Canada s Green Plan: Clean Air and Climate Change Implications for the Auto Industry. Canadian Vehicle Manufacturers Association October 6, 2006

Transcription

1 Canada s Green Plan: Clean Air and Climate Change Implications for the Auto Industry Canadian Vehicle Manufacturers Association October 6, 2006

2 What We Know and Perhaps don t Know about the Federal Government s Green Plan We Know that: it will be released before the end of October (at least that s the best we know) emphasis will be on clean air primarily and greenhouse gas (GHG) reductions; Clean Air Act all environmental policy objectives will be accomplished by regulation; all sectors targeted To date, very general consultation with all major sectors Consultation with industry executive level in automotive and oil/gas industry More detailed consultation over the next couple of months

3 What We Know and Perhaps don t Know about the Federal Government s Green Plan CEO - Ministerial Meeting: Constructive dialogue Government recognition of integrated auto industry on North American Basis Auto industry has requested GHG MOU be honoured for its duration and beyond

4 What are the Realities In Terms of Environmental Performance Clean Vehicles and Cleaner Air Greenhouse Gas Reductions

5 Vehicles Produce Both Smog-Causing Emissions and GHG Emissions Smog-causing Emissions NOx VOC Particulate Matter Since 1990 advances in vehicle technology have dramatically reduced smog-causing vehicle emissions Greenhouse Gas Emissions CO 2 N 2 O CH 4 (Methane) All other things equal, vehicle weight increases fuel consumption, which increases CO 2 emissions from the tailpipe Technology improvements that add weight negatively impact fuel consumption

6 Current Emissions Realities: Canadian Smog-Causing Emissions by Sector: Today Off-Road Transportation, 12.8% Heavy-Duty Transportation, 8.1% Miscellaneous, 10.5% Marine Transportation, 2.3% Rail Transportation, 2.2% Air Transportation, 1.3% Forest Fires, 2.0% Non-Industrial Fuel Combustion, 9.7% Cars & Light Trucks contribute only 9.5% of smogcausing emissions; by 2020 will contribute only 4.1% Open Sources, 4.4% Incineration, 0.2% Industrial Sources, 37.0% Source: Emissions Projections Working Group, Chaired by Environment Canada

7 Tier 2, On-Road Emissions are the Only Sector Forecast to Decline CANADA SMOG-CAUSING (VOC+NOx) EMISSIONS Source: Environment Canada Emissions Projection Working Group 2000 Inventory and Forecast, February ,000,000 5,000,000 Transportation is the Only Sector to show a VOC+NOx Reduction to 2020 Tonnes VOC+NOx 4,000,000 3,000,000 2,000,000 1,000,000 Miscellaneous Industrial Source Incineration Open Sources Non Industrial Fuel Combustion Forest Fires Air Transportation Rail Transportation Marine Transportation Off-Road Transportation Heavy-Duty Transportation Light-Duty Transportation 0 Ligh-Duty Transport (% of TOTAL) % 11.4% 9.5% 8.2% 6.7% 4.9% 4.1% On-Road Transportation Shows Significant Reduction

8 Current Emissions Realities: New Cars are the Cleanest Cars Removing the oldest vehicles on the road offers the greatest opportunity to improve air quality and reduce GHG emissions = Model Year Car There are over 1 million 1987 model year vehicles on Canadian roads 2006 Model Year Car

9 Vehicle Facts How clean are new Tier 2 vehicles? Burning one cord of wood in a fireplace produces more smog causing emissions than the entire lifetime emissions produced from 10 Tier 2 SUV s* You would have to drive 37 new Tier 2 SUV s* around the earth s circumference to equal the emissions from burning that cord of firewood Painting a room with one gallon (4.54 l) of interior water-based paint produces more smog-causing emissions than driving a Tier 2 vehicle* from Toronto to Vancouver and back! * Tier 2, Bin 5 Certified

10 Current Emissions Realities: Canadian GHG Contribution by Sector Pipelines, 1.8% Fugitive (Solid Fuels, Oil & Gas), 7.6% Rail/Air/Marine (Domestic), Motorcycles & Off Road Vehicles, 6.7% Source: Canada s 2004 GHG Inventory (May 2006) Heavy Duty Vehicles, 6.2% Industrial Processes, 7.2% Cars & Light Trucks contribute only 12.5% of Canadian GHGs Stationary Fuel Combustion, 40.6% Other (i.e. Solvent, Waste), 3.8% Agriculture, 8.2%

