No. H 215/07
For release - November 7, 2007

MOTOR VEHICLE FUEL CONSUMPTION STANDARDS ACT PROCLAIMED

OTTAWA — The Honourable Lawrence Cannon, Minister of Transport, Infrastructure and Communities, and the Honourable Gary Lunn, Minister of Natural Resources Canada welcomed the proclamation into law of the Motor Vehicle Fuel Consumption Standards Act (MVFCSA).

"Regulating the fuel efficiency of new motor vehicles is an important element of the Government's legal framework for reducing greenhouse gas emissions. Proclaiming the Act is an important step towards achieving one mandatory national standard," said Minister Cannon.

"The proclamation of this act is good news for Canada," said Minister Lunn. "Setting mandatory fuel consumption standards will lead to sustained improvements in fuel efficiency and help to reduce greenhouse gas emissions from vehicles purchased in Canada."

In 2005, the Government of Canada and the Canadian automotive industry signed a Memorandum of Understanding (MOU) stipulating that the Canadian automotive industry would take actions to voluntarily reduce greenhouse gas (GHG) emissions of new vehicles in Canada. The agreement called on the automobile industry to cut GHG emissions from light-duty vehicles (cars, minivans, sport utility vehicles and pickup trucks) so that by 2010, annual emissions reductions will reach 5.3 megatonnes (Mt).

Under the MVFCSA, fuel consumption standards will be established for light-duty road motor vehicles. These standards will come into force following the expiration of the MOU between the auto industry and the Government of Canada in 2010 and will be implemented for model year 2011.

MVFCSA standards will be developed with input from stakeholders. They will be designed for Canada to maximize our environmental and economic benefits, will be achievable within the integrated North American market and will be benchmarked against a stringent, dominant North American standard. The new standards will be published by the end of 2008.

For more information on the Government of Canada's ecoTRANSPORT initiatives, please visit www.ecoaction.gc.ca

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BACKGROUNDER

MOTOR VEHICLE FUEL CONSUMPTION STANDARDS ACT

THE ACT

In 1982, Parliament passed the Motor Vehicle Fuel Consumption Standards Act (MVFCSA), providing for mandatory fuel consumption standards. The Act establishes the legal authority to regulate fuel consumption for prescribed classes of motor vehicles. However, the Government did not proclaim the act due to a voluntary commitment by manufacturers to continue to provide vehicles that meet U.S. standards. The voluntary commitment was broadly consistent with the framework and authorities established by the Act.

The Motor Vehicle Fuel Consumption Standards Act provides that:

• all motor vehicle fuel consumption values must be registered with Transport Canada;
• each motor vehicle must bear a fuel consumption label and a national fuel consumption mark;
• Company Average Fuel Consumption (CAFC) standards will be set for specific classes of motor vehicles;
• each vehicle maker or importer must submit the data required to calculate their CAFC values for comparison against the standards;
• fines will be set for each vehicle maker or importer whose CAFC value for a particular class of motor vehicle is higher than the standard for that class; and
• CAFC credits will be recorded for each vehicle maker or importer whose CAFC value for a particular class of motor vehicle is lower than the standard. If a penalty year occurs, credits may be taken from any or all of the three years before or from the year following the penalty year, to reduce the fine.

Potential entry into force and use of the act has been a regulatory backstop for the last 25 years, while previous governments have pursued voluntary approaches with the auto industry. This government has decided to use regulation over voluntary agreements as it provides a greater degree of certainty, predictability and accountability.

HISTORY

Fuel consumption regulation in North America came into effect as a response to the "Energy Crisis" of the mid 1970's. In the U.S., the Energy Policy and Conservation Act of 1975 introduced Corporate Average Fuel Economy (CAFE) standards, which were required to be met by each manufacturer or importer, averaged across vehicle sales in each year. The standards for passenger vehicles were set by the U.S Congress and, in 1979, separate standards for light trucks were introduced by the U.S. Department of Transportation.

The Canadian and the American motor vehicle manufacturing industries have grown increasingly integrated since the 1965 Auto Pact, which reduced barriers to the flow of automotive trade and investment between the two countries. In 1976, the Government of Canada established voluntary Company Average Fuel Consumption (CAFC) targets. These targets, by agreement with the motor vehicle industry, were set to represent an equivalent level of vehicle fuel-efficiency as provided by the CAFE standards in the U.S.

In 2005, the Government of Canada and the Canadian automotive industry signed a Memorandum of Understanding (MOU) stipulating that the Canadian automotive industry would take actions to voluntarily reduce greenhouse gas (GHG) emissions of new vehicles in Canada.

The agreement called on the automobile industry to cut GHG emissions from light-duty vehicles (cars, minivans, sport utility vehicles and pickup trucks) so that by 2010, annual emissions reductions will reach 5.3 megatonnes (Mt).

In October 2006, the Government of Canada announced, under a Notice of Intent to Regulate, that it intends to regulate the fuel consumption of road motor vehicles under the Motor Vehicle Fuel Consumption Standards Act after the expiry of the MOU between the auto industry and the Government of Canada. Regulations would take effect for model year 2011. This was confirmed in April 2007, under the Regulatory Framework for Air Emissions. It was stated that as part of a broader transportation policy package, a mandatory fuel-efficiency standard, beginning with the model year 2011, will be developed through a process that will involve input from all the stakeholders, and it will be published by the end of 2008. It will be designed for Canada to maximize our environmental and economic benefits, will be achievable within the integrated North American market, and will be benchmarked against a stringent, dominant North American standard. Furthermore, it confirmed that the government will build on the 2005 agreement in establishing its ambitious regulated fuel-efficiency standard. These new regulations will be developed and implemented under the Motor Vehicle Fuel Consumption Standards Act.

November 2007