Friday, 19 September 2014

Clean Transportation: Canada Can Set its Own Agenda for Uptake in an Integrated North American Market

The Integrated North American Market is Not a Barrier
There will be those, the automobile industry in particular, who will tell us that Canada cannot set different objectives for reducing emissions and improving the fuel consumption of vehicles sold in Canada because Canada and the US represent an integrated market.  By that, they mean that cars manufactured in the US and Canada are destined for the US and Canadian markets. 

Other manufacturers, those with no manufacturing facilities in North America, produce vehicles specifically tailored to the North American market. 

Yet, notwithstanding these considerations, the integrated market reasoning to the effect that Canada cannot set itself apart from the US, is faulty for several reasons.

The California Difference and Leadership
For many years, California had more stringent smog regulations for new vehicles than the rest of North America.  Yet all vehicle manufacturers, regardless of the locations of their respective manufacturing plants, managed to make the necessary modifications to meet the California standards for new vehicles destined for sale in that state.  Since California has roughly the same population as Canada, then it stands to reason that Canada can do things differently than the US, should it desire to do so.

More recently, California and 7 other states announced plans to introduce requirements concerning the percentage of zero emission (eg electric and hydrogen vehicles)and low emission/hybrid vehicles sold in their respective markets beginning with the year 2018.  There is no reason why Canada cannot join them and thereby contribute to the improvement in the North American economies of scale for providing proportionally greater numbers of low and zero emission vehicles for the Canadian market.

Corporate Average Fuel Economy (CAFE) Standards
The only important existing mechanism for improving the fuel consumption of new vehicles sold in Canada are the corporate average fuel economy (CAFE) standards.  Beginning 2016, a new set of standards will come into effect.  The Canadian standards are identical to those of the US.  

Since  a given manufacturer's CAFE performance for a given year is weighted by the total sales and the fuel consumption of each model, aggregated over the total vehicle sales of the manufacturer for the year in question, a more stringent Canadian CAFE standard than that of the US would merely mean that the distribution of models placed on the Canadian market would be different than the arrays of models of the same manufacturer makes available on the US market -- e.g. proportionally fewer big SUV models; and higher numbers of intermediate sedans; small cars; and hybrid and zero emission vehicles destined for the Canadian market.  

The nice thing about above-described more stringent than US Canadian CAFE, is that this approach does not require any requirements for technological changes, or undue burdens on the part of the vehicle manufacturers.  Of course, the manufacturers can be expected to squeal anyway. 

In any case, vehicle selections and standard equipment have always been different on the US and Canadian sides of the border.  A case in point, the Ford Motor Company discontinued the Mercury line-up in Canada many years before the company did the same in the US.  Another example, you're out of luck if you had wanted to buy a 2014 Accord Hybrid in Canada while they are readily available in the US.

Fuel Consumption Ratings:  Implications for CAFE and Consumer Choices
The fuel consumption ratings of vehicles sold in Canada are different than the ratings of the similar and the same vehicles rated by the US Environmental Protection Agency (EPA).  Unlike the US ratings, the Canadian ratings are supplied by the manufacturers and are not verified by any third party government organization.  By contrast, in the US, the fuel consumption ratings are based on test procedures and calibrations to reflect on the road experiences.  To keep the manufacturers honest, the EPA conducts verifications of around 15% of the models of new vehicles placed on the US market.

The result of the aforementioned differences are such that 1) US ratings are viewed as a reliable and realistic relative guides as to what one could expect from the vehicles on the US market while 2) the Canadian fuel consumption numbers are so exaggerated, that few Canadians consider the Canadian numbers relevant when it comes time to making their choices for a new vehicle.

Accordingly, if Canada is to have an effective and more stringent than US CAFE standards, it would be necessary to introduce testing and calibration procedures similar to that of the US EPA but with adjustments for taking into account winter driving conditions, including the use of snow tires.  This approach is essential to  assure that the Canadian CAFE achieved by each manufacturer reflects the "real world" (actual)  results of each manufacturer in reaching the more stringent Canadian targets.

As well, the more realistic data on fuel consumption stemming from the aforementioned approach is critical for assuring that Canadian consumers have credible fuel consumption information which they can rely on when comparing vehicles on the Canadian market.

Complimentary Government Leadership Roles
With respect to the influencing of consumer purchases to favour more fuel efficient and low or zero emission vehicles, the federal sales tax could be modulated in a revenue neutral fashion to charge less for the low and zero fuel consumption/emission vehicles and higher rates for the high energy consuming vehicles. 

France and Finland have adopted this model.   China is considering going one step further by eliminating the purchase tax (10%) for all new energy vehicles, in particular electric vehicles.

Lastly, the federal government could play a major leadership role in advancing clean transportation in Canada by 1) adopting a meaningful vehicle green procurement targets and 2) participating in clean transportation demo projects funded by government sustainable development and clean transportation innovation funds. 

With respect to the first item, once again China is leading the way by requiring that, beginning in 2016, 30% of vehicles purchased by the central government must be electric vehicles.   In parallel, regional government bodies in Beijing-Tianjin-Hebei region, the Yangtze River Delta, and the Pearl River Delta are aiming for electric vehicles and hybrids to makeup at least  15% of all new vehicle procurements by 2015 and 30% by 2016.

All of the aforementioned measures are readily applicable without major efforts on the part of both government and industry, as soon as Canada has federal government is willing to implement them. The only thing standing in the way of pursuing these progressive measures are political will and popular support to make this happen.... in Canada.

As Jack Layton used to say, "Don't let them tell you it can't be done."

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