehicles sold in Canada are vehicles designed for and marketed in the U.S. The Department believes that a U.S. fleet designed to meet the U.S. fleet average standard (i.e., 0.07 g/mile in 2009) will, when sold concurrently in Canada, yield a similar but not identical result in Canada. An analysis conducted by Environment Canada (see footnote 4)  indicates that, even under extreme scenarios, the variations between Canadian and U.S. fleet averages are expected to be small. The Canadian overall fleet average may be marginally better than the U.S. because Canadians tend to prefer smaller vehicles, most of which are sold in high volume and expected to be certified with lower emissions.

The Regulations contain provisions that act as safeguards towards ensuring a Canadian fleet emission performance comparable to the U.S. For example, any vehicle that is sold in Canada and the United States must meet the same emission standards (i.e., be certified to the same bin) in Canada as in the U.S. A company cannot include vehicles in the group not subject to a fleet average standard if the total number of equivalent vehicles sold in Canada exceeds the total number of such vehicles sold in the U.S. This ensures that a company cannot exclude vehicles that are certified to higher bins from being subject to a fleet average NOx standard in Canada by selling an insignificant number of such vehicles in the U.S.

The Regulations provide that a company may only generate emission credits in a model year if the average NOx value for its entire Canadian fleet is lower than the applicable fleet average emission standard. In any model year that a company elects to not subject its group of U.S-certified vehicles that are sold concurrently in Canada and the U.S. from the fleet average standards, the company forfeits any emission credits that it may have obtained in previous model years. This prevents companies from selectively benefiting from the emission credit program on a year-by-year basis.

Taking into account the integrated nature of the North American vehicle manufacturing industry and the expected composition of the Canadian fleet, the Department believes that the fleet averaging provisions are structured in a manner that will deliver fleet average emissions comparable to the U.S. while minimizing the regulatory burden on companies and allowing companies to market vehicles in Canada independently from the U.S.

Benefits and Costs

Benefits

Emission Reductions

The Regulations introduce significantly more stringent emission standards for on road-vehicles and engines. For example, on a per-vehicle basis the allowable levels of smog-forming emissions such as NOx, VOCs and PM from new heavy light-duty trucks (i.e., large pick-up trucks, vans and sport utility vehicles) will on average be reduced by 95, 84 and 92 percent respectively, relative to current regulated limits. On the same basis, emissions from heavy duty diesel engines will be reduced by 95, 89 and 90 percent respectively.

As the new cleaner vehicles and engines enter the Canadian market, the Regulations will result in considerable reductions of air pollutants emitted from the in-use fleet of on-road vehicles. The reductions in emissions of Criteria Air Contaminants were estimated in a study conducted for Environment Canada by SENES Consultants Limited and Air Improvement Resource, Inc. The study, entitled "Updated Estimate of Canadian On-Road Vehicle Emissions for the Years 1995-2020 (revised December, 2001)" forecasts emissions of VOCs, NOx, CO, PM₁₀ and SO₂ from on-road vehicles over the years 2000 to 2020. Emission forecasts were completed using modified versions of the U.S. EPA models, MOBILE 5C for VOC and NOx, PART5C for PM and SO₂ and the "Serious Area CO Model", all with Canadian data.

The emission reductions forecast are relative to a "base case" which reflects existing regulations and voluntary agreements. The main elements of the base case are:

•  past and current motor vehicle emission regulations under the Motor Vehicle Safety Act;

•  interim low-emission vehicle memorandum of understanding for 2001 to 2003 model year light-duty vehicles and light-duty trucks;

•  memorandum of understanding and regulations that limit the sulphur content of on-road diesel fuel to 500 p.p.m. until 2006;

•  regulations to limit the average level of sulphur in Canadian gasoline to 30 p.p.m. in 2005, with an interim level of 150 p.p.m. beginning in 2002;

•  regulations to control the benzene content of gasoline to less than one percent;

•  provincial regulations and standards that limit Reid Vapour Pressure in gasoline; and

•  inspection and maintenance programs in effect in the Lower Fraser Valley of British Columbia and the Ontario portion of Windsor-Quebec City Corridor.

The base case provides ongoing emission reductions as new vehicles replace older, more polluting ones through to the 2010 to 2015 time frame. However, the projected increase in vehicle use (i.e., total distance traveled) opposes the benefits such that further gains in the longer term are only possible with new emission standards.

