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Vol. 143, No. 14 — July 8, 2009

Registration

SOR/2009-197 June 18, 2009

CANADIAN ENVIRONMENTAL PROTECTION ACT, 1999

P.C. 2009-1036 June 18, 2009

Whereas, pursuant to subsection 332(1) (see footnote a) of the Canadian Environmental Protection Act, 1999 (see footnote b), the Minister of the Environment published in the Canada Gazette, Part I, on April 26, 2008, a copy of the proposed Volatile Organic Compound (VOC) Concentration Limits for Automotive Refinishing Products Regulations, substantially in the form set out in the annexed Regulations, and persons were given an opportunity to file comments with respect to the proposed Regulations or to file a notice of objection requesting that a board of review be established and stating the reasons for the objection;

Whereas, pursuant to subsection 93(3) of that Act, the National Advisory Committee has been given an opportunity to provide its advice under section 6 (see footnote c) of that Act;

And whereas, in the opinion of the Governor in Council, pursuant to subsection 93(4) of that Act, the proposed Regulations do not regulate an aspect of a substance that is regulated by or under any other Act of Parliament in a manner that provides, in the opinion of the Governor in Council, sufficient protection to the environment and human health;

Therefore, Her Excellency the Governor General in Council, on the recommendation of the Minister of the Environment and the Minister of Health, pursuant to subsection 93(1) of the Canadian Environmental Protection Act, 1999 (see footnote d), hereby makes the annexed Volatile Organic Compound (VOC) Concentration Limits for Automotive Refinishing Products Regulations.

VOLATILE ORGANIC COMPOUND (VOC) CONCENTRATION LIMITS FOR AUTOMOTIVE REFINISHING PRODUCTS REGULATIONS

INTERPRETATION

Definitions

1. The following definitions apply in these Regulations.

“automotive refinishing” « finition automobile »

“automotive refinishing” means any activity relating to the servicing, maintenance, repair, restoration or modification of motor vehicles or mobile equipment, or their parts, involving the application of a coating or surface cleaner.

“coating” « revêtement »

“coating” means a product that forms a film when applied to a surface for protective or any other automotive refinishing purpose. It excludes products used in carrying out metal plating and lacquer topcoats and any oil-based enamel paints used for the restoration of motor vehicles or mobile equipment made on or before 1985 and their parts.

“excluded compounds” « composés exclus »

“excluded compounds” means the compounds that are excluded under item 65 of Schedule 1 to the Canadian Environmental Protection Act, 1999 as well as acetic acid, 1,1–dimethylethyl ester (C6H1202).

“mobile equipment” « équipement mobile »

“mobile equipment” means any equipment, other than a motor vehicle, that is capable of being pulled on a highway.

“motor vehicle” « véhicule automobile »

“motor vehicle” means any self-propelled vehicle, but does not include

(a) an aircraft as defined in subsection 3(1) of the Aeronautics Act;

(b) rolling stock as defined in section 6 of the Canada Transportation Act; or

(c) a boat, ship or craft designed, used or capable of being used solely or partly for navigation in, on, through or immediately above water.

“surface cleaner” « nettoyant de surface »

“surface cleaner” means a product used to prepare the surface of motor vehicles or mobile equipment by removing unwanted matter from the surface before applying a coating. It excludes products used for cleaning automotive refinishing equipment and hand-held spray bottle spot cleaners used to prepare surfaces prior to sanding.

“volatile organic compounds” or “VOC” « composés organiques volatils » ou « COV »

“volatile organic compounds” or “VOC” means volatile organic compounds that participate in atmospheric photochemical reactions and that are not excluded compounds.

APPLICATION

Application

2. (1) Subject to subsection (2), these Regulations apply in respect of any product containing volatile organic compounds set out in column 1 of the schedule, if

(a) the product is to be used for automotive refinishing; or

(b) anywhere on the product’s container, or in any documentation relating to the product supplied by the product’s manufacturer, importer or seller or their duly authorized representative, it is indicated that the product may be used for automotive refinishing.

Non-Application

(2) These Regulations do not apply in respect of automotive refinishing products set out in column 1 of the schedule that are

(a) manufactured, imported, offered for sale or sold for the purposes of export;

(b) used for application in or on the premises of a factory or a shop, for purposes other than automotive refinishing, on products other than motor vehicles, mobile equipment, or their parts;

(c) imported, offered for sale or sold in a non-refillable aerosol spray container or manufactured or imported to be packaged in that type of container;

(d) imported, offered for sale or sold in a container with a capacity of 14.8 mL (0.5 fl oz) or less or manufactured or imported to be packaged in that size of container;

(e) manufactured, imported, offered for sale or sold to be applied to motor vehicles or mobile equipment, or their parts, during manufacture;

(f) manufactured, imported, offered for sale or sold to be used as a solvent in a laboratory for analysis;

(g) manufactured, imported, offered for sale or sold to be used in scientific research;

(h) manufactured, imported, offered for sale or sold to be used as a laboratory sample or analytical standard;

(i) manufactured, imported, offered for sale or sold for use in chemical agent resistant coatings for motor vehicles, mobile equipment or their parts, for use in a military operation; or

(j) manufactured, imported, offered for sale or sold in a container with a capacity of 118.3 mL (4.0 fl oz) or less or manufactured or imported to be packaged in that size of container, for use in automobile mobile restoration services.

(3) For the purposes of paragraph (i), “military operation” means any operation undertaken to protect national security, support humanitarian relief efforts, participate in multilateral military or peace-keeping activities under the auspices of international organizations or defend a member state of the North Atlantic Treaty Organization.

PROHIBITIONS

Manufacture or import

3. (1) A person must not manufacture or import any automotive refinishing product set out in column 1 of the schedule if its VOC concentration exceeds the limit set out in column 2 of the schedule for that product unless

(a) the product is required to be diluted before use to a VOC concentration equal to or less than that limit set out in column 2 and the manufacturer, importer or seller, as the case may be, specifies the instructions for dilution on the product’s label or accompanying documentation, in both official languages; or

(b) the person that manufactures or imports has been issued a permit under section 5.

Sell or offer for sale

(2) A person must not sell or offer for sale any automotive refinishing product set out in column 1 of the schedule if its VOC concentration exceeds the limit set out in column 2 for that product unless

(a) the product is required to be diluted before use to a VOC concentration equal to or less than that limit set out in column 2 and the manufacturer, importer or seller, as the case may be, specifies the instructions for dilution on the product’s label or accompanying documentation, in both official languages; or

(b) the product was manufactured or imported under a permit issued under section 5 and the sale or offer to sell occurs no later than one year after the day on which the permit expires.

Combination of multiple components

(3) For greater certainty, if the written instructions of the manufacturer, importer or seller require the combination of multiple components before the product is to be used, the VOC concentration in the product resulting from the combination of the multiple components must not exceed the VOC concentration limit set out in column 2 of the schedule for that product.

Lowest VOC concentration limit

(4) If anywhere on the container of a coating set out in the schedule, or in any documentation relating to the coating supplied by the manufacturer, importer, seller or their duly authorized representative, it is indicated that the coating may be used for the purpose of a different coating set out in the schedule, then the lowest VOC concentration limit applies.

PERMITS

APPLICATION

Requirement for permit

4. (1) Any person that manufactures or imports a product set out in column 1 of the schedule, other than a product referred to in paragraph 3(1)(a), or the components of such a product that must be combined together before its use in which the VOC concentration exceeds the limit set out in column 2 for that product, must hold a permit issued under section 5.

Required information

(2) An application for a permit must be submitted to the Minister and contain the following information:

(a) respecting the applicant,

(i) their name, civic and postal addresses, telephone number and, if any, fax number and e-mail address,

(ii) the name, title, civic and postal addresses, telephone number and, if any, fax number and e-mail address of their duly authorized representative, if applicable;

(b) respecting the product,

(i) its trade name, if any,

(ii) its VOC concentration,

(iii) the estimated quantity to be manufactured, sold, offered for sale or imported in a calendar year and the unit of measurement,

(iv) the category of the product as set out in the schedule and the information on which the selection of the product category was made, and

(v) in the case of an application for renewal of a permit under subsection 5(3), the number of the existing permit that was issued under section 5;

(c) evidence that it is not technically or economically feasible for the applicant at the time of the application to reduce the VOC concentration in the product if the limit set out in column 2 of the schedule is not met for that product;

(d) a description of the plan prepared identifying the measures that will be taken by the applicant so that the VOC concentration in the product to be manufactured or imported will be within the limit set out in column 2 of the schedule for that product;

(e) identification of the period within which the plan is to be fully implemented; and

(f) the civic and postal addresses of the location where information, supporting documents and the certification referred to in subsection (3), are kept.

Certification

(3) The application must be accompanied by a certification dated and signed by the applicant or by their duly authorized representative, stating that the information contained in the application is accurate and complete.

Format for submission

(4) The application and certification may be submitted either in writing or in an electronic format that is compatible with the format that is used by the Minister, and the documents must bear the written or electronic signature, as the case may be, of the applicant or their duly authorized representative.

Additional information

(5) The Minister may, on receiving an application made under this section, require further details that pertain to the information contained in the application and that are necessary for the application to be processed.

CONDITIONS OF ISSUANCE

Conditions for issuing permit

5. (1) Subject to subsection (2), the Minister must issue the permit if the following conditions are met:

(a) the applicant has provided evidence that it is not technically or economically feasible at the time of the application to reduce the VOC concentration in the product to the limit set out in column 2 of the schedule for that product;

(b) the applicant has prepared a plan to identify the measures that will be taken by the applicant such that the VOC concentration in the product for manufacture or import is within the limit set out in column 2 of the schedule for that product; and

(c) the period within which the plan is to be fully implemented does not exceed four years after the day on which the first permit is issued to the applicant.

Grounds for refusing permit

(2) The Minister must refuse to issue a permit if

(a) the Minister has reasonable grounds to believe that the applicant has provided false or misleading information in support of their application; or

(b) information required under subsections 4(2) or (5) has not been provided or is insufficient to enable the Minister to process the application.

Expiry and permit renewal

(3) A permit expires 24 months after the day on which it is issued unless, within the period of 30 days before the day on which the permit expires, the applicant submits an application for renewal in accordance with section 4. The validity of the first permit may only be extended once for an additional 24 months for a given product and the same use.

REVOCATION

Grounds for revocation

6. (1) The Minister must revoke a permit if he or she has reasonable grounds to believe that the implementation of the plan referred to in paragraph 5(1)(b) will not be completed within the specified period or that the permit holder has provided false or misleading information.

Conditions for revocation

(2) The Minister must not revoke a permit unless the Minister has provided the permit holder with

(a) any written reasons for the revocation; and

(b) an opportunity to be heard, by written representation, in respect of the revocation.

DETERMINATION OF VOC CONCENTRATION

Automotive refinishing coating

7. The VOC concentration in a coating as set out in the schedule is determined by the following equation:

VOC concentration = VOC concentration in a coating

where

VOC concentration is the grams of VOC per litre of coating, undiluted or diluted in accordance with the written instructions of the manufacturer, importer or seller if required before the product is to be used;

Ws is the weight of volatiles, in grams;

Ww is the weight of water, in grams;

Wec is the weight of excluded compounds, in grams;

Vm is the volume of coating, in litres;

Vw is the volume of water, in litres; and

Vec is the volume of excluded compounds, in litres.

Surface cleaner

8. The VOC concentration in a surface cleaner as set out in the schedule is determined by the following equation:

VOC concentration = VOC concentration in a surface cleaner

where

VOC concentration is the grams of VOC compounds per litre of surface cleaner, undiluted or diluted in accordance with the written instructions of the manufacturer, importer or seller if required before the product is to be used;

Ws is the weight of volatiles, in grams;

Ww is the weight of water, in grams;

Wec is the weight of excluded compounds, in grams; and

Vm is the volume of surface cleaner, in litres.

ACCREDITED LABORATORY

Accredited laboratory

9. Any laboratory that performs an analysis for the purposes of these Regulations must be accredited under the International Organization for Standardization standard ISO/IEC 17025:2005, entitled General requirements for the competence of testing and calibration laboratories, as amended from time to time, and its accreditation must include the analysis in question within its scope of testing.

LABELLING

Manufacture date — manufacturer or importer

10. (1) A person that manufactures or imports any product set out in the schedule must indicate on the container in which the product is offered for sale or sold, the date on which the product was manufactured or a code representing that date. If a code is used, the manufacturer or importer must provide the Minister, on request, with an explanation of the code.

Manufacture date — seller

(2) A person that offers for sale or sells any product set out in the schedule must indicate on the container in which the product is offered for sale or sold, the date on which the product was manufactured or a code representing that date. If a code is used, the person who offers for sale or sells the product must provide the Minister, on request, with an explanation of the code.

Instructions for dilution — manufacturer or importer

11. (1) If a product set out in column 1 of the schedule requires dilution before its use, the manufacturer or importer must ensure

(a) that the product’s label or the accompanying documentation specifies the instructions for the recommended dilution in both official languages; and

(b) that any instructions for dilution appearing on the product’s label or in any accompanying documentation would not result in dilution of the product to a concentration greater than the VOC concentration limit set out in column 2 for that product.

Instructions for combination

(2) If a multiple component product requires that components be combined before its use, the manufacturer or importer must ensure that the product’s label or the accompanying documentation specifies, in both official languages, the instructions for the recommended combinations.

