While in Bali for the Conference of the Parties on Climate Change, the Québec Minister of Sustainable Development, Environment and Parks, Ms. Line Beauchamp, announced that the cabinet had authorized the publication of the Draft Regulation respecting greenhouse gas emissions from Motor Vehicles and Fees for Excess Emissions ("draft regulation") with the view of Québec becoming the first Canadian province to adopt the California light vehicle emission standards for passenger vehicles and light trucks for model years 2010 to 2016.

Québec expects to adopt the draft regulation and have it come into force concurrently with similar regulations to be adopted by some fifteen northeast American states. The draft regulation has been tabled in accordance with Québec's Climate Change Action Plan 2006-2012 in an effort to reduce transportation sector emissions about half of which are from light vehicles.

Automobile manufacturers will be required to ensure that for each of those model years the average of the GHG emissions from their vehicles will not exceed the regulatory standards. The draft regulation also provides for the creation of an emission credits exchange system. The draft regulation is subject to public consultation for a 60-day period starting January 3, 2008 and can be consulted on the Ministry's website at www.mddep.gouv.qc.ca.

Categories of Vehicles

The emission standards are aimed at two categories of vehicles:

  1. vehicles designed for the transportation of up to twelve persons and having a gross vehicle weight not exceeding 3,855 kg, and those designed for the transportation of goods and having a loaded vehicle weight not exceeding 1,705 kg; and
  2. vehicles designed for the transportation of up to twelve persons that have a gross vehicle weight exceeding 3,855 kg, but not exceeding 4,535 kg, and vehicles designed for the transportation of goods and having a loaded vehicle weight exceeding 1,705 kg, but a gross vehicle weight not exceeding 3,855 kg.

The draft regulation applies to motor vehicles in both categories that (i) are fuelled wholly or partly by gasoline or diesel fuel or, in the case of hybrid vehicles, partly by gasoline or diesel fuel and partly by electricity, (ii) belong to the 2009 model year or a later model year, and (iii) are initially sold, leased or otherwise placed in service in Québec. Mopeds, motorcycles, emergency vehicles, tool vehicles and off-highway vehicles are excluded.

The draft regulation sets the fleet average emission requirement for large volume manufacturers (e.g. a vehicle manufacturer that, for the 2006 model year, placed at least 12,000 vehicles from its vehicle fleet in service in Québec or that, after the 2006 model year, places at least 12,000 vehicles from its vehicle fleet in service in Québec in each of the three consecutive years, as well as any other manufacturer acquired in whole or in part by such a manufacturer). This requirement, expressed in grams of CO2 equivalent per kilometre, is set to decrease for category 1 vehicles starting with the 2009 model year from 201 grams of CO2 equivalent/km to 127 g CO2 equivalent/km for the 2016 model year while the standard for category 2 vehicles is set to decrease from 273 g CO2 equivalent/km for the 2009 model year to 206 g CO2 equivalent/km for the 2016 model year.

The fleet average emission requirement for other manufacturers, for each category and for the 2016 model year, is set at the maximum average emission shown for the 2012 model year (145 g CO2 equivalent/km for category 1 vehicles and 224 g of CO2 equivalent/km for category 2 vehicles).

The draft regulation provides the formula to calculate the GHG emission for a motor vehicle of a given year as well as the CO2 equivalent emission factor.

Responsibility to Assess Compliance 

According to the draft regulation, the responsibility for assessing compliance with the maximum emission standard prescribed falls to the vehicle manufacturer or the person who is entitled to use, in Québec, the trade mark, name or distinctive sign that identifies or is used to market the type of motor vehicle concerned. If that person has no domicile or establishment in Québec, the person responsible shall then be either the person who offers a franchise or owns the chain, banner or group where a point of retail sale or leasing of motor vehicles is supplied or operated in Québec or that person's representative in Québec or, if the vehicle is placed in service otherwise than in a manner mentioned above, the retailer in Québec.

Emission Credits

If the average emission value is lower than the prescribed maximum standard, the person may be allocated a credit or, if the emission standard is not met, a fee will be charged for the excess according to the time frame and conditions set forth in the draft regulation.

For each category, the total of the credits is calculated by determining the difference between the average emission value and the applicable maximum standard, and by multiplying the result by the total number of vehicles taken into account in establishing the average emission value of the vehicles in the said category.

Credits would be allocated to those who, for the 2006, 2007 or 2008 model year, comply with the standards set for the 2012 model year for either category. It will be up to the person seeking credits to prove compliance with the draft regulation. The credits would be considered as if they had been allocated in 2011 and will retain their full value until 2012 after which they will then lose 50% of their value in 2013 and 75% in 2014, the credits expiring in 2015. Beginning with the 2009 model year, credits will retain their full value for five years after the year in which they were allocated and will thereafter lose 50% of their value in the sixth year, 75% in the seventh year then expiring in the eighth year.

The draft regulation provides that a person to whom credits have been allocated by the Minister may trade all or any of them to another person aimed by the regulation as long as a written notice is sent to the Minister and to the beneficiary of the trade. The notice must specify the credits traded and their period of validity. The credits can only be sold or traded for the purposes of the draft regulation.

Emission Fees

As to fees payable for excess emissions, the draft regulation provides that beginning with the 2010 model year for large volume manufacturers and with the 2016 model year for other manufacturers, a fee of $5,000 per vehicle equivalent is payable for any excess over the maximum emission standards. In order to determine the fees payable, the number of vehicle equivalents will be calculated by multiplying the total number of motor vehicles in the category by the number of grams difference between the average emission calculated in accordance with the draft regulation and the applicable maximum emission standard and by dividing the result by the maximum emission standard prescribed for the model year.

Fees would be paid annually on May 31 of the year following the year in which the motor vehicles were sold, leased or otherwise placed in service in Québec and be accompanied by the annual emission report required under the draft regulation. Any person required to pay fees may offset all or part of the debt for a given year by using the credits allocated pursuant to the draft regulation.

Annual Emissions Report

The annual emissions report is relatively comprehensive. The persons covered by the draft regulation having to provide information such as the establishments where the motor vehicles covered by the report were sold, leased or otherwise placed in service in Québec, the total number of vehicles concerned for each designated category, their curb weight, their gross vehicle weight and their city and highway fuel consumption figures based on the latest calculation criteria used by the Transport Canada, the makes, characteristics (vehicle class, engine size, transmission, number of speeds, fuel type, hybrid capacity) and the model years of the vehicles covered by the report with the respective numbers for each type of vehicle, the average emission value for the vehicles concerned, the total emission grams in excess of the maximum emission standard, the total, in grams, of emissions lower than the prescribed maximum emission standards for which an allocation of a credit is requested, the total amount of fees payable, where applicable, etc.

Although the automobile industry is apparently favourable to emission reductions, the consultation period will confirm to what extent the industry will agree with the requirements set in the draft regulation, particularly in the wake of the U.S. EPA's recent decision rejecting California's bid to regulate vehicle GHG emissions, based on the proposed countrywide implementation of the Corporate Average Fuel Economy (CAFE) standards pursuant to the recently signed Energy Bill.