Phase 2 of Heavy-duty Vehicle and Engine GHG Emission Regulations

1. Phase 2 of the Heavy-duty Vehicle and Engine Greenhouse Gas Emission Regulations

2. Outline • Background and Context • Proposed Approach • Canada’s Small Business Lens and One-for-One Rule • Next Steps

3. Milestones of Phase 2 Regulatory Development • United States • In February 2014, the U.S. President directed the EPA and NHTSA to develop a second phase of more stringent GHG emission and fuel efficiency standards for heavy-duty vehicles, engines of post-2018 model years • OnJune 19, 2015, the U.S. EPA and the NHTSA jointly released proposed new standards to reduce the GHG emissions and fuel consumption of new heavy-duty vehicles, trailers and engines for post-2018 model years • On August 16, 2016, the U.S. EPA and the NHTSA released the Final Phase 2 regulations for post-2018 model years

4. Milestones of Phase 2 Regulatory Development • Canada • The Heavy-Duty Vehicle and Engine Greenhouse Gas Emission Regulations were published in the Canada Gazette, Part II, on March 13, 2013 (now referred to as “Phase 1” regulations) • Reduce GHG emissions by establishing mandatory emission standards for new on-road heavy-duty vehicles and engines of the 2014 and later model years, in alignment with the U.S. EPA standards • A Notice of Intent was published in the Canada Gazette, Part I on October 4, 2014,to signal government’sintent to develop a second phase of proposed regulations to further reduce GHG from post-2018 model years heavy-duty vehicles in alignment with the U.S.

5. Canada GHG Transportation Emissions Profile • 23% of Canada’s GHG emissions in 2014 come from transportation sources • 8% of total GHG emissions came from on-road heavy-duty vehicles Canada’s Emissions Breakdown by Economic Sector (2014) Canada’s GHG Emissions – 2014 Transportation 171 Mt CO2 eq Source: National Inventory Report 1990-2014, 2016

6. Outline • Background and Context • Proposed Approach • Canada’s Small Business Lens and One-for-One Rule • Next Steps

7. Guiding Principles for Development of Phase 2 Regulations • Develop proposed regulations to further reduce GHG emissions from on-road heavy-duty vehicles, trailers and engines for post-2018 model years • Continue to cover emissions standards addressing GHGs from transportation, including carbon dioxide (CO2), nitrous oxide (N2O), methane (CH4) and hydrofluorocarbons (HFCs) • Proposed regulations build on the standards and structure of the existing Phase 1 Regulations • Striving to align as closely as possible with U.S. EPA regulations, while considering specific characteristics of the Canadian market

8. Alignment and Collaboration with U.S. EPA • Phase 1 regulations align with emission standards of the U.S. EPA • Alignment of Canada/U.S. regulations is important given the commonality of vehicle offerings and cross border trade • A policy of alignment allows the development of stringent regulations while reducing administrative burden to industry and government • Substantial collaboration to support aligned standards for vehicles and engines under the Canada-United States Air Quality Agreement (AQA) • Environment and Climate Change Canada is continuing to collaborate with the U.S. EPA to support and inform the development of more stringent standards for post-2018 model year heavy-duty vehicles and engines

9. Canada’s Phase 1 Regulations • Canadian Phase 1 HDV GHG Regulations are aligned with the U.S. • Aligned prescribed classes of vehicles and engines • Aligned emissions standards • Aligned test procedures • Compliance flexibilities aligned with the U.S. • e.g. CO2 emission credit system, additional credits for advanced and innovative technologies • U.S. EPA certificates accepted to demonstrate compliance with the emissions standards

10. Canada’s Phase 1 Regulations • Canada-specific considerations: factors such as authorities granted by Canadian legislation and timelines can sometimes require Canada-specific details in certain regulations • Administrative requirements, such as the National Emission Mark • Differences due to timing of publication: include phase-in flexibilities for vocational vehicles and tractors with U.S. EPA Certificates and enhanced flexibilities for engines with U.S. EPA certificates • Threshold differences based on differences in fleet mixes and sales volumes than the U.S. (e.g. vocational tractors, small volume companies) • Implementation of the current Phase 1 Regulations • Beginning with the 2014 MY, companies are required to submit to the Minister, by June 30 of each year, an end of model year report for all their heavy-duty vehicles and engines • The Department has received end of model year reports for the first two years and is assessing compliance with the current Regulations