Instructions for dilution — seller

12. (1) If a product set out in column 1 of the schedule requires dilution before its use, the seller must ensure

(a) that the product’s label or the accompanying documentation specifies the instructions for the recommended dilution in both official languages; and

(b) that any instructions for dilution appearing on the product’s label or in any accompanying documentation would not result in dilution of the product to a concentration greater than the VOC concentration limit set out in column 2 for that product.

Instructions for combination

(2) If a multiple component product requires that components be combined before its use, the seller must ensure that the product’s label or the accompanying documentation specifies, in both official languages, the instructions for the recommended combinations.

RECORD KEEPING

Required information

13. (1) Any person that manufactures, imports or sells a product set out in the schedule must maintain records containing the following information:

(a) in the case of a person that manufactures,

(i) the quantity of the product manufactured at each manufacturing plant,

(ii) the trade mark and trade name of the manufactured product, and

(iii) the date of the product’s manufacture;

(b) in the case of a person that imports,

(i) the quantity of the product imported,

(ii) the trade mark and trade name of the product imported,

(iii) the port of entry where the product was imported,

(iv) the name, civic or postal address, telephone number, and, if any, the fax number and e-mail address of the principal place of business of the sender,

(v) the date of import of the product,

(vi) the Harmonized Commodity Description and Coding System number for the product,

(vii) the importer number for the product shipped, and

(viii) the copies of the bill of lading, invoice and all documents submitted to the Canada Border Services Agency for the product shipped;

(c) in the case of a person that sells to a supplier, wholesaler or retailer,

(i) the quantity of the product sold,

(ii) the trade mark and trade name of the product sold,

(iii) the date of the sale of the product,

(iv) the delivery date of the product, and

(v) the name, civic or postal address of each supplier, wholesaler and retailer to whom the product was sold.

Record keeping and time limits

(2) Any person that submits the information set out in subsection 4(2) must keep a record of that information, supporting documents and the certification referred to in subsection 4(3) for a period of at least five years after the day on which they are submitted.

Location and duration of records

(3) The records, supporting documents and the certification as referred to in subsection 4(3) must be kept, for a period of at least five years after the day on which they are made, at the person’s principal place of business in Canada or at any other place in Canada where they can be inspected. If the records are kept at any place other than the person’s principal place of business, the person must provide the Minister with the civic address of the place where they are kept.

COMING INTO FORCE

After registration — one year

14. (1) Subject to subsection (2), these Regulations come into force one year after the day on which they are registered.

After registration — 18 months

(2) Subsections 3(2) and 10(2), section 12 and paragraph 13(1)(c) of these Regulations come into force 18 months after the day on which they are registered.

SCHEDULE
(Sections 2 and 3, subsection 4(1), paragraphs 4(2)(c) and (d), 5(1)(a) and (b), and subsections 11(1) and 12(1)

VOC CONCENTRATION LIMITS FOR AUTOMOTIVE REFINISHING PRODUCTS

Item

Column 1


Product Category and Description

Column 2

VOC Concentration Limit (g/L)

 

COATINGS

 

1.

Primer Surfacer

A coating formulated to be applied for corrosion resistance, adhesion of subsequent coatings or to fill in surface imperfections. Adhesion promoters are not included in this category.

250

2.

Primer Sealer

A coating formulated to be applied before the application of another coating for the purpose of colour uniformity or to prevent a subsequent coating from penetrating underlying coatings.

340

3.

Pre-Treatment Wash Primer

A coating that contains a minimum of 0.5% acid by weight and not more than 16% solids by weight that is formulated to be applied directly to bare metal surfaces to provide corrosion resistance and to facilitate adhesion of subsequent coatings.

660

4.

Adhesion Promoter

A coating formulated to be applied to uncoated plastic surfaces to facilitate adhesion of subsequent coatings.

840

5.

Colour Coating

A pigmented coating formulated to be applied to a primer or an adhesion promoter that requires a subsequent clear coating. This category includes metallic or iridescent colour coatings.

420

6.

Uniform Finish Coating

A coating formulated to be applied to an area of repair for the purpose of blending it to match the finish of the rest of the surface.

540

7.

Truck Bed Liner Coating

A coating that protects a truck bed from surface abrasion. Colour coatings, multicolour coatings and single-stage coatings are excluded.

310

8.

Temporary Protective Coating

A coating that temporarily protects certain areas from overspray or mechanical damage.

60

9.

Underbody Coating

A coating formulated to be applied to the wheel wells, the inside of door panels or fenders, the underside of a trunk or hood or the underside of a motor vehicle.

430

10.

Single-Stage Coating

A pigmented coating formulated to be applied without a subsequent clear coat. Single-stage coatings include single-stage metallic or iridescent colour coatings.

420

11.

Multicolour Coating

A coating that exhibits more than one colour in the dried coat after a single application, hides surface defects and is formulated to be applied over a primer or adhesion promoter. This category includes metallic or iridescent multicolour coatings.

680

12.

Clear Coating

A coating that contains no pigments and is formulated to be applied over any other coating.

250

13.

Other Coatings

All other coatings not described in this schedule.

250

 

SURFACE CLEANERS

 

14.

Surface Cleaners

50

REGULATORY IMPACT
ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Executive summary

Issue: Volatile organic compounds (VOCs) are one of the main ingredients of ground-level ozone which results in the formation of smog. Recent studies confirm the environmental and human health impacts of smog and show that air pollution increases the risk of lung cancer and heart disease. The use of automotive refinishing products results in the emission of VOCs following application of the products to a surface.

Voluntary measures taken so far on automotive refinishing products have not been successful in achieving significant reductions in VOC emissions. In view of the environmental and health concerns, additional action is required to further reduce these emissions.

Description: The Volatile Organic Compound (VOC) Concentration Limits for Automotive Refinishing Products Regulations (the Regulations) deliver on the Government of Canada’s commitment to improving air quality for Canadians. The Regulations reduce VOC emissions from consumer and commercial products as outlined in the Regulatory Framework for Air Emissions (see footnote 1) (the Regulatory Framework) and also fulfill Canada’s international commitments to reduce VOC emissions under the Ozone Annex.

The objective of the Regulations is to protect the environment and health of Canadians from the effects of air pollution. The Regulations establish VOC concentration limits for 14 categories of automotive refinishing products for use in Canada. These products are required to meet the established concentration limits before they can be manufactured, imported, offered for sale or sold in Canada.

The manufacture and import prohibitions will come into force one year after the Regulations are registered, while the sale and offer for sale prohibition would come into effect 18 months after the Regulations are registered.

Cost-benefit statement: The Regulations are estimated to result in a cumulative reduction of 71.1 kilotonnes in VOC emissions over a 25-year period (or an average annual reduction of 40% per year). The present value of the cost of the Regulations is estimated to be $330.2 million (calculated over a 25-year period) including costs to industry of $326.5 million and to the federal government (for enforcement and compliance promotion) of $3.7 million.

In light of the reduction in adverse health and environmental impacts of ground-level ozone, particulate matter and smog, and taking into account the benefit of meeting Canada’s international air pollution commitments, it is anticipated that the benefits of the Regulations, as shown in other jurisdictions will justify the costs.

Business and consumer impacts: Automotive repair shops will incur the majority of the incremental costs resulting from the Regulations. The costs of the Regulations are expected to range from 1% to 2.5% of industry revenue while repair shops absorb the one-time costs of compliance, and less than one percent of revenue thereafter. The impact of the Regulations on large multinational companies is expected to be negligible as these companies already produce compliant automotive refinishing products for the European Union (EU) and United States (U.S.) markets. The impact on consumers would be determined by the ability of the automotive repair shops to pass on the incremental costs to consumers through higher prices. It is unlikely that there would be a significant increase in repair costs.

Domestic and international coordination and cooperation: The VOC concentration limits were established in collaboration with international jurisdictions including U.S. states (especially California) and EU countries. In addition, discussions took place with other government departments as well as provincial and territorial governments to ensure that there is no inconsistency with their requirements. The state of technology and the potential measures to reduce VOC emissions that may be adopted in these jurisdictions were taken into consideration in finalizing the Regulations.

Performance measurement and evaluation plan: The objectives of these Regulations are aligned with various Government of Canada regulatory initiatives under the Clean Air Regulatory Agenda (CARA) (see footnote 2), as described in the Regulatory Framework. The evaluation of the Regulations will be based, among other criteria, on the level of compliance reporting through the associated enforcement activities. The Regulations will be evaluated as part of the program evaluation for CARA.

Issue

Volatile organic compound emissions from automotive refinishing products are a contributing factor in the creation of air pollution. The use of automotive refinishing products results in the emission of VOCs from solvent-based products and, to a lesser extent, from water-based products. Precursor substances such as VOCs along with NOx are involved in a series of complex photochemical reactions (see footnote 3) that result in the formation of ground-level ozone (O3), which is a respiratory irritant and one of the major components of smog. Smog is a noxious mixture of air pollutants, consisting primarily of O3 and particulate matter (PM) that can often be seen as a haze over urban centres.

Air pollution has been shown to have a significant adverse impact on human health, including premature deaths, hospital admissions and emergency room visits. Studies (see footnote 4), (see footnote 5) indicate that air pollution is associated with an increased risk of lung cancer and heart disease. Scientific evidence (see footnote 6) further indicates that O3 can also have a detrimental impact on the environment. This impact can lead to reductions in agricultural crop and commercial forest yields, reduced growth and survivability of tree seedlings, and increased plant susceptibility to disease, pests, and other environmental stresses (e.g. harsh weather).

To address the environmental and health concerns associated with VOCs, the Government of Canada has taken a number of actions to encourage voluntary reductions in VOC emissions. These measures have resulted in some reductions in VOC emissions from automotive refinishing products. However, additional reductions are still technologically and economically feasible. Given the continued contribution of VOC emissions from automotive refinishing products to air pollution, the impact of air pollution on the environment and human health, and Canada’s national and international commitments, additional actions are required to reduce these emissions.

Objectives

The Government of Canada made commitments under the Regulatory Framework to reduce VOC emissions from consumer and commercial products by introducing regulations to limit VOC concentration in these products, including automotive refinishing products. The objective of the Regulations is to protect the environment and health of Canadians from the effects of air pollution. The Regulations will contribute to a reduction in the formation of air pollution through a reduction in VOC emissions. The regulatory VOC concentration limits are expected to reduce VOC emissions from these products by an average of 40% per year or an aggregate reduction of about 71.1 kilotonnes over a 25-year period.

Description

The Regulations

The Regulations establish concentration limits for VOCs in 14 categories of automotive refinishing products. The VOC concentration limits would apply to automotive refinishing products like pre-treatment wash primers, surface primers, primer sealers, colour coatings, clear coatings, truck bed liner coatings, and surface cleaners. These automotive refinishing products are used to refinish, service, maintain, repair, restore, or modify a motor vehicle, mobile equipment or their parts.

Application

The regulatory VOC concentration limits apply to 14 categories of automotive refinishing products, with some minor exceptions. The concentration limits and product categories are identified in the Schedule of the Regulations. For example, the VOC concentration limit for colour coatings is 420 g/L and 50 g/L for surface cleaners. If a manufactured or imported automotive refinishing product falls into more than one category, this product is required to meet the concentration limit for the category with the most stringent VOC concentration limit.

The VOC concentration limits do not apply to the following:

  • Automotive refinishing products that are manufactured, imported, offered for sale or sold for the purpose of export only. These products would be subject to the relevant regulatory requirements in the destination countries.
  • Automotive refinishing products that are used for application in or on the premises of a factory or a shop for the purposes other than automotive refinishing. Based on comments received, Environment Canada has determined that emissions of VOCs from such applications are considered to be manufacturing process-related emissions which may be controlled through other control mechanism. As such, these emissions would effectively be addressed by risk management measures that target industrial emission sources from those sectors.
  • Automotive refinishing products that are imported, offered for sale or sold in non-refillable aerosol spray containers or are manufactured or imported to be packaged in non-refillable aerosol containers. These products will be addressed through future measures aimed at reducing VOC emissions from coatings sold in non-refillable aerosol containers.
  • Automotive refinishing products that are imported, offered for sale or sold in a container with a capacity of 14.8 ml (0.5 fluid ounces) or less, or are manufactured or imported to be packaged in that type of container. These products (e.g. touch-up coatings) differ from typical automotive refinishing coating in that they are typically used by automobile owners to repair minor scratches or nicks, requiring no mixing prior to application, and are sold in small containers. Touch-up coatings are considered an insignificant emission source representing negligible risk to the environment or human health.
  • Automotive refinishing products that are used during the manufacturing of motor vehicles or mobile equipment, or their parts. These products will be addressed through future measures aimed at reducing VOC emissions from industrial point sources.
  • Automotive refinishing products that are used as solvents in laboratories for analysis, scientific research, or as laboratory samples or analytical standards. The exemption has been revised to provide clarity and to apply to non-compliant automotive refinishing products for testing their properties (such as performance, colour, durability, gloss, etc.) as part of the laboratory business or for manufacturers and importers. The product quantities used and the associated VOC emissions are very small, representing negligible risk to environment or human health.
  • Automotive refinishing products that are manufactured, imported, offered for sale or sold for use in a chemical agent resistant coating (CARC) for motor vehicles, mobile equipment or their parts, for use in a military operation. The use of CARC is considered critical for military applications as these products render the vehicle and equipment impervious to chemical agents and resistant to degradation by decontaminant agents. This exemption is provided since it is currently not possible to reformulate the products to meet the low VOC concentration requirement without compromising the performance requirements. In addition, the product quantities used and the associated VOC emissions are small, representing negligible risk to the environment or human health.
  • Automotive refinishing products for use in mobile restoration services that are manufactured, imported, offered for sale or sold in a container with a capacity of 118.3 ml (4 fluid ounces) or less, or are manufactured or imported to be packaged in that size container. This exemption has been provided to allow independent mobile automotive paint touch-up operators to use non-compliant products. The application of such products is limited to small repairs such as key scratches, paint chips and minor bumper scuffs, and use small amounts of the product. The VOC emissions from these types of applications are low as compared to similar repairs done in automotive repair shops.