The SENES study indicates that the Regulations combined with the technology-enabling Sulphur in Diesel Fuel Regulations will result in progressively greater annual emission reductions in the 2004 to 2020 period. For the year 2020, the associated emission reductions in NOx, VOCs, CO and PM₁₀, relative to the base case, are summarized in Table 7.

Table 7— Emission Reductions of NOx, VOCs, CO and PM₁₀ in 2020

Pollutant	Base Case Emissions in 2020 (tonnes)	Emissions in 2020 with Regulations (tonnes)	Percentage Reduction in 2020 (with Regulations vs. Base Case)
NOx1	495 672	132 494	73
VOCs	169 679	146 469	14
CO	1 909 649	1 465 916	23
PM10	11 526	4 129	64

¹ Based on an erratum issued by SENES to their report of December, 2001. The erratum corrected an underestimation of NOx emissions, which is less than 1% in the year 2020

The Regulations will also result in reductions of the following substances on the List of Toxic Substances, Schedule 1 of CEPA 1999 and which are constituents of hydrocarbon emissions from motor vehicles: acrolein, acetaldehyde, benzene, 1,3-butadiene and formaldehyde (i.e., proposed for addition to the List). Although specific limits are not included for most of these substances, the standards will have the effect of reducing their emissions through the application of improved emission control technologies. The U.S. EPA indicates that "technologies used to reduce exhaust hydrocarbons also reduce the hydrocarbon species listed as MSATs [Mobile Source Air Toxics]. This is true whether control is achieved through engine or component modifications, add-on devices, or the use of aftertreatment devices such as oxidation or three-way catalysts. We are not aware of vehicle or engine technologies that selectively reduce MSATs without reducing other hydrocarbons to a similar degree" (see footnote 5) .

In a separate study conducted for Environment Canada, SENES Consultants Limited and Air Improvement Resource, Inc. used the U.S. EPA MOBTOX model to estimate the emission reductions of toxic hydrocarbons. Based on the results of the study, the Regulations combined with the technology-enabling Sulphur in Diesel Fuel Regulations will result in progressively greater annual emission reductions in the 2004 to 2020 period. For the year 2020, the estimated emission reductions relative to the base case are summarized in Table 8.

Table 8 — Emission Reductions of Toxic Hydrocarbons in 2020

Pollutant	Base Case Emissions in 2020 (tonnes)	Emissions in 2020 with Regulations (tonnes)	Percentage Reduction in 2020(with Regulations vs. Base Case)
acrolein	175	125	29
acetaldehyde	906	546	40
benzene	3 771	3 256	14
1,3-butadiene	688	568	17
formaldehyde	2 338	1 374	41

Health and Environmental Benefits

The emission reductions described in the previous sections will generate multiple health and environmental benefits. Health benefits can be described in terms of damages or health effects avoided. Table 9 summarizes a selection of health effects and their associated pollutants. (see footnote 6) 

Table 9 — Selected Health Effects and their Associated Air Pollutants

Health Effects	Pollutant
Premature mortality	PM
Hospital admissions	PM, VOCs + NOx
Emergency room visits	PM, VOCs + NOx
New cases of chronic bronchitis	PM
Respiratory illness in children	PM
Asthma symptom days	PM
Restricted activity days	PM, VOCs + NOx
Acute respiratory symptoms	PM, VOCs + NOx

The above list is not exhaustive. The combination of PM, VOCs, NOx and CO also result in adverse health effects but the valuation of the benefits from reducing these pollutants in combination is very difficult. There are also direct health benefits from reductions in toxic substances.

In its regulatory impact analysis (see footnote 7) , the U.S. EPA estimates the total annual U.S. benefits for the year 2030 resulting from the Final Tier 2/Gasoline Sulphur Rule to be US$25.2 billion (in 1997 dollars), 93 percent of which relate to avoided premature mortality. The environmental benefits that could be estimated are in the areas of recreational visibility and agricultural crop damages, which accounted for about 2 percent (or US$590 million) of the total benefits.

