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Canadian car manufacturers are feeling left behind after Ottawa signed a memorandum with California to push forward with eco-friendly vehicles — a proposal that appears to be at odds with the new NAFTA agreement.
“It’s putting the cart before the horse,” Huw Williams, the national spokesperson for the Canadian Automobile Dealers Association (CADA), told the Financial Post. “The government had a choice to wait and encourage the U.S. to come together with California, but this was done for political reasons and not the best technological thinking in mind.”
Canada took a major step towards ensuring free trade and automotive harmonization within North America with the NAFTA agreement, CADA said, but the “movement away from a harmonized approach will hinder choice and increase costs for Canadian consumers.”
The memorandum of understanding, signed Wednesday, shows Canada plans to have all light-duty vehicles sold in country to be free of emissions by 2040. It is also hopes to cut emissions by 30 million tonnes in 2030, equivalent to taking seven million vehicles off the road.
“We can build the vehicles of the future here at home, create good jobs, and remain competitive — all while reducing pollution and helping Canadians save hundreds of dollars a year at the pump,” Catherine McKenna, Minister of Environment and Climate Change said in a statement.
The two parties have committed to work together on their respective regulations to reduce greenhouse gas pollution from vehicles such as cars, pickup trucks and SUVs. “Effective regulations, like those currently in effect in California and Canada, help ensure that people can drive fuel-efficient cars that cut down on pollution and save money in fuel costs,” according to the Ministry of Environment and Climate Change.
The announcement is at odds with the Trump administration, which has proposed preventing California from regulating vehicle emissions or requiring a rising number of zero emission vehicles. While California has sued the U.S. for trying to ban its formation of tighter laws that at least nine states have adopted, Canada is reviewing its own vehicle emissions standards.
“The problem is our current regulations for light-duty vehicles references U.S. regulation… if they change their regulations ours would automatically change too,” Isabelle Turcotte, the federal policy director at the Pembina Institute told the Financial Post.
“Back in the day, I don’t think we ever expected someone would switch them back — they are really common sense and hard to argue with because of lower cost for gasoline, the environment and for our health.”
Under current rules in Canada, 2025 model-year light-duty vehicles are expected to burn half as much fuel and emit half as much greenhouse gases as 2008 vehicles — fuel standards that had been harmonized with the U.S.
But in August 2018, the U.S. proposed freezing fuel efficiency requirements at 2020 levels during their own review, clawing back standards announced during President Barack Obama’s era.
While Canada reviews its own plans on emissions, CADA is worried the divergence between the two countries could create different markets and standards for different provinces, which would slow or even stop manufacturers from getting the green light to produce new vehicles.
There is a sensitive balance to strike: millions of Canadians are employed in auto manufacturing, retailing, servicing and fuels.
Flavio Volpe, president, Automotive Parts Manufacturers’ Association
“If California customers can’t buy our new car, they’ll drive across the border to Nevada,” Williams said. “If the framework is split into two or three segments, makes it difficult to produce… We can’t have one jurisdiction in P.E.I., one for Quebec; it’s a difficult regime for manufacturers and consumers because it gets expensive,” Wiliams said.
And not getting it right could by costly.
“There is a sensitive balance to strike: millions of Canadians are employed in auto manufacturing, retailing, servicing and fuels,” Automotive Parts Manufacturers’ Association president Flavio Volpe wrote in a statement. “We are all invested in a future with clean air and temperate climate but we don’t have the luxury of risking how we pay the bills today to support it.”
CADA admits the government was in a difficult position with Trump’s changes and acknowledged that something had to be done to improve Canada’s standing in the global automotive sector.
“Canada’s share of the North American and worldwide market has been declining for more than a decade,” Williams said.
Will Mitchell, the Anthony S. Fell Chair in New Technologies and Commercialization at the University of Toronto’s Rotman School of Management, says Canada is producing half as many vehicles as it was 20 years ago.
“For auto production in Canada to have a future, we have to differentiate,” he told the Financial Post. “We need to be different in ways customers value — right now, Canada’s on a slippery slope to nowhere.”
You have a a critical mass of players seriously committed to doing something about climate change.
Will Mitchell, Anthony S. Fell Chair, New Technologies and Commercialization, Rotman School of Management
Mitchell thinks Canada being on California’s side has economic benefits and environmental ones.
“If there are some states that don’t follow through, it should give an advantage to Canadian produced cars,” he said. “Having the largest market in the U.S. and one of the largest markets in the world with the Canadian government in the Top 10 for production, you have a a critical mass of players seriously committed to doing something about climate change.”
Pembina’s Turcotte says aligning with California will make Canada more eco-friendly and reduce the financial burden on consumers — contrary to the industry’s assertion that the lack of harmonization will raise costs.
“People will get less-polluting cars and cars that cost them less for fuelling up,” she told the Financial Post. “With the zero emissions strategy, Canadians can also benefit from purchasing incentive… and the clean fuel standard is biggest piece of puzzle in terms of getting us where we need to be (for climate change).”
• Email: [email protected] | Twitter: bobbyhristova
With files from Thomson Reuters
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