Prohibition

Subject to the above exceptions, the Regulations prohibit the manufacture, offer for sale, sale or import of automotive refinishing products for use in Canada with concentrations of VOC in excess of the category-specific limits set out in the Schedule of the Regulations.

Permits

Following internal review, Environment Canada has revised the Regulations to include a provision for permit applications for products that would not otherwise be able to meet the regulatory requirements for technical or economic reasons. The permits will be issued to automotive refinishing product manufacturers and importers to allow them to continue manufacturing or importing these products provided the conditions of issuance outlined in the Regulations are met. Permit applications are to be submitted to the Minister of Environment and may be granted provided that the applicant:

  • provides evidence to show that it is not technically or economically feasible to reduce the concentration of VOCs in the products as given in the Regulations;
  • prepares a plan identifying the measures that will be taken to ensure that these products will meet the VOC concentration limits; and
  • specifies the period within which the above mentioned plan will be fully implemented, which shall not exceed four years from the date the original permit is issued.

The information to be provided in the permit application is outlined in section 4 of the Regulations. The permit will be valid for a period of two years from the date it is issued, and can be extended once for an additional two years provided the application is submitted prior to the expiry of the first period. The conditions under which a permit renewal may be granted are the same as those for the original permit. After a permit for the manufacture or import of a product expires, the sale and offer for sale of the product will have a sell-through period.

Other provisions

The Regulations also include provisions defining labelling and record keeping requirements. These provisions are included to facilitate compliance and enforcement of the Regulations. For enforcement purposes, the record keeping requirements were modified to specify the type of information required to determine compliance with the Regulations, define the records that are most relevant for demonstrating compliance and the information that should be retained in Canada to ensure that Environment Canada’s enforcement officers have access to the records.

Following comments received from stakeholders, the method for the determination of VOC concentrations has been removed. The intent of referencing the test method in the proposed Volatile Organic Compound (VOC) Concentration Limits for Automotive Refinishing Products Regulations (the proposed Regulations) was for the purpose of enforcement activities by Environment Canada. While the regulated community would still need to test the automotive refinishing products to ensure they are in compliance, there are no mandatory testing requirements. In order to reduce confusion, references to the specific test method have been removed from the final regulatory text.

Coming into force

The Regulations are made pursuant to subsection 93(1) of the Canadian Environmental Protection Act, 1999 (CEPA 1999) and will come into force one year after the Regulations are registered. This will allow a one year transition period to automotive refinishing product manufacturers and importers.

In addition, for each automotive refinishing product category, there would be an 18 month sell-through period after the Regulations are registered. The sell-through period is intended to provide the industry with time to sell automotive refinishing products manufactured or imported and to provide sufficient time to all repair shops to transition to low VOC automobile refinishing products prior to the coming into force date as set out in the Regulations. This change is expected to allow automotive repair shops adequate time to convert their equipment to use low VOC automotive refinishing products.

These revisions to the coming into force dates of the Regulations have been made in response to comments from industry.

Background

The use of automotive refinishing products contributes to Canadian urban VOC emissions. In 2005, urban VOC emissions (excluding emissions from upstream oil and gas, oil sands development and forest fires) in Canada were estimated to be 1 383 kilotonnes. (see footnote 7) Solvent use accounted for 348 kilotonnes of these emissions, with automotive refinishing products accounting for 5.5 kilotonnes. (see footnote 8)

The Government of Canada has undertaken a number of actions to reduce air pollution to protect the environment and health of Canadians. These are summarized below.

Actions in Canada

In 1999, scientific assessments (see footnote 9), (see footnote 10) of PM and O3 found that these substances met the criteria set out in section 64 (see footnote 11) of CEPA 1999 and were added to its Schedule 1 (List of Toxic Substances). In addition, as a result of this scientific assessment, those VOCs which contribute to the creation of PM and O3 were also found to meet the criteria set out in section 64 of CEPA 1999 and were added to the List of Toxic Substances in 2003. (see footnote 12) This made available the full range of management instruments under CEPA 1999, including regulations under subsection 93(1) for controlling these emissions.

In June 2000, to address the concerns associated with smog formation, the Government of Canada and all provinces and territories except Quebec adopted the “Canada Wide Standards for Particulate Matter (PM) and Ozone”. To achieve these standards, a number of actions need to be taken to reduce the emission of several air pollutants, including actions to reduce VOCs.

In December 2000, in order to address the Canada-U.S. transboundary flows of air pollutants (O3), Canada and the U.S. signed the Ozone Annex to the 1991 Canada-U.S. Air Quality Agreement, (see footnote 13) with commitments to reduce VOC emissions from consumer and commercial products, which include automotive refinishing products.

On March 27, 2004, the Ministers of the Environment and of Health published Canada’s Federal Agenda for Reduction of Emissions of Volatile Organic Compounds (VOCs) from Consumer and Commercial Products (see footnote 14) (the Federal Agenda). The Federal Agenda outlined the Government of Canada’s plan to develop regulations under CEPA 1999 to set VOC emission standards for automotive refinishing products.

In October 2006, the Government of Canada published the Notice of Intent to develop and implement regulations and other measures to reduce air emissions (see footnote 15) (notice of intent). The notice of intent outlined the approach that would be taken for reducing emissions of air pollutants including a commitment to propose regulations that would limit the concentration of VOCs in automotive refinishing products.

In April 2007, the Government of Canada released the Regulatory Framework which identified the reduction of VOC emissions from automotive refinishing products as part of the Clean Air Regulatory Agenda (CARA). The key components of the Regulatory Framework as they relate to consumer and commercial products include:

  • significant reductions of VOC emissions and other smog precursors from industrial, commercial and consumer products;
  • bringing forward regulations between 2007 and 2010 to limit VOC concentrations in automotive refinishing products, architectural coatings, and certain consumer products; and
  • aligning the VOC concentration limits, where appropriate, with similar requirements in the U.S.

Acting on this commitment, the Government of Canada published the proposed Regulations in the Canada Gazette, Part I on April 26, 2008.

Actions in other jurisdictions

A number of actions have been taken in the U.S. and EU to control the concentrations of VOCs in automotive refinishing products and are described in the following sections.

United States Environmental Protection Agency

In 1998, the United States Environmental Protection Agency (U.S. EPA) promulgated the National Volatile Organic Compound Emission Standards for Automobile Refinish Coatings (the National Rule). (see footnote 16) The National Rule specifies VOC concentration limits for seven categories of automotive refinishing products.

California Air Resources Board

California was the first jurisdiction to enact rules for VOC concentration limits for automotive refinishing products, in an effort to address the smog problem affecting many of its cities. The severity of smog problems in the Los Angeles County air basin prompted the California South Coast Air Quality Management District (SCAQMD) in 1988 to develop VOC concentration limits for certain types of automotive refinishing products. Over the years, these limits have gradually been adjusted such that they are now the most stringent limits in the United States.

In 2005, the California Air Resources Board (CARB) developed a set of limits that were recommended for use by the districts in California. The VOC concentration limits that were set by the CARB suggested control measure (SCM)(see footnote 17) for automotive refinishing product categories are either equivalent to the SCAQMD limits, or are more stringent. The recommended effective dates for the CARB SCM vary by automotive refinishing product category, and are to be implemented by 2009 or 2010. In 2005, SCAQMD amended the Motor Vehicle and Mobile Equipment Non-Assembly Line Coating Operations Rule (see footnote 18) to align with the CARB SCM. Other districts in California are also considering amending their rules to align with the CARB SCM.

Ozone Transport Commission

In 2000, the Ozone Transport Commission (OTC), which represents 12 northeastern states and the District of Columbia, developed a Model Rule for Mobile Equipment Repair and Refinishing for state regulations based on the VOC concentration limits of the U.S. EPA National Rule. The OTC is currently evaluating the potential for aligning their VOC concentration limits for automotive refinishing products with the CARB SCM standards.

Lake Michigan Air Directors Consortium

The main purpose of the Lake Michigan Air Directors Consortium (LADCO), which represents the states of Illinois, Indiana, Michigan, Wisconsin and Ohio, is to provide technical assessments for and assistance to its member states on problems of air quality, and to provide a forum for its member states to discuss air quality issues. Illinois, Indiana, and Wisconsin have adopted the VOC concentration limits of the U.S. EPA National Rule, with additional emission controls on activities related to automotive refinishing. In 2005, LADCO commissioned an assessment of the Reasonably Available Control Technology (RACT) for VOC concentration limits for automotive refinishing products. This assessment recommended adopting the SCAQMD Rule as a control measure for strengthening RACT.

European Union

In April 2004, the EU finalized a directive that is expected to reduce VOC emissions from coatings, including automotive refinishing products. The directive, effective January 1, 2007, sets VOC concentration limits for seven categories of automotive refinishing products.

Industry profile

Paint and coating manufacturing sub-sector

The world automotive refinishing products market is dominated by five large companies with manufacturing facilities located outside of Canada. These companies supply a large portion (approximately 85%) of the global market. Information collected from automotive refinishing product manufacturers through a 2003 Environment Canada voluntary survey, (see footnote 19) indicated that these companies also supply 85% of the Canadian automotive refinishing products market. Canadian automotive refinishing product manufacturers are small and medium-sized enterprises (SMEs). These SMEs are mainly involved in the production of automotive refinishing additives, surface cleaners and other niche products (such as truck bed liner coatings, temporary protective coatings and underbody coatings) and supply approximately 15% of the Canadian automotive refinishing products market.

In Canada, revenue of the paint and coating manufacturing sub-sector (which includes the automotive refinishing product manufacturers) was approximately $2.3 billion in 2005, and its gross domestic product (GDP) (see footnote 20) growth rate was approximately 2.5% between 2000 and 2005. Employment in the paint and coating manufacturing sub-sector accounted for 7.5% of the labour force in the chemical manufacturing sector. In 2005, Canada had a trade deficit of $517.5 million, with the United States being the main trading partner for both imports and exports. Total exports were $431.4 million, with exports to the U.S. accounting for nearly $391.3 million or approximately 91% of total exports, followed by China at $5.3 million or 1.2% in 2005. In the same year, imports were approximately $949 million, with the U.S. accounting for $895 million or approximately 94% of total imports, followed by Germany at $13.1 million or 1.4%.

Automotive refinishing and repair sub-sector

The automotive refinishing and repair sub-sector is the primary user of the automotive refinishing products, with an estimated 8 100 automotive refinishing and repair establishments (repair shops) in Canada. It is estimated that 27 000 people are employed by these repair shops.

The repair shops can be categorized into small, medium and large repair shops based on employment, process or revenue. Repair shop categorization is as follows:

Table 1: Repair Shop Categorization

Repair Shop Size

Employees

Gross Annual Revenue

Process

Small

1 to 3

< $200,000

Without paint mixing machines and 1 paint booth

Medium

3 to 5

$200,000 - $400,000

With paint mixing machines and 1-2 paint booths

Large

6 to 8

> $400,000

With paint mixing machines and more than 2 paint booths

Irrespective of the categorization basis, the sub-sector is dominated by small- and medium-size repair shops accounting for approximately 70% of the repair shops in the sub-sector. The regional distribution of the repair shops is directly correlated with population density, with large- and medium-size repair shops concentrated in major urban centres and small repair shops catering to smaller towns and remote areas. The majority of repair shops are located in Ontario (31%) and Quebec (29%). The western provinces and territories account for an additional 29%, with an equal share of small, medium and large repair shops. The remaining 11% of the repair shops are located in the Atlantic Provinces, of which approximately 60% are small repair shops.

Regulatory and non-regulatory options considered

A number of alternatives, including regulatory and non-regulatory options, were considered to achieve the estimated reduction in VOC emissions from automotive refinishing products, and are discussed below.

Status quo

Scientific evidence (see footnote 21) indicates that the presence of VOCs in the environment is primarily due to human activity and that they are precursors to substances that are harmful to human health and the environment. Since the early 1990s, a number of voluntary actions have been implemented to reduce VOC emissions. However, evidence shows that these actions are not able to provide the desired reduction in VOC emissions. Furthermore, maintaining the status quo would not result in achieving the reductions in VOC emissions outlined in the Regulatory Framework nor in meeting Canada’s international commitments under the Ozone Annex.

Market-based instruments

Market-based instruments, which include emission trading programs and fees/charges, were given due consideration. Market-based instruments work by providing incentives aimed at changing consumer and producer behaviour. When properly designed and implemented, market-based instruments can promote cost-effective ways of dealing with environmental issues. In addition, they can provide long-term incentives for pollution reduction and technological innovation.