The U.S. EPA estimates total U.S. annual benefits of the Final Heavy-Duty Engine/Diesel Fuel Rule (see footnote 8)  at US$70.4 billion (in 1999 dollars), of which the benefits from avoided premature mortality accounted for 83 percent. Environmental benefits in recreational visibility and avoided agricultural crop damages account for about 6 percent (or US$4.4 billion) of the total benefits. These benefits are thought to be underestimated due to the extreme difficulty of valuing potentially significant health and environmental benefits. (see footnote 9) 

Although the magnitude of the benefits attributable to the Regulations in Canada would vary proportionately with those of the United States as a result of differences in population, the types of benefits for Canada would be similar in nature to those mentioned above for the United States. While emission reductions could be achieved by the industry's widespread and continuous voluntary offering of U.S. certified products in Canada, the Regulations provide a framework to ensure that Canada will achieve significant emission reductions, and associated reductions in health and environmental impacts.

Other Benefits

The fleet average NOx standards for light-duty vehicles, light-duty trucks and medium-duty passenger vehicles provide other benefits. They will ensure that all manufacturers in the competitive Canadian market are required to comply with the same standards and provide the same incentives as in the United States to market vehicles with advanced emission control technology. The structure of the Canadian fleet averaging provisions avoids unnecessarily restricting sales of vehicles that are relatively more popular in Canada and may facilitate the marketing of high efficiency engines such as direct injection gasoline and diesel. Vehicles equipped with these types of engines emit lower levels of CO₂, a key greenhouse gas, but will likely be certified in higher bins pending development of appropriate NOx control technologies.

Costs

The increased costs to manufacturers to meet future U.S. emission standards have been estimated by the U.S. EPA in their regulatory impact analyses associated with the various rules. In order to meet the more stringent Tier 2 exhaust and evaporative emission standards, the U.S. EPA estimates that the longer term incremental costs to manufacturers, converted to 1999 Canadian dollars, will be $63 for light-duty vehicles, $58 to $119 for light light-duty trucks, and $239 to $251 for heavy light-duty trucks and medium-duty passenger vehicles. An additional incremental cost of $134 is estimated for medium-duty passenger vehicles to comply with new on-board diagnostic and on-board refuelling vapour recovery standards.

In the case of the Phase 1 emission standards for heavy-duty vehicles and engines, the U.S. EPA estimates that the longer term incremental costs to manufacturers, converted to 1999 Canadian dollars, will be $358 for light heavy-duty diesel engines, $409 for medium heavy-duty diesel engines, $547 heavy-heavy-duty diesel engines and $380 to $406 for Otto-cycle heavy duty-engines.

In the case of the Phase 2 emission standards for heavy-duty vehicles and engines, the U.S. EPA estimates that the longer term incremental costs to manufacturers, converted to 1999 Canadian dollars, will be $1,743 for light heavy-duty diesel engines, $2,098 for medium heavy-duty diesel engines, $2,773 for heavy heavy-duty diesel engines and $248 for Otto-cycle heavy-duty engines. For vehicles equipped with a heavy-duty diesel engine meeting the Phase 2 emission standards, the U.S. EPA estimates an increase in the life-cycle operating cost ranging from $756 for vehicles with light heavy-duty diesel engines to $7,128 for urban buses, most of which results from the additional cost of purchasing the technology-enabling low sulphur diesel fuel. In the case of Otto-cycle heavy-duty vehicles, there are no identified changes in operating costs.

With the integration of the North American vehicle manufacturing industry, it is clear that most of the technology development and manufacturing changes needed to meet the new more stringent technical standards in the Regulations will be made by manufacturers to comply with the U.S. EPA rules, including for vehicles destined for the Canadian market. Therefore, the actual incremental cost due to the Regulations is expected to be very low. There will, however, be some incremental administrative costs for industry, notably in label design to accommodate the national emissions mark and in reporting related to the fleet average NOx emissions standards. New data requirements will be minimized by aligning base data formats with existing reporting of fuel consumption information.

Incremental costs to the federal government associated with the development and administration of the Regulations are part of a number of integrated initiatives to reduce emissions from vehicles, engines and fuels, totaling $48.4 million over a four-year period starting in fiscal year 2001/2002. It is estimated that about one half of this total will be spent in support of the Regulations and companion regulations that will require low sulphur gasoline and diesel fuel. Major components of the costs include laboratory upgrades to account for the need for more precise testing to verify conformance with the new more stringent standards and the regulatory development, administration and compliance verification activities. Whenever a possible violation of the Regulations is identified, enforcement officers may carry out inspections, investigations or both. Alleged violations, such as those concerning the use of the national emissions mark or compliance with the emission standards or documentation requirements, may be identified by Environment Canada's technical personnel, through information transmitted to the Department by the Canada Customs and Revenue Agency or through complaints received from the public. Enforcement activities may also include inspections by enforcement officers at Canada's international borders.