11 Current Emissions Realities: Automotive Facilities Auto Assembly Rubber Plastics Pulp & Paper Newsprint Metal Mining Agricultural Chemicals Petroleum Refining Breweries Manufacturing Glass Automotive assembly does not register in a ranking of emissions intensity in key Canadian sectors Steelmaking Pipelines Oil Sands Thermal Electricity Gas Manufacturing Lime Manufacturing Cement Thermal Electricity Coal Kilograms of CO2 per $1000 of Output Source: Industry Canada

12 Current Emissions Realities: New Cars are the Cleanest Cars Older Vehicles 92% Current Year 8% Of the 18.7 million vehicles on Canadian roads, only 8% are current model year New vehicles represent less than 1% of total Canadian GHG and smog-causing emissions

13 Canadian Consumers Already Make Energy Efficient Choices in Their Vehicle Purchases Comparing vehicles sold by segment 2005 Calendar Year Passenger Cars Canada U.S. Small Car 29.9% 16.4% Sports Car 1.5% 2.8% Medium Car 10.5% 12.8% Large Car 6.0% 7.9% Total Premium 4.5% 7.7% Light Trucks Compact Pickup 3.5% 3.6% Full Size Pickup 12.1% 13.3% Crossover Utility 1.9% 3.5% Small Utility 10.2% 8.4% Medium Utility 2.2% 5.6% Large Utility 0.8% 3.4% Premium Utility (S, M, L) 2.1% 3.6% Mini Van 10.0% 6.2% Bus/Van 1.8% 2.1% Other 3.0% 2.7% 3 out of every 10 vehicles purchased by Canadians are small cars Less than 1% of all vehicles sold in Canada are large SUVs Canadian consumers prefer smaller multi-purpose vehicles, with 1.6 cars per household vs. 2.0 in the USA

14 Greenhouse Gas Memorandum of Understanding Canadian Government agreement with automakers to reduce GHGs by 5.3 MT by 2010 Agreement signed between industry and federal government in 2005 Commits to annual industry GHG targets and public reporting Respects harmonized Canadian/U.S. fuel economy standards - not a fuel economy agreement 70 different advanced technology vehicles (e.g., hybrids, cylinder deactivation) and over 30 alternative fuel vehicles (e.g., E-85 Ethanol, bio-diesel) are now available to Canadian consumers Fuel price is a key drivers of change consumers are looking to reduced fuel costs this could further reduce GHGs

15 Why An Integrated Approach Provides Better Results Unlike other sectors, the auto industry must reduce GHG emissions from our products which depend on consumer purchasing and driving behaviour, the total on-road fleet and fuels GHG reductions from the vehicle fleet require actions across a wide range of factors: Vehicle technology Fleet turnover Fuel price, quality and availability Distance traveled and adapting to weather Traffic congestion/infrastructure Driver behavior and training including maintenance and idling patterns An integrated approach is seen as more effective at achieving long-term GHG reductions for the onroad fleet and new vehicles

16 The Benefits of a North American Approach Canadian consumers have access to vehicles designed to meet: The most stringent emissions standards in the world The most comprehensive safety standards in the world At the lowest possible cost Fuel efficiency standards in the US (CAFÉ) are determined by NHTSA: CAFÉ standards are set at the maximum amount that is technologically and economically feasible without compromising vehicle safety

17 California Vehicle-GHG Standards are not Suitable for Canada California-style CO2 standards: deteriorate vehicle safety forced downsizing increase smog-causing emissions delayed fleet turnover Not technically possible in the very aggressive timeframe stipulated Consumer choice must be preserved with all consumer impacts considered. Under this proposed regulation, many models of vehicles would be eliminated. Consumers cost would increase vs other jurisdictions (more than $3,000 per available vehicle). Costs will not be offset by savings at the gas pump. Jobs in the dealer network and the automotive supplier base will be at risk Regulations must be achievable, and provide social benefits worth their costs. California regulation is based on a theoretical vehicle never before built. The automobile envisioned by regulators would not achieve the expected fuel efficiency. Citizens would see no health benefits from this regulation. The regulation only addresses carbon dioxide, not smog. Vehicle smog improvements are already on track to be virtually eliminated. Reductions in fleet turnover will impede these improvements.