An emission trading system was considered as a means of managing emissions of VOCs from the use of automotive refinishing products. However, a trading system would not function at the point of use since there are a large number of widely dispersed users. There would also be significant issues around the measurement and verification of emission reductions. A trading system could be envisioned at the manufacturer level; however, it is unlikely that such a system would be effective or efficient. Such a system would require setting a cap on the quantity of VOCs used for each of the facilities manufacturing automotive refinishing products. Moreover, a mechanism would need to be introduced to ensure that VOC reductions from automotive refinishing products or substances covered under other measures are not included in the cap, nor are VOCs in automotive refinishing products for export or intermediate processes. In addition, nearly 85% of the automotive refinishing products are imported. As these manufacturers are located abroad, a trading system would be difficult to design and implement due to jurisdictional considerations. This lack of simplicity would raise the administrative costs of the mechanism substantially. A firm-size threshold would also need to be introduced so that small, niche manufacturers would not bear the relatively large administrative costs of the trading system. It is expected that the remaining large manufacturers would be limited in number and there would be insufficient differentiation in the marginal cost of abatement to support a trading system.

For the purpose of achieving VOC emission reductions, fees and charges were considered and analyzed as potential measures. Fees and charges could be levied on products containing VOCs above the proposed concentrations. It is expected that such a system would require a significant amount of time to implement, and as technology evolves, it would be costly and time consuming to make changes to the fee structure to achieve additional reductions. This approach was therefore also rejected.

The use of economic instruments, therefore, does not present itself as an effective option for reducing VOC emissions.

Additional voluntary measures

To date, voluntary measures have been the only mechanisms used in Canada to reduce VOC emissions from automotive refinishing products. So far voluntary action, education and awareness programs have made limited progress in lowering VOC emissions from the automotive refinishing sub-sector. For example, in 1998 the CCME National Standards for the Volatile Organic Compound Content of Automotive Refinish Products (see footnote 22) (CCME product standards) and the CCME National Standards and Guidelines for the Reduction of Volatile Organic Compounds from Canadian Commercial/Industrial Surface Coating Operations — Automotive Refinishing (see footnote 23) (CCME guidelines) were published. The CCME product standards specified VOC content limits for several automotive refinishing product categories, while the CCME guidelines established operating standards for new and existing surface coating operations of automotive refinishers and outlined a code of good practice for all operations. However, as there was limited adoption of these product standards and guidelines, the reductions in VOC emissions were minimal. Greater reductions are needed to achieve the type of reductions outlined in the Regulatory Framework. The main concern with voluntary instruments is their lack of effectiveness in achieving significant VOC emission reductions. Since the majority of the automotive refinishing products are imported, it is difficult to leverage importers and foreign manufacturers to use the voluntary code. Furthermore, implementing voluntary measures would not enable Canada to meet its international and domestic commitments more effectively. Since the existing voluntary measures have resulted in minimal reductions of VOC emissions, additional voluntary measures are unlikely to result in greater reductions in VOC emissions and are not being considered any further as an option.

Regulations aligned with CARB suggested control measure

Developing regulations in Canada that are aligned with CARB limits was considered to be the most practical and effective way of reducing VOC emissions. Being mandatory, regulatory measures would provide the required level of certainty.

During the period 2003 to 2006, Environment Canada collected VOC concentration data for a broad range of automotive refinishing products sold in Canada. This data was modelled against various VOC concentration limits in other U.S. jurisdictions. The model indicated that the greatest potential reduction in Canada would be achieved by establishing VOC concentration limits similar to CARB SCM. Aligning VOC concentration limits with CARB limits would ensure that Canadian firms adopt state of the art technology. Other jurisdictions in the U.S., such as SCAQMD, have established VOC concentration limits similar to CARB SCM and OTC is in the process of evaluating the limits established by CARB. Therefore, aligning the Regulations with CARB SCM will facilitate consistency across North America, provide a level playing field to manufacturers and importers of automotive refinishing products and provide consistent treatment across jurisdictions.

Benefits and costs

An analysis of benefits and costs was conducted to assess the economic impact of the Regulations on stakeholders, including the Canadian public, industry and Government.

Analytical framework

The approach to cost-benefit analysis identifies, quantifies and monetizes, where possible, the incremental costs and benefits associated with the Regulations. The cost-benefit framework consists of the following elements:

Incremental impact: Incremental impacts are analyzed in terms of incremental emission reductions, costs and benefits to all interested parties as well as the economy. The incremental impacts were determined by comparing two scenarios: one with and the other without the Regulations. The two scenarios are presented below.

Timeframe for analysis: The time horizon used for evaluating the economic impacts is 25 years. The first year of the analysis is assumed to be mid-2010, when the prohibitions applicable to the manufacture and import outlined in the Regulations are expected to come into force. The effective dates would be determined by the date on which the Regulations are registered.

Approach to cost and benefit estimates: All costs have been estimated in monetary terms to the extent possible and are expressed in 2006 Canadian dollars. Whenever this was not possible, due either to lack of appropriate data or difficulties in valuing certain components or data inputs, the cost item has been evaluated in qualitative terms.

Attempts were made to estimate the benefits associated with the Regulations. However, due to modelling constraints it was not possible to analyze the impact of VOC emission reductions from automotive refinishing products on ambient air quality improvement and related environmental and human health benefits. Therefore, a qualitative assessment of benefits was done by considering benefit estimates obtained in other jurisdictions.

Discount rate: A discount rate of 5% was used for this analysis. Since benefits could not be estimated, only the present value of the stream of costs was calculated. A sensitivity analysis using 3% and 7% discount rates to test the volatility of cost estimates to the discount rate was also conducted.

Cost estimates are based on Environment Canada’s voluntary survey conducted in 2003, (see footnote 24) supplemented by additional information from other sources and an economic study conducted in 2006. (see footnote 25) The data has been extrapolated to provide estimates for the entire Canadian market for automotive refinishing products.

Business as usual scenario

The business as usual (BAU) scenario assumes that automotive refinishing products manufactured and imported for sale in Canada that do not comply with the regulatory limit (non-compliant automotive refinishing products) have a compound annual growth rate of 1.45%. (see footnote 26) The demand for automotive refinishing products is largely driven by the number of automobiles requiring repairs. Factors such as stricter laws governing road safety, the increase in the number of damaged vehicles declared total losses, replacement of damaged parts instead of repairs and a decrease in the number of small repair jobs would all tend towards to a decline in the overall number of repairs in the sub-sector. However, due to population growth, the number of automobiles on the roads is expected to increase, resulting in an increase in the number of vehicles requiring repairs and the demand for automotive refinishing products. Therefore, to meet the demand, it is reasonable to expect that manufacture and import of automotive refinishing products will continue to grow at the estimated annual rate of 1.45% over 25 years.

The VOC emissions calculated as a percentage of automotive refinishing products are also assumed to grow as the quantity of these products manufactured, imported and used increases. It is estimated that the level of VOC emissions would, in the absence of the Regulations, increase from approximately 5.6 kilotonnes in 2010 to approximately 8.4 kilotonnes in 2034.

Regulatory scenario

The regulatory scenario is based on the implementation of the provisions of the Regulations, taking into account the prescribed requirements and their implementation schedule as well as the coming into force dates of the Regulations.

As in the BAU scenario, it is expected that the automotive refinishing products manufactured and imported would grow at the rate of 1.45% over 25 years. The regulated scenario assumes implementation of the regulatory provisions according to the timeline set out in the Regulations. Following the effective date for sale and offer for sale prohibition, the VOC concentrations in automotive refinishing products are expected to meet the levels identified in the Schedule of the Regulations, with a corresponding decrease in total VOC emissions. Due to the continued growth in demand for, and consumption of, automotive refinishing products, it is expected that following the initial reduction, total emissions would continue to grow at a rate of 1.45% per year. However, the concentration of VOCs in automotive refinishing products would be considerably less with the regulatory concentration limit than under the BAU scenario. As mentioned above, the prohibition on import and manufacture of automotive refinishing products will come into force one year after the Regulations are registered. The prohibition on sale and offer for sale of automotive refinishing products is scheduled to come into force 18 months after the Regulations are registered. Once the regulatory concentration limits are in place, total VOC emissions from compliant automotive refinishing products are estimated to be approximately 5 kilotonnes in 2034. These emissions are 3.4 kilotonnes lower than in the BAU scenario.

Figure 1 presents the estimated emissions trends for 25 years under these two scenarios.

Figure 1: Total Estimated VOC Emissions from Automotive Refinishing Products (2008 to 2034)

Figure 1 Total Estimated VOC Emissions from Automotive Refinishing Products

The cumulative reduction in VOC emissions over 25 years is estimated to be 71.1 kilotonnes (or an average annual reduction of 40% per year) as a result of the VOC concentration limits. The estimates for the reductions in VOC emissions (published in the Canada Gazette, Part I) have shifted due to the change in the coming into force dates of the Regulations. While the prohibitions on manufacture and import will come into force one year after the Regulations are registered, the prohibitions on sale and offer for sale will come into force 18 months after the Regulations are registered. As non-compliant automotive refinishing products will be available during this 18-month period, the reductions in VOC emission are assumed to be realized after the prohibition on sale and offer for sale comes into force.

Costs to industry

Automotive refinishing products manufacturers

Based on information collected by the Environment Canada survey, the majority of current automotive refinishing products will not meet the VOC concentration limits. In order to meet the regulatory requirements, manufacturers could either reformulate or discontinue non-compliant automotive refinishing products and increase the volume of compliant products. In most cases, compliant automotive refinishing products are currently available for most of the product categories, and it is therefore expected that reformulation of non-compliant products would not be required. The non-compliant automotive refinishing products could be simply replaced with the existing compliant ones.

The impact of the Regulations on the large global automotive refinishing products suppliers will be negligible. These companies have already transitioned to automotive refinishing products with low concentrations of VOCs in order to meet the regulatory requirements in Europe and the U.S. Although these companies are currently supplying the Canadian market with automotive refinishing products that have high concentrations of VOCs, they have indicated that compliant automotive refinishing products are available and can be supplied at no or minimal additional cost. According to the information provided in the Environment Canada survey, some costs may be incurred during transportation and storage of automotive refinishing products by the manufacturers. This incremental cost could be reflected in a higher price of the automotive refinishing products.

Automotive refinishing product suppliers may also incur costs associated with disposal of non-compliant products, after the concentration limits become effective. The proposed Regulations have been revised to include an 18-month sell-through period intended to minimize the likelihood of negative impacts on automotive refinishing product suppliers. The sell-through period would allow the automotive refinishing product suppliers to continue to market and sell non-compliant products manufactured or imported into Canada prior to the effective dates. Notwithstanding this allowance, limited disposal costs may still be incurred following the expiry of the sell-through period, as suppliers recycle or dispose of the remaining non-compliant automotive refinishing products. However, the impact of the Regulations on automotive refinishing product suppliers would likely be negligible.

Small and medium-sized manufacturers in Canada would be impacted by the Regulations, as some of them may need to reformulate their products. Manufacturers in Canada may incur some incremental costs of producing automotive refinishing products separately for domestic and export markets. Manufacturers are expected to incur the latter costs in cases where the increased cost of reformulated products negatively affects their competitiveness in international markets. Due to insufficient data, it is not possible to quantify these impacts, but they are expected to be minor.

Automotive refinishing products manufacturers may also incur some administrative costs which primarily relate to the record keeping requirements of the Regulations. The maintenance of records for enforcement activities is similar to those required for tax purposes. Since no additional records would need to be maintained for these Regulations, the costs are expected to be negligible and have not been calculated for the purpose of this analysis.

Automotive refinishing and repair sub-sector

There are approximately 8 100 repair shops in Canada, of which approximately 72% are small repair shops and the remaining 28% are categorized as medium and large. To facilitate the analysis, the repair shops have been further classified on the basis of the paint mixing equipment. It is estimated that half of the small repair shops do not have paint mixing machines.

The incremental recurring costs include expenditures on automotive refinishing products, which vary with the size of the repair shop. For example, a small repair shop may spend approximately $7,000 to $15,000, while a large repair shop may spend from $50,000 to $70,000 annually on automotive refinishing product purchases. An increase in the price of these products would, therefore, result in an increase in the recurring costs to the repair shops.

The incremental one-time costs to repair shops include investments in new equipment or upgrades to existing equipment, to be able to use the compliant automotive refinishing products. These repair shop conversion investments in spray guns, gun cleaning systems, compressors, storage heaters, air blowers, paint booth air enhancement equipment, new booths and compressed air filtration systems are estimated as one-time costs. In addition, the repair shops would also need to dispose of non-compliant automotive refinishing products and replace their inventory with compliant ones. In subsequent years, the incremental recurring costs would consist primarily of the price differential between compliant and non-compliant automotive refinishing products.

In addition to these costs, the repair shops will also incur training costs for all personnel involved in automotive refinishing activities, especially in the application of compliant automotive refinishing products.

The main cost assumptions include the following:

  • each repair shop would purchase one gun cleaning system, air blowers and storage heaters and one spray gun per painter;
  • repair shops with mixing machines would also invest in compressors and compressed air filtration systems;
  • small repair shops with mixing machines would incur costs to dispose of and replace non-compliant automotive refinishing products and purchase colour tools. An estimated 4% of these repair shops would also invest in new paint booths;
  • seventy-five percent of the medium and large repair shops would incur costs for booth air enhancements, 20% of them would invest in new booths and 40% would purchase compressors;
  • all one-time equipment costs have been annualized over a 10-year period at a 5% interest rate. After 10 years, no additional equipment costs would be incurred by the sub-sector as a result of this Regulations;
  • ninety-five percent of the small repair shops without mixing machines are assumed to incur one-time equipment costs in the first year when the prohibition on manufacture and import comes into force. The remaining 5% of the small repair shops are assumed to incur these costs in the second year when the sale and offer for sale prohibition comes into force.
  • all repair shops with mixing machines are assumed to incur one-time equipment costs in year one when the prohibition on manufacture and import comes into force.
  • training costs would be spread over an 18-month period after the Regulations are registered. In subsequent years no incremental training costs are expected to be incurred;
  • all shops located in Ontario will incur a cost to apply for a certificate of approval; and
  • all repair shops would incur a 5% increase in the costs for automotive refinishing products in the first five years following the coming into force of the prohibition on manufacture and import. During the remainder of the analysis period, the estimated increase in the recurring costs is assumed to be approximately 2.5%.