Funding to support the Regulations was announced by the Minister of the Environment in February 2001, as part of resources to support the fulfillment of the Ozone Annex to the 1991 Canada-United States Air Quality Agreement.

Benefit/Cost

The U.S. EPA found that, for the United States, the annual benefits from Final Tier 2/Gasoline Sulphur Rule outweighed costs by a ratio of 4.8 to 1. For the Final Heavy-Duty Engine/Diesel Fuel Rule this ratio is 16.8 to 1. It should be noted that such results are due to the combination of new vehicle emission standards and the two fuels regulations (i.e., low sulphur gasoline and low sulphur diesel). However, given the similar characteristics of the Canadian vehicle fleet, a Canadian vehicle and fuels program that aligns with that of the United States, and the fact that the actual incremental costs of meeting the requirements of the Regulations in Canada is expected to be considerably lower than in the United States, it is clear that the benefits of the Canadian regulations outweigh the associated costs.

Competitiveness Implications

The automotive industry is a key sector of the Canadian economy and is in an extremely competitive situation. Since 1989, the industry has experienced a growth in productivity to the point that it is now among the few industries with higher productivity than its United States counterpart. Referring to the Harbour and Associates Inc. 2000 report, Industry Canada indicates "that Canada is 11% more productive than the United States in terms of labour hours per vehicle. On average, Canada uses only 24.4 labour hours per vehicle, whereas the United States uses 27.1 labour hours per vehicle (see footnote 10) ". Of the ten top most productive plants in North America, four are in Canada.

In 1999, direct labour cost was 38 percent lower in Canada than in the United States. Industry Canada adds that "Canadian plants have won five out of the 15 J.D. Power Plant Quality Awards for North America". The automotive industry is export oriented with less than 20 percent of production consumed in Canada. (see footnote 11) 

As a result of being competitive, the Canadian automotive industry enjoys a large share of investment relative to its size. Harmonized regulations can be seen in this context as a critical factor in maintaining the benefits of industry integration and supporting the competitiveness of the Canadian automotive industry.

Consultation

The Regulations have been developed in a process that builds on a long history of consultation on motor vehicle emissions. Recent examples are the 1995 CCME Task Force on Cleaner Vehicles and Fuels, the 1998 promulgation of new regulations under the Motor Vehicle Safety Act and the passage of CEPA 1999 with its Part 7 Division 5 addressing vehicle and engine emissions.

On April 4, 2000, the Deputy Minister of the Environment wrote to a wide range of stakeholders inviting them to participate in the development of the Federal Agenda on Cleaner Vehicles, Engines and Fuels. Environment Canada prepared a discussion paper "Future Canadian Emission Standards for Vehicles and Engines and Standards for Reformulation of Petroleum-based Fuels" which was distributed to all interested parties. On May 25 and 26, 2000, Environment Canada convened a multi-stakeholder workshop in Toronto to discuss future measures to reduce air pollution from vehicles, engines and fuels. The workshop was attended by 125 representatives from federal, provincial, territorial and municipal governments, environmental and health organizations, the petroleum refining industry, automotive and engine manufacturers, and the alternative fuels sector. In July 2000, workshop presentations and related written submissions were distributed to all stakeholders.

The consultation revealed a broad consensus that Canada's emission standards for on-road vehicles and engines should be based on alignment with corresponding U.S. federal programs. Commenters recognized that the highly integrated North American automotive manufacturing industry, together with the alignment with aggressive U.S. EPA programs to reduce vehicle emissions, will allow Canada to achieve significant emissions reduction in a cost-effective manner.

There were different views on the need for Canada to implement fleet averaging emission standards as in the United States. The auto industry advocated Canada/United States product alignment with no fleet averaging while the Canadian Petroleum Products Institute (CPPI) and the Greater Vancouver Regional District (GVRD) recommended adopting a fleet average standard requiring manufacturers to consider their sales in Canada to achieving an overall emission performance comparable with the United States (Note: this topic is discussed in the "Alternatives" section).