18 IF CALIFORNIA STANDARD ADOPTED: For all Automakers Based on 2006 FE Ratings % of Lost Models* -- Nameplates No Longer Available in Canada Cars Trucks % 42% % 49% % 63% % 76% % 77% % 79% % 83% % 86% * Notes -The use of a fleet averaging only minimally mitigates the impact. Even with fleet averaging product availability will be severely constrained for new vehicle purchasers in Canada. Also assumes widespread availability of E-85, otherwise even more models impacted.

19 Global Overcapacity and Intense Competition in North America are Economic Realities for the Canadian Automotive Manufacturing Sector Increased competition from offshore manufacturers 24 companies selling in Canada Intense Competition Overcapacity 14.6 million units worldwide (58 assembly plants) North American overcapacity estimated at 3.3 million units (13 assembly plants) Legacy costs Canadian $ appreciation Border Issues Electricity rates Other Challenges Regulatory Pressures Environmental Pressures Fuel Economy Emissions Product costs increasing for regulatory actions Consumers resistant to pricing pass through

20 California Vehicle-GHG Standards are not Suitable for Canada Myth - No Impact for Canada There is no real linkage between our regulatory policies and future investment in manufacturing. Reality Disharmonized FE approach would force major restrictions of Canadian vehicle sales and availability huge dealer impact Restrictions on choice consumer reaction Negative Political consequences Reduced sales Threatens existing Canadian manufacturing mandate Loss of Canadian market volume will impact re-investment decisions Current global overcapacity and investment realities Asian market growth and less probable brownfield re-investment Canadian supply chain implications Significant dependence on anchored Canadian assembly plants

21 Building a Productive and Globally Competitive Auto Sector: Environmental Leadership Canada s environmental policy focus should support the continuing leadership of the auto industry in bringing new, cleaner technologies and fuel to Canadian consumers Other approaches to accelerate environmental leadership are available: Introduce incentives to help consumers purchase advanced technology and alternate fuel vehicles Develop infrastructure for alternative fuel including ethanol (E-85) and bio-diesel (U.S., Brazil, Sweden are all positive examples) Create incentives to accelerate the retirement older and less technologically advanced vehicles in order to increase fleet turnover and put more cleaner and safer vehicles on Canadian roads Develop a national clean fuel standard to provide cleaner burning fuels to Canadian consumers (World Wide Fuel Charter)

22 Canada-Korea FTA Recent Activities: Government economic impact analysis released: No consultation with industry Very limited in scope Didn t consider broader impacts as a result of integration of industry Study comes after significant discussion and exchange of offers (7 sessions to date)

23 Canada-Korea FTA (cont d) CAW economic study, letters, and petition released Canada/U.S. Industry/Government Quad meeting: Continued united position of industry Government s have agreed to continued coordination Government s have not offered a plan that would create sustained, fair, two way trade CVMA dealers began meetings and letters campaign with MPs National industry associations (CME, CCC) now engaged in discussion on free and fair trade Collapse of WTO: Government of Canada to focus on more bi-laterals like Korea essential to make sure that Korea sets the right precedent

24 Canada-Korea FTA Where we stand today: United Canada/US Position: Korea is an important auto market that could be beneficial to domestic manufacturing History of barriers to trade with Korea demonstrates that they will not negotiate away domestic barriers to trade and that NTBs are used repeatedly to block market access Must put the responsibility for opening Korea s market on Government not industry Any free trade agreement that does not provide a realistic chance of auto manufacturers having sustained, fair market access in Korea cannot be expected to be supported by industry Government must table a realistic proposal that will achieve market access goals Next Steps: Continued political pressure essential Must concentrate on getting market access in Korea industry position has been portrayed as protectionist it is not about protecting, it is about fair trade which does not exist

25 Contact Information THANK YOU! Mark A. Nantais President Canadian Vehicle Manufacturers Association 170 Attwell Drive, Suite 400 Toronto, Ontario M9W 5Z5 Phone: (416) Fax: (416)