The incremental impact of the Regulations on recurring costs is a function of the price of the automotive refinishing products and the quantity used. Discussions with automotive refinishing product manufacturers and the Canadian Paint and Coatings Association (CPCA) indicate that the incremental impact is expected to include both an incremental cost due to higher product prices and an incremental benefit due to a reduction in the volume of refinishing product required to complete repair to an automobile. The CPCA, based on the experience in EU countries, estimates the increase in recurring costs to range from 0% to 5%. It is likely that the price of the automotive refinishing products would be higher only in the initial years, after which it is expected to stabilize at lower levels. It is also expected that, as repair shops gain experience in the use of paints with low concentrations of VOCs, the repair shops would improve the efficiency with which the products are applied. All these factors are expected to lower the overall recurring cost impact within five years of the coming into force of the Regulations. Due to a lack of verifiable data on the actual increase in recurring costs to repair shops in Canada, a range of 2.5% to 5% has been assumed for this analysis.

For repair shops located in Ontario, any modifications that affect the air emissions from repair shops requires them to apply for a certificate of approval from the Ontario Ministry of Environment. For this reason, repair shops in Ontario will incur additional costs. The certificate of approval application cost is $600 per application and the cost for a modernization study ranges from $800 to $1,500. For the purpose of analysis an average cost of $1,100 for a modernization study has been assumed.

Based on these assumptions, the compliance costs for the automotive repair sub-sector are presented in the following table.

Table 1: Present Value of Incremental Cumulative Costs to Automotive Repair Sub-Sector — 2010 to 2034 (in million $)

Incremental Costs

Small Shops Without MM 2

Small Shops With MM 2

Medium and Large Shops

All Shops

One-time equipment costs

8.0

43.0

90.6

141.6

Automotive refinishing product costs

14.6

44.0

66.6

125.2

Training costs

4.1

24.8

26.7

55.6

Certificate of approval costs1

1.1

1.6

1.4

4.1

Total costs

27.8

113.4

185.3

326.5

Numbers may not add up to totals due to rounding.
1 The certificate of approval costs will be incurred only by automotive repair shops located in Ontario.
2 MM refers to paint mixing machines.

It is estimated that the present value of recurring costs and one-time investments in equipment to upgrade the repair shops will be $326.5 million. Given the level of uncertainty with regard to the incremental impact on automotive refinishing product prices and volumes of product used, a sensitivity analysis was conducted to assess the impact of varying the percentage increase in the price of automotive refinishing products from zero to 15%. The total incremental costs could, therefore, vary from approximately $201 million in the best-case scenario (0%) to $776 million (15%) in the worst-case scenario.

It is expected that the automotive refinishing product manufacturers will provide some support for training for their major customers, the large automotive repair shops. As the extent of this support is not known, it was not possible to evaluate the magnitude or importance of this cost to the automotive refinishing product manufacturers. Training costs have therefore been assigned in full to the automotive repair shops. However, it is reasonable to assume that the actual impact of the proposed Regulations on the automotive repair shops will be less than is estimated in this analysis, as some of the training costs may in fact accrue to the automotive refinishing product manufacturers. While this does not affect the incremental cost of the Regulations, it may have an impact on the profitability of some repair shops.

Small and medium-size automotive repair shop may be able to obtain financial assistance under the Canada Small Business Financing Program administered by Industry Canada. Since April 2009, automotive repair shop may be able to receive up to $350,000 in financing for the purchase or improvement of real assets such as land, buildings, equipment and leasehold improvements. Financial assistance from the Government or training from paint manufacturers would help reduce the incremental compliance costs in the initial years of the Regulations.

Costs to the Government

The federal government is expected to incur costs for implementing the Regulations. Government costs include enforcement and compliance promotion activities (including costs to administer the Regulations). These costs are presented in the following table.

Table 2: Present Value of Incremental Cumulative Costs to Government — 2010 to 2034 (in million $)

Incremental Costs

Present Value

Enforcement

3.3

Compliance promotion

0.4

Total cost to Government

3.7

With respect to enforcement costs, in the first year following the coming into force of the Regulations, an estimated undiscounted budget of $279,850 will be required. This includes an estimated one-time undiscounted cost of $250,000 for training enforcement officers, $15,350 for inspections (which includes operations and maintenance costs, transportation and sampling costs), $14,300 for investigations and $200 for measures to deal with alleged violations (including environmental protection compliance orders and injunctions).

For the subsequent nine years, the undiscounted enforcement costs will require an estimated annual budget of $447,350, which will include costs for inspections, investigations, measures to deal with alleged violations and prosecutions.

Compliance promotion activities are expected to include mail-outs of the Regulations, developing and distributing promotional materials (i.e. a fact sheet or material on the internet), attendance at trade association conferences and presenting workshops/ information sessions in order to explain the Regulations. Compliance promotion activities may also include responding to and tracking inquiries in addition to contributing to the compliance promotion database.

In the first year following the coming into force of the Regulations, compliance promotion activities are estimated to require an annual undiscounted budget of $117,000. In years two and three, compliance promotion activities are expected to require an estimated annual budget of $150,000, as activities may increase in intensity. In years four and five, compliance promotion activities are expected to be limited to maintenance levels and are estimated to require an additional annual budget of $15,000. It should be noted that the intensity and level of effort associated with these activities may change when compliance analyses are completed or if unforeseen challenges with respect to compliance arise.

The Government of Canada will also incur some administrative costs associated with the processing of permits. The cost for processing one permit application — issuing and renewal — is estimated to be about $3,000 to $4,000. These incremental costs have not been calculated, as the number of permit applications that would be received and processed is not known. However, it is anticipated that only a limited number of permit applications will be received. Therefore, the associated costs are likely to be negligible compared to the total incremental cost to the Government of Canada.

The Ontario Ministry of Environment will experience a slight increase in activity between 2010 and 2013 as automotive repair shops submit their certificate of approval applications. It is estimated that approximately 2 350 repair shops will apply for the certificate of approval as a result of these Regulations. The Ontario Ministry of Environment is not expected to incur any incremental costs for processing certificate of approval applications, as these are normally recovered from the repair shop owners as application fees.

Total costs

The present value of total incremental one-time equipment costs to industry is estimated to be $141.6 million and $125.2 million for automotive refinishing products. The industry is also estimated to incur an incremental cost of $55.6 million for training. The incremental cost to repair shops in Ontario for obtaining a certificate of approval is estimated to be $4.1 million. The present value of total incremental costs to industry is, therefore, estimated to be $326.5 million.

The present value of federal government enforcement costs is estimated to be $3.3 million, while compliance promotion costs are estimated to be $0.4 million. The present value of total costs to the federal government is therefore estimated to be $3.7 million.

The present value of total industry and government costs associated with the Regulations is estimated to be approximately $330.2 million.

The VOC concentration limits for automotive refinishing products are expected to result in a cumulative reduction of 71.1 kilotonnes in VOC emissions over 25 years. Therefore, the estimated cost per tonne of VOC emission reduction associated with the Regulations is estimated to be approximately $4,644.

Distributional impacts on the automotive repair shops

A distributional analysis was conducted using data on the number of repair shops that will be impacted in each of the three size categories and across regions. The analysis showed that Quebec has a larger share of small shops with no paint mixing machines (approximately 38%), while the share of medium and large shops in Ontario is higher at approximately 36%. As a result, approximately 35% and 24% of the total costs will be borne by the repair shops in Ontario and Quebec, respectively. Repair shops in Ontario will incur additional costs, as they will need to apply for a certificate of approval for air emissions. This is estimated to result in an incremental cost of approximately $3.9 million to repair shops in Ontario.

It should be noted that the impact on repair shops is expected to be relatively higher in the first two years of the Regulations coming into force, due to the incremental costs incurred by the repair shops for training and investment in equipment.

Comparing the significance of the incremental costs to average revenues for the three size categories, it is estimated that the incremental cost will be less than 1% of average revenue of $400,000 for small shops without mixing machines. With respect to small repair shops with mixing machines as well as the medium and large shops (with revenue of $600,000 and $800,000, respectively), the incremental costs represent a share of 2% to 2.5% of average annual revenue. Considering the assumption that the automotive product manufacturers would provide some training support to the large repair shops in the first year of the Regulations coming into force, it is expected that the magnitude of incremental costs incurred by these repair shops would also be less than 1% of average revenues. While incremental costs represent a relatively small percentage of repair shop revenue, there may be some impacts on profitability. The impact of the Regulations on repair shops’ profitability has not been assessed due to the absence of data on operating costs and profit margins.

Impacts on employment

The Canadian automotive refinishing product manufacturers represent a small percentage of the overall market share of these products. While some of the SMEs are expected to be affected by the Regulations, the impacts would likely be negligible. As such, the impacts on employment for manufacturers are not expected to be significant.

Employment in the automotive refinishing and repair sub-sector is also not expected to be significantly affected. The cost impacts may affect the profitability of some repair shops, especially small repair shops in large urban centres, and this could potentially result in closures and personnel lay-offs. However, since the skilled workers employed in this sub-sector are in high demand, they would likely be absorbed by other repair shops.

Competitiveness

The Regulations establish VOC concentration limits on automotive refinishing products manufactured or imported for use in Canada. The multinational companies that dominate the global automotive refinishing products market also dominate the Canadian market. These companies already produce compliant automotive refinishing products for the European and U.S. markets, products that could be supplied to the Canadian market as well. However, Canadian manufacturers may experience increased production costs if, for example, they have to maintain separate production lines for the Canadian and export markets. Such production cost increases may cause the Canadian automotive refinishing products manufacturers to suffer a loss in competitiveness in export markets. Because Canadian manufacturers export a limited volume of products, the impact on competitiveness is expected to be negligible. Moreover, with the U.S. and the EU progressively adopting stringent VOC concentration limits for automotive refinishing products, competitiveness would no longer be a concern for these manufacturers. Indeed, the competitiveness will increasingly require that companies manufacture products that are compliant with regulations in importing jurisdictions.

There may be some domestic competitiveness impacts for the domestic manufacturers. In particular, it is likely that some of the smaller manufacturers may suffer an unequal share of compliance costs relative to other medium-sized companies. Costs are expected to be an important consideration for these small manufacturers during the first years following the coming into force of the Regulations. As a result, the smaller manufacturers might experience a loss in domestic competitiveness. The precise extent to which the unequal share of costs would affect the competitiveness within the SMEs has not been evaluated due to lack of information.

The automotive refinishing and repair sub-sector in Canada only caters to the domestic market. The magnitude of the competitiveness impact on repair shops is contingent on their ability to absorb the increased costs. The factor restricting repair shops from passing on their increased costs to consumers is the role of the automobile insurance companies. The insurance companies contribute an estimated 58% of all revenues generated by collision and repair shops in Canada, while vehicle owners contribute the balance. The re-organization occurring within the insurance industry is resulting in aggressive cost-cutting efforts in that sub-sector. This has led many collision and repair shops to enter into special or preferred arrangements with insurers that typically reduce their hourly labour rate and revenue per job. The repair shops enter into these agreements with the expectation that the volume of work would increase. However, with the declining trend in accidents and repair jobs, this has not occurred and, in addition, the repair shops are not in a position to increase the repair price. Any repair price increase would mean an increase in insurance premium, and this is unlikely to happen in the short term. The decline in the number of repair jobs results in lower revenues and profit margins for all repair shops.

In general, the incremental cost impacts on repair shops represent a relatively small percentage of revenue and are expected to be manageable. However, there may be conditions under which some repair shops may either close down or consolidate. The factors that could influence closures and consolidations include the ability to pass on increased costs to consumers, level of support for training received from automotive refinishing product manufacturers, competition from other repair shops, location, profitability, etc. While there may be some adverse impacts, it is not possible to assess them with any degree of confidence due to lack of information.

Impacts on consumers

The Regulations are expected to have some impact on consumers to the extent that repair shops are able to pass on some of the incremental costs through higher prices for repair jobs. There is some uncertainty over the magnitude of the costs that would eventually be paid for by consumers. However, due to the pressure from insurance companies and the declining trend in accident repair jobs, it is unlikely that a significant increase in repair costs would result.

Benefits to Canadians

Environment Canada has estimated that the cumulative VOC emission reductions resulting from the Regulations would be 71.1 kilotonnes over 25 years from 2010 to 2034, with an average annual reduction of 40% per year. These reductions, combined with other VOC emission reduction initiatives proposed under the Government of Canada’s Regulatory Framework, are expected to result in an incremental reduction in human and environmental exposure to O3 and PM. These would result in benefits to

  • human health — reduced incidence of premature death, hospital admissions, doctor visits, emergency room visits, lost work and school days, etc.;
  • agriculture and forestry — improved yields; and
  • environment — reduced damage to the ecosystems.