The "Support Document to the Notice of Intent on the Federal Agenda on Cleaner Vehicles, Engines and Fuels" contains background on the issues and summarizes the input provided at the workshop and through written submission.

Additional Pre-Canada Gazette Consultations

In November 2001, Environment Canada distributed a discussion draft of the Regulations to the provinces and territories through CEPA National Advisory Committee and to a broad range of stakeholders to further focus consultations on this initiative. The discussion draft was also posted on Environment Canada's Web site to ensure wide availability. There was support for many aspects of the Regulations and some additional suggestions were made. Meetings were held with industry representatives to consider practical aspects of the Regulations. The main issues raised by stakeholders and the Department's response were summarized in the publication of the proposed Regulations in the Canada Gazette, Part I, on March 30, 2002.

Consultations after Canada Gazette, Part I Publication

Pre-publication of the proposed On-Road Vehicle and Engine Emission Regulations in the Canada Gazette, Part I, on March 30, 2002 initiated a 60-day public consultation period where stakeholders were invited to submit their views on the proposed Regulations. The Department received comments from 22 interested parties, including five private individuals. Once again, the comments indicated broad support among stakeholders for the policy of aligning Canada's emission standards with those of the U.S. The following paragraphs summarize the major issues raised and the Department's analysis, leading to the development of the final Regulations.

(a) Fleet Average NOx Standards

The issue that received the most and widest range of commentary was the proposed approach to aligning with the U.S. NOx fleet averaging standards applicable to light-duty vehicles, light-duty trucks and medium-duty passenger vehicles.

The David Suzuki Foundation, West Coast Environmental Law and five private individuals expressed concerns that the proposed option of allowing companies to meet a higher fleet average emission standard in Canada (i.e., the proposed section 27) would result in higher emissions in Canada and requested that the option be eliminated in the final regulations. Other commenters, including the B.C. Ministry of Water Land and Air Protection, Alberta Environment, the Ontario Ministry of the Environment and Energy, the Greater Vancouver Regional District, the Canadian Petroleum Products Institute and Shell Canada, expressed concern with the proposed option and requested that additional analysis be conducted to confirm that any flexibility provided in the fleet averaging provisions will not compromise the overall emission performance of the Canadian fleet.

The Canadian Vehicle Manufacturers' Association (CVMA) and the Association of International Automobile Manufacturers of Canada (AIAMC) and individual vehicle manufacturers (DaimlerChrysler, Ford, Volkswagen) expressed concern that, with a Canadian fleet average emission standard, the Department was imposing a requirement over and above that of providing Canada with the same vehicles and technology as the U.S. without demonstrating the benefits of the additional requirements. The industry requested that Environment Canada reconsider its approach and requested that the proposed Regulation be modified to enable those vehicles certified to U.S. EPA requirements and sold in both countries to be separated from Canada-unique vehicles. Canada-unique vehicles would have to meet a fleet average NOx standard but the fleet of vehicles covered by U.S. EPA certificates of conformity and "sold concurrently" would not be specifically mandated to meet a fleet average NOx standard in Canada.

The proposed Regulations required that companies submit an end of model year annual report indicating the fleet average NOx values for all vehicles sold in Canada. The industry suggested that the Department review company fleet averages each year and that the Regulation could be amended in the future if the desired environmental performance was not being achieved. The industry suggested that their proposal, in the absence of a demonstrated environmental need, would avoid imposing administrative costs on companies or taxpayers.

As described in the "Alternatives" section, the Department believes that variations between Canadian and U.S. fleet averages are expected to be small as long as the Canadian fleet is made up of vehicles that are sold concurrently in both countries. Accordingly, the Regulations have been modified to more completely recognize these vehicles.

An option is provided for companies to exclude U.S. certified vehicles that are sold in Canada and the U.S. from the mandatory fleet average NOx standards. Several safeguards and incentives included in the Regulations are designed to benefit the environmental performance of the Canadian fleet. Taking into account the integrated nature of the North American vehicle manufacturing industry and the expected composition of the future Canadian fleet, the Department believes that the structure of the fleet averaging provisions will deliver fleet average emissions comparable to the U.S. while minimizing the regulatory burden.

(b) National Emissions Mark

In the Canada Gazette, Part I, publication (March 30, 2002), the Department indicated that it was working with Transport Canada to examine the feasibility of having a combined national mark for safety and emissions or an alternative national emissions mark that meets the legislative requirements of CEPA 1999 in a manner that is more practical for the industry. This was in response to previous concerns expressed by the industry. An alternative mark was developed through consultations between the industry and various government departments. In their comments on the proposed Regulations, the CVMA and AIAMC requested that the necessary changes be made to reflect the new national emissions mark. The Regulations have been modified to include those changes and to establish a new national emissions mark symbol.

The provisions of CEPA 1999 directly require that imported vehicles and engines conform with the requirements of these Regulations as a condition of their importation into Canada. Therefore, the application of a national emissions mark to imported vehicles and engines is not necessary to ensure such conformity. The Regulations have been modified to only require the application of the national emissions mark on vehicles and engines that are manufactured in Canada as a means of ensuring that such vehicles conform with the requirements of the Regulations. This approach will facilitate the administration of, and compliance with, the Regulations and is consistent with the requirements for a national safety mark under the Motor Vehicle Safety Regulations.

(c) Lead-Time Requirements

The CVMA and AIAMC expressed concerns that there may not be sufficient time for companies to obtain their authorization from the Minister to use the national emissions and to make the necessary production changes to ensure that the mark is on 2004 model year vehicles. It was requested that the Regulations avoid the need to make a mid-model year production changes to accommodate the new labelling. In previous comments, the CVMA and AIAMC requested that initial authorization of the new mark be given no later than one year prior to the date that the new mark would be required.

In view of the above, the date that the Regulations come into force has been changed from September 1, 2003 to January 1, 2004. To allow that administrative steps be taken to authorize the use of the national emissions mark in an expeditious manner, sections 7 to 9 of the Regulations come into force on the date of their registration. The changes made to the Regulations will greatly reduce the scope of vehicles and engines of the 2004 model year that may need to have the national emissions mark incorporated as a mid-model year production change.

(d) Compliance with In-Use Emission Standards

The CVMA and AIAMC expressed concern with the in-use standards in the proposed Regulations, indicating that, in the design of Tier 2 vehicle emission technologies, manufacturers must consider the engine and fuel as a system. The emissions performance of new vehicles is required for a full useful life of at least 192,000 km or 10 years. In the case of U.S. certified Tier 2 vehicles, the full useful life performance of the vehicle emission control system is based on Tier 2 requirements for service accumulation with fuel that is widely and commercially available. While acknowledging that Canadian refineries are moving to meet the low sulphur gasoline regulations, the automotive industry remains concerned that current fuel attributes in Canada will affect companies' ability to meet the in-use requirements.

The CVMA and AIAMC strongly recommended that the applicability of "in-use" standards be deleted until such time that Canada establishes national fuel regulations that are appropriate for Tier 2 technology as specified in Category 3 or 4 fuels of the industry's World Wide Fuel Charter, April 2000. If the in-use standards were to be retained, the CVMA and AIAMC indicated that it is important to understand that meeting the requirements of the referenced standards specifically implies that these standards are met using only fuels specified by the U.S. Code of Federal Regulations.

Environment Canada believes it is important that the in-use emission standards be part of the Regulations. They are an integral part of notice of defect provisions of section 157 of the CEPA 1999 that address defects in the design, construction or functioning of a vehicle or engine that affect or are likely to affect compliance with a prescribed standard. The Department recognizes the complexity of emissions certification and it is intended that the requirements of the Canadian program be harmonized with those of the U.S. EPA. Differences in fuel specifications can affect emissions and sufficient engineering analysis must be performed during investigation of any vehicle's exceedance of in-use emission standards to determine when the issuance of a notice of defect under section 157 of the Act is warranted. The above considerations will be taken into account in the process leading toward such determinations.

In order to address the concerns expressed by the CVMA and AIAMC, a reference to "fuels" is added (subsection 15(1) of the proposed Regulations) to explicitly recognize that fuels are an important element of the emission certification procedures. In addition, a new subsection provides a link to subsection 153(3) of the Act to accept U.S. certification to corresponding standards as applied by the U.S. EPA.