It is currently not possible to quantify and monetize with confidence the benefits directly associated with the reduction of a tonne of VOC from automotive refinishing products in Canada. The expected magnitude of reduction in VOC emissions from the Regulations alone do not allow existing models to accurately detect or measure the impact on air quality, human and environmental health. The interrelationships between different pollutants are non-linear and complex, and it is therefore impossible to isolate the impact of VOC emission reductions from specific sources on air quality and ground-level ozone.

The U.S. EPA and CARB have been unable to precisely isolate and assess potential impacts associated with reductions in VOC emissions alone, despite a consensus that these impacts exist. Average estimates of the benefits from more broadly defined VOC sources, reported by the U.S. EPA, (see footnote 27) range widely from $6,800 to $18,800 per tonne (see footnote 28) of VOC emission reductions. More recently, the U.S. Office of Management and Budget (OMB) (see footnote 29) has published estimates of benefits associated with VOC reductions ranging from approximately $850 to $3,840 per tonne. The EU has also estimated the monetized benefits of reductions for its directive to reduce VOC emissions from paints. (see footnote 30)

Benefit estimates for EU member states range from $800 to $11,600 per tonne of VOC emissions reduced. However, differences in weather patterns, product use, land use, population, population density, architectural value and socio-economic conditions require caution in applying these estimates to the Canadian context.

The estimated low, high and average benefits from the EU and U.S. studies provide evidence of the order of magnitude of potential benefits from reducing VOC emissions.

Table 3: Estimated Benefits of VOC Emission Reductions ($/tonne)

Estimate Source

Low

Average

High

U.S. OMB

$850

$2,345

$3,840

EU

$800

$3,400

$11,600

U.S. EPA

$6,800

$12,800

$18,800

Although benefits of VOC reduction from automotive refinishing products alone are impossible to assess, the overall VOC emission reductions expected from all sources identified in the Regulatory Framework would contribute to improving air quality with consequent human health and environmental benefits. Benefits of reduced emissions of VOCs are expected to occur predominantly in urban areas and in particular in regions with persistently low air quality. Reduced human health risks are expected to also translate into lower health care costs to governments across Canada.

In addition to these direct benefits, the Regulations represent an important step by the Government of Canada towards meeting Canada’s commitments under the Ozone Annex. Meeting these commitments is critical to Canada’s long-term objective of reducing transboundary flows of air pollutants, with significant benefits to human and environmental health.

Conclusions

The cost impacts presented in the preceding sections are summarized in the table below. Without monetized benefit estimates, it is not possible to estimate the net present value of the Regulations. It is expected, however, that in light of the significant adverse health and environmental impacts of ground level O3, PM and smog, and taking into consideration the benefit of meeting Canada’s international commitments under the Ozone Annex, the benefits would likely exceed the costs.

Table 4: Incremental Cost-Benefit Statement (in million $)

Incremental Costs and Benefits

Base Year: 2010

2022

Final Year: 2034

Total (PV) 1 2010-2034

Average Annual

A. Quantified industry costs

Equipment

18.3

-

-

141.6

5.6

Automotive refinishing products

13.5

6.8

6.8

125.2

5.0

Training

58.2

-

-

55.6

2.2

Certificate of approval application

4.3

-

-

4.1

0.2

Total industry costs

94.3

6.8

6.8

326.5

13.0

B. Quantified Government costs

Enforcement

0.3

-

-

3.3

0.1

Compliance promotion

0.1

-

-

0.4

0.02

Total Government costs

0.4

-

-

3.7

0.1

Total costs

94.7

6.8

6.8

330.2

13.1

C. Quantified environmental impacts

Reduction in VOC emissions (kilotonnes)

2.3

2.8

3.4

71.1

2.8

D. Qualitative impacts

Cost — Industry

  • minor additional costs are expected to be incurred by automotive refinishing product manufacturers and importers for transportation and storage;
  • some small- and medium-size manufacturers may incur reformulation costs; and
  • manufacturers and importers of automotive refinishing products who apply for a permit to continue manufacturing and importing products with high VOC concentrations later than 2010 would also incur some additional administrative costs.

Cost — Government

  • the federal government would incur some costs for permit application and processing.

Cost — Canadians

  • negligible increase in automotive repair costs in the event that repair shops are able to pass on their incremental costs to consumers.

Benefit — Canadians

VOC emission reductions under these Regulations, combined with other VOC emission reduction initiatives proposed under the Regulatory Framework, are expected to result in:

  • intrinsic benefits to the environment due to lower VOC emissions;
  • improved yields in agriculture and forestry; and
  • lower levels of VOC emissions would benefit human health as the probability of certain health risks associated with air pollution would be reduced.

Benefit — Industry

  • some benefits to automotive repair shops due to reduction in the quantity of automotive refinishing product used.

Benefit — Government

  • benefits to the federal government due to reduction in expenditure on health services.

1 PV refers to present value

The present value of total incremental costs of the Regulations is estimated to be $330.2 million. The incremental recurring costs for automotive refinishing products are approximately 38% of the total incremental costs. Any increase or decrease in the price of automotive refinishing products would have a significant impact on total incremental costs of the automotive repair shops. One-time investment in equipment represents approximately 43% of total incremental costs and 17% of the costs would be incurred for training. The certificate of approval costs to repair shops in Ontario represent approximately 1.2% of the total incremental costs. The cost to the federal government represents approximately 1.1% of the total incremental cost.

The table below shows the sensitivity of the cost estimates to variations in the discount rate.

Table 5: Present Values of Costs — 2010 to 2034 (in million $)

PV 3 %

PV 5 %

PV 7 %

Costs to industry and consumers

366.7

326.5

294.4

Cost to Government

4.1

3.7

3.4

Total cost

370.8

330.2

297.8

VOC reductions (kilotonnes)

71.1

Cost per tonne

5,215

4,644

4,188

The table above shows that estimates of cost per tonne range between $4,188 and $5,215. Although on the high side, these estimates, when combined with the other two VOC initiatives, would fall within the benefit per tonne estimated from other jurisdictions, as shown in Table 3. It is expected that estimated benefits per tonne of VOC emission reductions would be comparable in Canada.

The extent to which the automotive refinishing and repair sub-sector would be able to pass on the incremental costs to consumers through higher prices would determine the ultimate distribution of costs between repair shops and consumers. From a distributional standpoint, the provinces of Ontario and Quebec would bear a larger share of the costs given the larger share of the affected repair shops in these provinces.

While Ontario and Quebec would incur a larger share of the costs, the benefits of reduced VOC emissions are also expected to occur primarily in these regions, in particular within the Windsor-Quebec corridor. The benefits of reduced VOC emissions are also expected to occur in Vancouver. The cumulative VOC emissions from automotive refinishing products with the regulatory requirements in place are estimated to be 71.1 kilotonnes lower (or an average annual reduction of 40% per year) over the 25-year period compared to the estimated emissions in the absence of the Regulations. By reducing the VOC emissions which are precursors to ground-level ozone, the Regulations would result in a reduction in the human health and environmental risk associated with air pollution, especially in the urban areas with high population densities.

Consultation

In May 2006, the discussion document entitled Discussion Paper for the Development of Regulations Limiting Volatile Organic Compounds in Automotive Refinish Coatings was published by Environment Canada for public comment, ending on October 31, 2006. The document outlined the proposed automotive product categories, concentration limits and approach for the proposed Regulations. Two consultation meetings were held in May and October 2006 with the purpose of clarifying and obtaining feedback on the proposed VOC concentration limits and regulatory requirements. Representatives from industry, industry associations, environmental non-governmental organizations (ENGOs), and government stakeholders participated in the meetings. In order to engage automotive repair shops, the end-users of the automotive refinishing products, and others in the automotive refinishing and repair sub-sector, Environment Canada gave presentations on the proposed Regulations at various locations across Canada, between September 2006 and May 2007. In total, Environment Canada made presentations to over 1 200 persons working in the automotive refinishing and repair sub-sector. Environment Canada also prepared an information sheet on the proposed Regulations, which was available on-line and widely distributed within the automotive refinishing and repair sub-sector. Stakeholders were generally supportive of the proposed Regulations.

In 2006, the CEPA National Advisory Committee (CEPA NAC) and relevant federal government departments were consulted on the proposed VOC concentration limits and regulatory elements. No major concerns were raised by CEPA NAC.

In addition to comments provided at the various consultation meetings, written comments were also provided by participants. A summary of stakeholders’ comments and concerns as they relate to the proposed regulatory requirements and Environment Canada and Health Canada’s responses are presented below.

Coming into force

Initially, Environment Canada had proposed a coming into force date of January 1, 2009. However, industry expressed significant concerns over the proposed deadline. They stated that more time would be required for the implementation of the proposed Regulations, particularly for training the automotive repair shop personnel in the use of automotive refinishing products with low VOCs.

Based on this feedback and on additional information gathered from the experience in the EU and certain districts in California on the transition to automotive refinishing products with low VOCs, Environment Canada delayed the coming into force date by one year, to January 1, 2010.

Impact on small and medium enterprises

Owners and operators of collision repair shops, particularly SMEs, expressed concern regarding the financial cost associated with the transition to compliant automotive refinishing products, including cost for inventory turn-over, new equipment (spray guns and air movement equipment), and training. Automotive refinishing products distributors also expressed concern regarding the cost to dispose of the non-compliant product already purchased and stored in their warehouses.

This issue was taken into consideration in the proposed Regulations to ensure effective regulations while minimizing costs to the automotive refinishing and repair sub-sector. Environment Canada also approached other federal government departments to determine if any government programs were available to assist with the costs to small business. Environment Canada approached Industry Canada and Human Resources and Social Development Canada to identify government programs available to small businesses for financial assistance. At the time, the Canada Small Business Financing Program from Industry Canada was identified to help SMEs get up to $250,000 in financing for the purchase or improvement of real assets such as land, buildings, equipment and leasehold improvements. Environment Canada will continue to work with the industry to identify other possible programs. In addition, as the proposed Regulations did not include any regulatory requirements to manage the final use of the automotive refinishing products, the repair shops would be able to use up any remaining non-compliant products, including colour tints, purchased prior to the effective date given in the proposed Regulations. As a result, the impact on SMEs was not expected to be significant. These factors were expected to help reduce the incremental compliance costs in the initial years of the proposed Regulations.

VOC concentration limits

Manufacturers and importers of automotive refinishing products also expressed concerns regarding the proposed VOC concentration limits for adhesion promoters, primer sealers, and single-stage coatings. They stated that it was currently not technically feasible to reformulate these products to meet the proposed requirements.

Environment Canada had proposed low VOC concentration limits for products where previously collected information suggested that product reformulation to meet the proposed limit was technically feasible. However, the information provided by stakeholders and verified by Environment Canada indicated that the technology was not available for reformulating the products to meet the VOC concentration limit. Therefore, the VOC concentration limits in the proposed Regulations for adhesion promoters, primer sealers, and single-stage coatings were increased to a concentration limit higher than CARB.

Exemptions

It was also recommended that tertiary-butyl acetate (TBAc) or acetic acid, 1,1-dimethylethyl ester be exempted from VOC definition in Schedule 1 of CEPA 1999. Manufacturers asked for the option to be able to use TBAc as a non-VOC substance when formulating certain types of products in order to comply with the VOC concentration limits.

At the time, evaluation of TBAc for its VOC emission contribution was being conducted by Environment Canada. It was expected that the evaluation would be available prior to finalizing the proposed Regulations, and Environment Canada would be in a position to make a final decision on whether or not to exempt the substance.

Stakeholders recommended that automotive refinishing products used for the restoration of antique vehicles, such as lacquers, be exempted from the proposed Regulations.

Lacquers are used mainly by hobbyists for restoration of antiques and represent a small percentage of automotive refinishing products usage. The physical properties of lacquer topcoats make them less desirable than other coating types for refinishing newer vehicles, and their use for new automobiles is decreasing. Moreover, it is not possible to reformulate lacquer topcoats with lower VOC concentration. As a result, Environment Canada included an exemption for lacquer topcoats in the proposed Regulations. This approach is similar to that of the U.S. EPA, which exempts lacquers from their National Rule.

Other comments

Other questions focused on clarification of the elements being considered, including test methods, compliance, and enforcement of the proposed Regulations. These issues were addressed by clarifying the proposed regulatory text.

Consultations on the proposed R egulations following publication in the Canada Gazette , Part I

On April 26, 2008, the proposed Regulations were published in the Canada Gazette, Part I for a 60-day comment period. During this period, Environment Canada received written submissions from 13 stakeholders including six industries, four industry and trade associations, one submission each from an automotive repair shop, government department and a foreign government. All comments received have been considered in finalizing the Regulations.

Some of the more specific comments as they relate to the provisions of the Regulations are discussed in detail below.

Impact on small and medium enterprises

Manufacturers and distributors of automotive refinishing products and the National Automotive Trades Association reiterated their concern regarding the costs associated with the transition to compliant automotive refinishing products and the cost to dispose of non-compliant products.

Recognizing the financial constraints facing automotive refinishing products distributors and the repair shops, Environment Canada has made every effort to ensure effective regulations while minimizing costs to the automotive refinishing and repair sub-sector. The Regulations have been revised to include an 18-month sell-through period which will allow more time for automotive repair shops to transition to compliant automotive refinishing products. The Regulations do not include any requirements for the final use of the automotive refinishing products. The repair shops will therefore have the opportunity to use any remaining non-compliant products, including colour tints, as an alternative to disposal. The sell-through period would also allow the distributors to sell non-compliant products purchased prior to the effective dates of the Regulations. As a result, the impact on SMEs, through reduced compliance costs in the initial years of the Regulations, will be minimized.