(e) Estimated Costs to Manufacturers

The CVMA and AIAMC indicated that the increased costs to manufacturers will be higher that those cited in the RIAS that accompanied the proposed Regulations.

The Canadian Trucking Alliance (CTA) indicated that the cost of adopting Phase 1 and Phase 2 emission standards for heavy-duty engines will be substantially higher than claimed in the proposed Regulations. CTA requested that Environment Canada revisit those cost estimates, consistent with a U.S. EPA draft report "Non-conformance Penalties for 2004 Highway Heavy Duty Diesel Engines", which included compliance cost estimates based on data provided by engine manufacturers, independent cost analyses, and the U.S. EPA's technical judgment. CTA is concerned that if this is not corrected, shippers may not appreciate the extent to which carrier costs will have to rise, and may resist efforts by carriers to charge rates sufficient to cover the costs.

The Department recognizes that the Regulations will result in some incremental administrative costs for industry, notably in label design to accommodate the national emissions mark and in reporting related to the fleet average NOx emissions standards. However, the CVMA or AIAMC did not provide any quantification of these costs to substantiate that they will be considerable.

In August 2002, the U.S. EPA published the final rule regarding non-conformance penalties (NCPs) for 2004 and later model year heavy-duty diesel engines (see footnote 12) . In the final rule, the U.S. EPA estimates for the average lifetime incremental cost of compliance for 2004 model year, heavy-duty diesel engines were considerably higher than those presented in the original standard-setting rulemaking. However, it is important to note that the two estimates of costs are not directly comparable for a number of reasons. The most important difference is the emission characteristics of the baseline engine used in the two analyses. The second major reason is that NCPs are intended to protect complying manufacturers and thus it is important in associated analyses to avoid underestimating reasonably projected costs. Accordingly, the U.S. EPA's cost analysis for the NCPs focuses solely on the compliance costs associated with the first year of production. On the other hand, cost analyses for regulatory actions to establish new emission standards are carried out with a longer term view and take into account factors that tend to reduce compliance costs over time, resulting in lower average costs. These issues are described in greater detail in the U.S. EPA's final rule.

In view of the above, the Department has not changed the cost estimates that were used to support the proposed Regulations. The cost estimates continue to be based on those used by the U.S. EPA in support of corresponding rules.

(f) Other Changes

In response to comments, technical changes were made to the Regulations, including:

•  to eliminate the need for a "Low Sulphur Diesel Only" label to reflect the passage of the Sulphur in Diesel Fuel Regulations;

•  to streamline the documentation that must be submitted upon importation of heavy-duty engines;

•  to increase the rental rate for test vehicles and engines to better reflect first year depreciation rates; and

•  to facilitate the reporting of defects to the Minister to be consistent with the requirements of Transport Canada and to include a time limit for the submission of quarterly defect reports.

In addition to the above, some changes have been made to the RIAS in accordance with comments received from stakeholders.

Compliance and Enforcement

Environment Canada administers a comprehensive program to verify compliance with current federal emission standards. The Regulations will be enforced in the same manner. Manufacturers and importers are responsible for ensuring that their products comply with the Regulations and are required to produce and maintain evidence of such conformity. The program will include:

•  authorizing and monitoring use of the national emissions mark;

•  monitoring vehicle and engine importation;

•  reviewing company evidence of conformity;

•  monitoring data submission for compliance with the corporate fleet average NOx standards and the banking or trading of emission credits;

•  registering company notices of defects affecting emission controls;

•  inspections of test vehicles and engines and their emission-related components;

•  laboratory emissions tests on a sample of new vehicles and engines that are representative of products offered for sale in Canada; and

•  laboratory emissions tests on a sample of typical in-use vehicles.

Environment Canada plans to coordinate monitoring efforts with the U.S. EPA by sharing information to increase program efficiency and effectiveness.

If a vehicle or engine is found not to comply with the Regulations, the manufacturer or importer is subject to the provisions in Part 10 of CEPA 1999, which deal with enforcement. In this situation, the normal course of events is to perform sufficient engineering assessment to determine if a notice of defect should be issued by the company to the owners of the particular model of vehicle or engine. This may result in a product recall to fix the defect.

In addition to the verification of compliance of individual vehicles and engines with prescribed standards, there are a number of record-keeping and reporting requirements to be monitored. When verifying compliance with the Regulations, the CEPA 1999 Compliance and Enforcement Policy will be applied. Once there is a confirmation that an alleged violation has been committed, the enforcement officer will select the appropriate response, based on the following criteria:

•  Nature of the alleged violation: This includes consideration of the damage, the intent of the alleged violator, whether it is a repeat violation, and whether an attempt has been made to conceal information or otherwise subvert the objectives and requirements of CEPA 1999.

•  Effectiveness in achieving the desired result with the alleged violator: The desired result is compliance within the shortest possible time and with no further repetition of the violation. Factors to be considered include the violator's history of compliance with CEPA 1999, willingness to cooperate with enforcement officials, and evidence of corrective action already taken.

•  Consistency: Enforcement officers will consider how similar situations have been handled in determining the measures to be taken to enforce CEPA 1999.

Contacts

• Ross White
  Director
  Transportation Systems Branch
  Air Pollution Prevention Directorate
  Environment Canada
  Hull, Quebec
  K1A 0H3
  Telephone: (819) 953-1120
  FAX: (819) 953-7815
  E-mail: ross.white@ec.gc.ca

• Céline Labossière
  Senior Economist
  Regulatory and Economic Analysis Branch
  Economic and Regulatory Affairs Directorate
  Environment Canada
  Hull, Quebec
  K1A 0H3
  Telephone: (819) 997-2377
  FAX: (819) 997-2769
  E-mail: celine.labossiere@ec.gc.ca

Footnote a 

S.C. 1999, c. 33

Footnote b 

S.C. 1999, c. 33

Footnote 1 

C.R.C., c. 1038

Footnote 2 

Otto-cycle (i.e., spark ignition) engines are typically powered by gasoline, but other fuels may be used

Footnote 3 

The U.S. Code of Federal Regulations is available at: www.access.gpo.gov/nara/cfr/waisidx_00/40cfr86_00.html

Footnote 4 

Environment Canada, Transportation Systems Branch, Scenario Analysis: Fleet Average NOx Emissions in Canada, November 2002

Footnote 5 

U.S. EPA, Control of Emissions of Hazardous Air Pollutants from Mobile Sources, Final Rule, Federal Register of March 29, 2001

Footnote 6 

The selection of health effects is similar to the categories of health effects used by the 1998 Government Working Group on Setting a Sulphur Level for Sulphur in Gasoline and Diesel. The combination of VOCs and NOx in the table is a proxy for ozone

Footnote 7 

U.S. EPA, Regulatory Impact Analysis - Control of Air Pollution from New Motor Vehicles: Tier 2 Motor Vehicle Emissions Standards and Gasoline Sulfur Control Requirements, EPA420-R-99-023, December 1999 (Chapter VII: Benefit-Cost Analysis). The documents are available electronically at http://www.epa.gov/otaq/tr2home.htm#ria

Footnote 8 

U.S. EPA, Regulatory Impact Analysis: Heavy-Duty Engine and Vehicle Standards and Highway Diesel Fuel Sulfur Control Requirements, EPA420-R-00-026, December 2000 (Chapter VII: Benefit-Cost Analysis). The documents are available electronically at http://www.epa.gov/otaq/diesel.htm#hd2007

Footnote 9 

Due to uncertainties, the impact of the avoidance of the combination of the various pollutants is not possible to evaluate. The other categories of benefits not evaluated but that should be taken into account are: residential visibility, household soiling damage, materials damage, nitrogen deposition to estuaries, commercial forest damage

Footnote 10 

Industry Canada, Canada's Automotive Industry 2000. The report is available at the Web site http://strategis.ic.gc.ca. The Harbour and Associates report is the most authoritative reference for productivity on the automotive sector

Footnote 11 

Industry Canada, The Competitiveness of the Canadian Automotive Sector (February 1998, also available at the Web site http://strategis.ic.gc.ca). The relative high ratio of production relative to Canadian sales is an indication that the industry is export oriented. For example, the "Big Three car manufacturers produce twice as many vehicles in Canada than they sell."

Footnote 12 

U.S. EPA, Final Rule, Non-conformance Penalties for 2004 and Later Model Year Emission Standards for Heavy-Duty Diesel Engines and Heavy-Duty Diesel Vehicles, Federal Register, August 8, 2002

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