VOC list

Some automotive refinishing products manufacturers and the foreign government recommended that Environment Canada develop a working list of VOCs in automotive refinishing products, with associated CAS numbers.

Any list of VOCs would need to be referred to with caution. With thousands of VOC species in existence, any such list is unlikely to be comprehensive. Existing lists in other jurisdictions can include VOC species, but also different distillates, mixes and blends composed of several VOCs. Given this complexity, and the limited value of a non-comprehensive list, Environment Canada decided to not create a VOC list at this time.

Reactivity-based methods for VOC concentration determination

The American Chemistry Council claimed that Canada could more effectively and efficiently reduce smog using a reactivity approach (i.e. based on the ozone-forming potential of each VOC), rather than by limiting the total VOC concentration of regulated coatings according to a mass-based approach.

As indicated in the Regulatory Impact Analysis Statement (RIAS) accompanying the Regulations, the proposed VOC concentration limits were based on the CARB requirements which set mass-based VOC concentration limits. VOC limits based on reactivity are not under consideration at this time for several reasons:

1. Not all industry representatives have been supportive of a reactivity-based approach, and no consensus yet exists among coating manufacturers;

2. More research needs to be done in developing a Canadian ozone-forming potential approach; and

3. A mass-based approach can achieve results now, while a reactivity-based approach would require significant additional research and analysis.

Environment Canada intends to follow the development of reactivity as a basis for VOC controls in coatings in the U.S. and in other parts of the world, and may give consideration to reactivity-based control measures in the future.

Definitions

  • Some industry representatives, the Canadian Vehicle Manufacturers’ Association and CPCA sought clarification regarding the term “on an assembly line” in paragraph 2(d) of the proposed Regulations.

The term “on an assembly line” was used in the paragraph to exempt the use of automotive refinishing products that are applied to motor vehicle or mobile equipment or their component parts during the manufacturing process. Environment Canada reconsidered the use of this term in this context and concluded that it was not essential to convey the intent of the subsection. Therefore, the term “on an assembly line” has been removed from the final regulatory text.

  • Some automotive refinishing product manufacturers also expressed the concern that the definition of the term “coating” in the proposed Regulations was very broad. They recommended that “which forms a film” be added to the definition to ensure that putties, body fillers and other products would not be captured as coatings in the “other coatings” category in the Schedule of the Regulations.

Coatings are defined as those product categories which are applied to a surface for protective or automotive refinishing purposes only. Environment Canada did not intend to categorize automotive refinishing products such as putties and body fillers as coatings as these products are not used for protective or other automotive refinishing purposes. In order to address this concern, the definition of “coatings” has been revised by adding the qualifying statement “that forms a film” as suggested by stakeholders. This revised definition is aligned with the definition of “coatings” in various U.S. automotive refinish coatings rules.

  • One automotive refinishing products manufacturer also recommended that the exempted use of lacquer topcoats be specified in the definition, as the proposed exemption for lacquer topcoat could be construed as an unrestricted use of this product, resulting in a significant misuse of this automotive refinishing product category.

Environment Canada reconsidered the lacquer topcoat exemption and agrees that the proposed definition of coatings could result in the use of this product category in applications other than those intended. The definition has therefore been revised to clarify that the lacquer topcoat exemption applies for the restoration of motor vehicles or mobile equipment that were manufactured on or before 1985.

Exemptions

  • An automotive refinishing products manufacturer requested that an exemption for spot cleaning of road tar with VOC-containing solvents in a spray bottle be included in the Regulations. A stakeholder indicated that based on the experience in California, it was difficult to properly clean heavy grease or tar spots with compliant cleaners to prepare the surface for waterborne basecoat application due to the sensitivity of these basecoats to oil or grease contamination. The stakeholder further indicated that this exemption was included in the CCME product standards and should be included in the Regulations as well.

After considering the performance issue associated with these specific surface cleaners, Environment Canada has included an exemption for the hand held spray bottle spot cleaners in the Regulations.

  • Chemical and automotive refinishing products manufacturers and CPCA requested that TBAc be added to the list of compounds excluded from the definition of VOC in Schedule 1 of CEPA 1999, in order to facilitate reformulation, minimize incremental compliance costs and provide a level playing field.

Stakeholders have clearly communicated the importance of TBAc as an ingredient in compliant formulations. Based on a preliminary assessment, Environment Canada has determined that TBAc has negligible reactivity and would not contribute in a meaningful way to the formation of PM and O3. Environment Canada has therefore excluded TBAc by means of the definition of an “excluded compound” in subsection 1(1) of the Regulations, and not by means of an amendment to Schedule 1 of CEPA 1999. The decision to exclude by means of an amendment to Schedule 1 would depend on the results of a full risk assessment, which is currently ongoing.

  • A representative of the Department of National Defence (DND) raised the concern that the regulatory VOC concentration limits directly affect the use of products considered critical for the proper maintenance and operation of vehicles and equipment used for military operations. Specifically, an exemption was sought for the Chemical Agent Resistant Coating (CARC), which is a coating system consisting of wash primer, primer and topcoat that have to be used together as a kit. The CARC system must meet performance specifications that make it impervious to chemical agents and resistant to degradation by decontaminant agents.

Environment Canada has reviewed the available information, and has determined that it is not possible to reformulate CARC pre-treatment wash primer and primer with low-VOC concentrations without compromising the performance specifications. As a result, Environment Canada has included a critical use exemption in the Regulations to allow the use of CARC on motor vehicles, mobile equipment, or their parts, when used in military operation.

  • An automotive refinishing products manufacturer noted that the manufacture of products for packaging in a container of 14.8 ml (0.5 fl. oz.) or less is exempted. The stakeholder recommended that a similar exemption should also be provided for products that are imported for the purpose of packaging in a similar size container.

Environment Canada considered this recommendation and concluded that the import of products for packaging in containers of 14.8 ml or less would have no impact on VOC emissions. Furthermore, the intent of the Regulations is to treat both imported and manufactured automotive refinishing products equally and provide a level playing field. Therefore, the Regulations have been revised to include an exemption for products that are imported specifically for packaging in containers of 14.8 ml or less.

  • A mobile restoration operator also recommended that coatings used in mobile restoration services be exempted from the Regulations. It was pointed out that these special coatings which are different from coatings used by a conventional repair shops cannot be reformulated to low VOC concentration products.

Environment Canada has considered this recommendation and has exempted this application in the Regulations. The quantity of automotive refinishing products used by mobile restoration operators to repair chips, scratches or scuffs on painted surfaces requires a very small amount of VOC emitting products. This exemption will therefore have a negligible impact on VOC emissions.

  • A few automotive refinishing product manufacturers, importers and CPCA pointed out that several non-automotive repair shops use automotive refinishing products because of the durability of these products. It was recommended that automotive refinishing products used for these other applications be exempted from the Regulations.

Environment Canada considers emissions of VOCs from such applications to be manufacturing process-related emissions from the automotive refinishing product sector. These emissions can more effectively be addressed by risk management measures targeting industrial emission sources from that sector. An exemption has therefore been added to exclude products that are not used for automotive refinishing.

  • Some automotive refinishing product manufacturers, importers and CPCA expressed concern that the proposed sale and offer for sale prohibition could prevent them from buying back unused non-compliant automotive refinishing products from their distributors. They indicated that non-compliant automotive refinishing products that do not meet VOC limits could be exported to jurisdictions outside Canada or sold for use in applications that have been exempted from the Regulations.

Environment Canada reconsidered the sale and offer for sale provision and has included an 18 month sell-through period in the Regulations. This revision will enable manufacturers of automotive refinishing products to deplete their inventories, allow alternate use of these products, and reduce the quantity of the non-compliant products requiring disposal. This revision will reduce manufacturer, importer and user disposal costs, in particular for vulnerable SME automotive repair shops.

  • One automotive refinishing product manufacturer recommended that training facilities or educational institutions be exempted from the Regulations.

Environment Canada, after reconsideration, has determined that the use of non-compliant automotive refinishing products by training facilities or education institutions would not be exempted. These facilities generally provide training in the application of automotive refinishing products to automotive repair shops, and are therefore considered to be significant users of the products. These facilities would, however, be able to use non-compliant products only if the training is being provided for applications that are exempted under the Regulations.

Manufacturer liability

The text in paragraph 2(1)(b) and subsection 3(4) of the proposed Regulations makes a “manufacturer, importer or seller or any person acting on their behalf” liable if any representation is made in contravention of the provisions of the Regulations. Concerns were expressed that the wording “anyone acting on their behalf” could make them responsible for downstream individuals with whom they have no direct relationship.

It is not the intent of the Regulations to extend responsibility of manufacturers and importers to any downstream activities. Clarification is provided by changing the wording of the subsection to “manufacturer, importer or seller or their duly authorized representative”.

Method of analysis

Several concerns were expressed with regard to the test method and the provision on the accredited laboratory referred to in the proposed Regulations. Automotive refinishing product manufacturers and importers indicated that it was not clear if all products would need to be tested using the test method referenced in the proposed Regulations.

Environment Canada included the test method and the provision on the accredited laboratory in the proposed Regulations to inform the regulated community of the test method that would be used by Environment Canada for the purpose of verifying compliance with the provisions. However, there were no mandatory testing requirements by the industry. In order to reduce this confusion, references to the specific test method have been removed from the final regulatory text.

Labelling

An automotive product manufacturer recommended that the date code include only the month and year in which the product was manufactured. They felt that requiring a specific day on the label would substantially increase the labelling costs and cause significant logistical difficulties.

Environment Canada is of the opinion that providing the month and year of manufacture on the labels would not be sufficient for enforcement purposes. For enforcement purposes, the specific date of manufacture is required to ensure that the products are compliant on the date that corresponds to the coming into force date of the Regulations one year after they are registered. In addition, Environment Canada will also accept the use of the manufacturing date code (e.g. a batch code) instead of the actual manufacturing date. This should minimize any logistical difficulties.

Record keeping

Several comments were received regarding the requirement to maintain all records in Canada. Importers claimed that, given the number of products that they import and the distribution of their places of business throughout the world, it would be too complicated to maintain all these records in Canada.

The regulatory record keeping requirements specify the type of information required by Environment Canada’s Enforcement Branch to determine compliance with the Regulations, define the records that are most relevant for demonstrating compliance and ensure that when Environment Canada’s enforcement officers conduct enforcement activities, they have access to the records within their jurisdiction. Record keeping provisions have therefore been retained in the Regulations, but have been modified to specify the sales information that must be kept, in Canada, for enforcement purposes. Given that the sales in question are made in Canada, it should be possible to make the associated sales information available. The revised record keeping requirements are not expected to impose any undue administrative burden on the regulated community.

Coming into force

A chemical paint manufacturer and the National Automotive Trades Association requested that more time be included prior to the effective date of the sale and offer for sale provision. They raised the concern that the time between registration and the coming into force date of January 1, 2010, as specified in the proposed Regulations, would be insufficient for all automotive repair shops to transition to using automotive refinishing products with low VOC concentrations.

In order to address these concerns, Environment Canada has revised the effective dates for the Regulations. The manufacture and import prohibitions will now come into force one year after the Regulations are registered, while the sale and offer for sale prohibition would come into effect 18 months after the Regulations are registered. These revisions are expected to provide adequate time for automotive repair shops to make the necessary changes to their equipment and provide training to staff.

Comments specific to the Regulatory Impact Analysis Statement

  • Automotive repair shop owners and operators expressed concern about the impact of the increase in costs on their profitability. They estimated an average profit margin for repair shops of 6%, and indicated that the incremental cost of the proposed Regulations would be about half of the repair shop profits. It was suggested that a more detailed analysis of the impact on repair shops’ profit margins be undertaken to fully account for the impact of the Regulations.

As indicated in the RIAS, it was not possible to fully quantify the impact of the Regulations on the profits of repair shops, due to lack of data on profit margins, uncertainty about the ability of repair shops to pass on the incremental costs to consumers, and the level of potential support by automotive refinishing product manufacturers for training of repair shop personnel. Therefore, the estimated incremental cost ranging from 1% to 2.5% of average revenue was used to account for the uncertainty and represents, in the opinion of Environment Canada, a worst-case scenario. In addition, the share of costs as a percentage of revenue is expected to decline over the years to less than 1% as repair shops absorb the one-time costs of compliance. While there may still be some impacts for the smaller repair shops, generally it is expected that the impacts will be manageable.

  • The repair shop owners and operators also expressed concern with regard to the increase in paint prices. They indicated that the rate used in the analysis was low compared to their expectations of a 15% increase in price. They were concerned that such a price increase would put additional pressure on the automotive repair shops.

In the cost-benefit analysis, Environment Canada assumed that the price of automotive refinishing products would increase by 5% over the first five years and a further 2.5% over the following years. This assumption was based on information provided by CPCA and their experience in EU countries. Due to lack of historical data on the price trends for compliant automotive refinishing products in Canada, it was not possible to conduct a more detailed analysis. However, a sensitivity analysis of total incremental costs to a 15% increase in the paint prices was conducted. The analysis showed that total incremental costs would more than double as a result of a 15% increase in paint prices, representing the worst case scenario. Support from the automotive refinishing manufacturers for training and availability of federal government financial assistance programs is expected to reduce the overall financial impact on automotive repair shops.

  • One automotive product manufacturer indicated that the analysis should take into consideration recent economic conditions as a consequence of which a lower growth rate than that used may be warranted.

Environment Canada acknowledges that recent economic conditions have had — and continue to have — a significant impact on many Canadian businesses. Although the economic data pertaining to these conditions can not be incorporated into the analysis above, Environment Canada has considered possible implications for the regulated community. Economic forecasts in Canada and the U.S. predict that an economic recovery (see footnote 31) may be underway by the time the full provisions of the Regulations come into effect in 2011.

Rationale

The Government of Canada is committed to improving air quality through a number of regulatory and non-regulatory actions which target the precursors to air pollution, like VOCs, and reduce the formation of smog. Under the Regulatory Framework, the main targets for VOC emission reductions are industry, transportation, and consumer and commercial products (including automotive refinishing products). Together, actions in these areas are expected to yield significant reductions in VOC emissions and improvements in air quality.

The Regulations result in a reduction of approximately 71.1 kilotonnes of VOC emissions over 25 years. The incremental cost of achieving these reductions is estimated to be $330.2 million over the same period or $4,644 per tonne of reduced VOC emissions. Given the significant health and environmental impacts of air pollution, it is expected that in combination with the reductions achieved through other measures, the benefit of these reductions would exceed the cost per tonne. This conclusion is consistent with international benefit estimates of $850 to $18,800.

Environment Canada has also conducted extensive consultations with industry, provincial and territorial governments, ENGOs and other government departments which have informed the development of the Regulations. As a result a number of flexibility mechanisms have been included in the Regulations to promote compliance by industry, while ensuring that long-term reductions in VOC emissions from automotive refinishing products are achieved.

International coordination

The Government of Canada, given it’s commitment to reduce VOC emissions, has historically been coordinating its efforts to reduce VOC emissions through development and implementation of bilateral agreements with the U.S. under the Ozone Annex. Collaborative effort, not only with organizations in the U.S., but also in EU countries, has taken place in accordance with the established government process.

These Regulations have been developed to enable Canada to meet its international commitments under the Ozone Annex and harmonize the VOC requirements with those in other countries, especially the U.S. As part of the regulatory development process, Environment Canada held discussions with U.S. organizations on their VOC concentration limits and their experience with implementation were taken into consideration in finalizing the Regulations. An analysis of the applicable VOC concentration limits in the U.S. EPA, CARB, OTC and LADCO model rules, with the objective of selecting the one that provides the greatest potential reduction in Canada was undertaken. The analysis indicated that establishing VOC concentration limits similar to CARB SCM would yield the maximum potential level of VOC emissions reductions in Canada.

Given the expected performance of concentration limits based on the CARB SCM, the economic and technological feasibility of the associated concentration limits, and the benefit of harmonizing Canada’s requirements with those in many U.S. states, the concentration limits set out in the CARB SCM were selected as the most appropriate basis for the Regulations, with adaptations to reflect the Canadian context.

Implementation, enforcement and service standards

Implementation

An intensive approach will be adopted by Environment Canada within the first six months of the publication of the Regulations to ensure their effective and efficient implementation. Environment Canada will develop and distribute promotional materials (e.g. a fact sheet, Web site material) to ensure that the regulated community is aware of the requirements of the Regulations. Working relationships have been established with industry and industry associations involved in the manufacture and use of automotive refinishing products. Environment Canada will work with these organizations to ensure that the appropriate information is available to the regulated community. As the regulated community becomes more familiar with the requirements of the Regulations, these activities are expected to decline to a maintenance level.

Enforcement

Since the Regulations would be made under CEPA 1999, enforcement officers will, when verifying compliance with the proposed Regulations, apply the Compliance and Enforcement Policy implemented under the Act. The Policy sets out the range of possible responses to violations, including warnings, directions, environmental protection compliance orders, ticketing, ministerial orders, injunctions, prosecution, and environmental protection alternative measures (which are an alternative to a court trial after the laying of charges for a CEPA 1999 violation). In addition, the Policy explains when Environment Canada will resort to civil suits by the Crown for costs recovery.

When, following an inspection or an investigation, an enforcement officer discovers an alleged violation, the officer will choose the appropriate enforcement action based on the following factors:

  • 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 the Act.
  • 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 the Act, willingness to cooperate with enforcement officers, 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 the Act.

Environment Canada will monitor VOC concentration limits and compliance with the Regulations.

Service standards

The Regulations include a provision to allow the manufacture and import of non-compliant automotive refinishing products through permits. Applicants will not be required to pay any permit application fees. The permit applications will be reviewed by Environment Canada. The administrative procedure (including issuance of the permit) may take up to 30 working days, if all the required information is submitted to the satisfaction of Environment Canada. Environment Canada will make every effort to process the permit applications quickly. The administrative process will include the following:

  • permit applications are stamped with date on which they are received;
  • applications are reviewed to ensure all necessary and required information has been provided; and
  • follow-up with the companies to inform them that permit applications have been received and to request additional information if needed.

Compliance with the service standards for processing permit applications will be monitored and evaluated as part of the regulatory evaluation.

Implementation, compliance promotion and enforcement activities as well as processing of permit applications activities will be resourced under existing resource capacity and allocated accordingly within the existing departmental reference level.

Performance measurement and evaluation

The Regulations have been developed to improve air quality, and protect the environment and human health from the risks posed by air pollution. After all elements of the Regulations come into effect, it is expected that annual VOC emissions from automotive refinishing products will be 40% lower than they would be without the Regulations. In the longer term and in combination with other consumer and commercial product regulatory programs, the Regulations would result in reductions of VOC emissions and the consequent environmental and health benefits. In addition to meeting Canadian environment and health objectives, the Regulations also contribute towards Canada’s international commitments under the Ozone Annex.

The reduction in VOC emissions contributes directly to Environment Canada’s strategic objective and is aligned with various Government of Canada regulatory initiatives under CARA, as described in the Regulatory Framework. Development of the Regulations will therefore be evaluated as part of the evaluation of CARA. An evaluation plan for CARA was developed in fiscal year 2008–2009, with the evaluation scheduled for completion in 2009–2010. Follow-up evaluations for the regulatory initiatives within the consumer and commercial products program, including the Regulations, may be considered as part of the department’s risk-based evaluation planning cycle.

Through its enforcement activities, Environment Canada will be in a position to assess the extent to which VOC emission reductions from automotive refinishing products have been achieved after the coming into force of the Regulations. Information gathered from sources such as regulatory reporting and permits, as well as the results of monitoring or sampling, will provide the performance information necessary to measure progress towards the objectives, and the effectiveness of the Regulations. The performance information collected for the Regulations will be summarized and reported within three years of the effective dates of the Regulations.

The progress, performance and overall effectiveness of individual regulatory initiatives under the consumer and commercial products program will be reported on through a variety of means, including the annual report for CEPA 1999 and Departmental Performance Reports.

Contacts

Guy Gagné
Controls Development Engineer
Products Division
Environment Canada
351 Saint-Joseph Boulevard, 18th Floor
Gatineau, Quebec
K1A 0H3
Telephone: 819-994-5787
Fax: 819-953-3132
Email: Guy.Gagne@ec.gc.ca

Markes Cormier
Senior Economist
Regulatory Analysis and Instrument Choice Division
Environment Canada
10 Wellington Street, 24th Floor
Gatineau, Quebec
K1A 0H3
Telephone: 819-953-5236
Fax: 819-997-2769
Email: Markes.Cormier@ec.gc.ca

Footnote a
S.C. 2004, c. 15, s. 31

Footnote b
S.C. 1999, c. 33

Footnote c
S.C. 2002, c. 7, s. 124

Footnote d
S.C. 1999, c. 33

Footnote 1
For further information, visit the Web site at www.ec.gc.ca/doc/media/m_124/report_eng.pdf.

Footnote 2
For further information, visit the Web site at www.ec.gc.ca/doc/media/m_124/p1_eng.htm.

Footnote 3
Chemical reaction activated by sunlight.

Footnote 4
Krewski, D.; Burnett, R.; Jerrett, M.; Pope, C. A.; Rainham, D.; Calle, E.; Thurston, G., and Thun, M. “Mortality and long-term exposure to ambient air pollution: ongoing analyses based on the American Cancer Society cohort.” J Toxicol Environ Health A. 2005 Jul 9-2005 Jul 23; 68(13-14):1093-109.

Footnote 5
Krewski, D.; Burnett, R. T.; Goldberg, M.; Hoover, K.; Siemiatycki, J.; Abrahamowicz, M.; Villeneuve, P. J., and White, W. “Reanalysis of the Harvard Six Cities Study, part II: sensitivity analysis.” Inhal Toxicol. 2005 Jun-2005 Jul 31; 17(7-8):343-53.

Footnote 6
U.S. Environmental Protection Agency, Fact Sheet, (July 17, 1997), EPA’s Revised Ozone Standard, (www.epa.gov/ttn/oarpg/naaqsfin/o3fact.html).

Footnote 7
For further information, visit the Web site at www.ec.gc.ca/pdb/cac/Emissions1990-2015/EmissionsSummaries/VOC_e.cfm.

Footnote 8
Environment Canada, Discussion Paper for the Development of Regulations Limiting Volatile Organic Compounds in Automotive Refinish Coatings, 2006 (www.ec.gc.ca/nopp/voc/docs/autoRef/en/autoref_e.pdf).

Footnote 9
Environment Canada and Health Canada (2000), Priority Substances List Assessment Report: Respirable Particulate Matter Less than or Equal to 10 Microns (www.ec.gc.ca/substances/ese/eng/psap/final/PM-10.cfm).

Footnote 10
Health Canada and Environment Canada (1999), National Ambient Air Qual- ity Objectives for Ground-Level Ozone — Summary: Science Assess- ment Document (www.hc-sc.gc.ca/ewh-semt/pubs/air/naaqo-onqaa/ground_ level_ozone_tropospherique/index-eng.php).

Footnote 11
As per section 64 of CEPA, VOCs were found to be toxic as they were entering the environment in a quantity or concentration, or under conditions that (a) have or may have an immediate or long-term harmful effect on the environment or its biological diversity, and (c) constitute a danger in Canada to human life or health.

Footnote 12
For further information, visit the Web site at www.canadagazette.gc.ca/partII/2003/20030702/html/sor229-e.html.

Footnote 13
For further information, visit the Web site at www.ec.gc.ca/cleanair-airpur/ CAOL/air/can_usa_e.html.

Footnote 14
For further information, visit the Web site at www.ec.gc.ca/nopp/DOCS/ notices/voc/en/index.cfm.

Footnote 15
For further information, visit the Web site at www.ec.gc.ca/Ceparegistry/ documents/notices/g1-14042_n1.pdf.

Footnote 16
For further information, visit the Web site at www.epa.gov/ttn/atw/183e/arc/ fr1194.pdf.

Footnote 17
For further information, visit the Web site at www.arb.ca.gov/coatings/autorefin/scm/resolution-scm.pdf.

Footnote 18
For further information, visit the Web site at www.aqmd.gov/rules/reg/ reg11/r1151.pdf.

Footnote 19
Environment Canada, Discussion Paper for the Development of Regulations Limiting Volatile Organic Compounds in Automotive Refinish Coatings, 2006 (www.ec.gc.ca/nopp/voc/docs/autoRef/en/autoref_e.pdf).

Footnote 20
GDP measures the value added contribution to the economy by the specific activity or sector.

Footnote 21
Krewski, D.; Burnett, R.; Jerrett, M.; Pope, C. A.; Rainham, D.; Calle, E.; Thurston, G., and Thun, M. “Mortality and long-term exposure to ambient air pollution: ongoing analyses based on the American Cancer Society cohort.” J Toxicol Environ Health A. 2005 Jul 9-2005 Jul 23; 68(13-14):1093-109

Footnote 22
For further information, visit the Web site at www.ccme.ca/assets/pdf/ pn_1288_e.pdf.

Footnote 23
For further information, visit the Web site at www.ccme.ca/assets/pdf/ pn_1278_e.pdf.

Footnote 24
Environment Canada, Discussion Paper for the Development of Regulations Limiting Volatile Organic Compounds in Automotive Refinish Coatings, 2006 (www.ec.gc.ca/nopp/voc/docs/autoRef/en/autoref_e.pdf)

Footnote 25
Cheminfo Services Inc., Technical Study of Coatings and Operations for Re-finish of Automobiles and Mobile Equipment in Canada, 2006

Footnote 26
The compound annual growth rate is calculated as percentage of non-compliant automotive refinishing products manufactured and imported for sale in Canada, after adjusting for exports, over a five-year period from 1999 to 2005.

Footnote 27
U.S. EPA, “Marginal Damage Estimates for Air Pollutants,” original source: Federal Purchasing Categories Ranked by Upstream Environmental Burden: An Input/Output Screening Analysis of Federal Purchasing, 1998.

Footnote 28
All values are in 2006 Canadian dollars per metric tonne. 

Footnote 29
U.S. Office of Management and Budget: “Informing Regulatory Decisions: 2004 Draft Report to Congress on the Costs and Benefits of Federal Regulations and Unfunded Mandates on State, Local, and Tribal Entities,” December 2004, p. 34.

Footnote 30
European Union, “The Costs and Benefits the Reduction of Volatile Organic Compounds from Paints, Final Draft,” May 2, 2002.

Footnote 31
Department of Finance Canada, (February 2009), Canada’s Economic Action Plan — Budget 2009 (www.budget.gc.ca/2009/pdf/budget-planbugetaire-eng.pdf).