11. Proposed Key Elements of Canada’s Draft Phase 2 Regulations • Would continue to apply to manufacturers and importers of new on-road heavy-duty vehicles or engines • Wouldnot apply to owners or operators • Would also apply to manufacturer and importers of new trailers pulled by tractors • Would establish more stringent standards starting with the 2021 model year for vehicles and engines • Existing standards for the 2018 model year would continue to apply until new standards are introduced • Would introduce new standards starting with the 2018 model year for trailers • Standards become progressively more stringent up to the 2027 model year for vehicles, trailers and engines

12. Regulatory Categories and Applicable Emission Standards • To take into account the significant differences in heavy-duty sector applications, proposed Phase 2 would establish more stringent emission standards that cover the same broad regulatory categories of heavy-duty vehicles applications and would introduce standards for trailers: • Class 2B and 3 Pick-up Trucks and Vans • Class 7 and 8 Combination Tractors (i.e. semi-trucks) and their engines • Class 2B through 8 Vocational Vehicles and their engines • Trailers pulled by tractors

13. Vehicles – Emission Standards to be Proposed in Canada • Class 2B and 3 Pick-up Trucks and Vans • More stringent CO2 fleet average emission standards, based on “work factor” starting with MY 2021, followed by increased stringency in MY 2024 and 2027 • Same CH4 and N2O emission standards as Phase 1 • Compliance continues to be assessed on chassis dynamometer (complete vehicle testing) • Tractors and Vocational Vehicles • More stringentCO2 vehicle emission standards based on truck configuration starting with model year 2021, followed by increased stringency in MY 2024 and 2027 • Complianceassessed with enhanced computer simulation model (GEM)

14. Engines – Emission Standards to be Proposed in Canada • Heavy-duty engines for tractors and vocational vehicles • More stringentCO2 standards starting with 2021model year for compression-ignition engines, followed by increased stringency in MY 2024 and 2027 • Same CO2standards as Phase 1 for light and medium heavy-duty spark-ignition engines • Same N2O and CH4emission standards as Phase 1 • Compliance continues to be assessed on engine dynamometer (engine only testing)

15. Vehicles and Engines - CO2 Emission Fleet Averaging to be Proposed in Canada • Canadian regulations would continue to include CO2 Emission Credit System • Provide the option for companies to manufacture or import vehicles and engines with emission levels worse or better than standard, provided that their average fleet emission level does not exceed the standard (“fleet averaging”) • Companies can generate, bank and transfer emission credits • Credits valid for 5 years; deficits must be eliminated within 3 years • Credits and deficits monitored through annual reporting

16. Trailers – Emission Standards to be Proposed in Canada • Trailers pulled by tractors • Box type trailers: Performance-based CO2 standards starting with MY 2018, followed by increased stringency in MY 2021, 2024 and 2027 • Compliance would be assessed using a prescribed compliance equation with variables such as: • trailer aerodynamics (e.g. skirts, boat tails, gap reducers) • tire rolling resistance • automatic tire inflation systems (ATIS) or tire pressure monitoring systems (TPMS) • light weight components • Non-box trailers and non-aero trailers: Design-based CO2 standards (low rolling resistance tires and ATIS or TPMS) • Non-box trailers are tank, flatbed and container chassis trailers

17. Key Changes between U.S. NPRM and U.S. Final Rule • Introduction of PM standards for diesel APU’s installed in tractor vehicles • New classes for vocational vehicles (e.g. school buses, motor home, concrete mixer, etc.) • Introduction of credit multipliers for advanced vehicles (3.5 for plug-in hybrid electric vehicles, 4.5 for electric vehicles, and 5.5 for fuel cell vehicles) • Option to comply on average for box trailers starting only in 2027 • Introduction of transition allowances to exempt from emission standards a number of trailers for model year 2018 to 2026 • No increase in stringency for N2O standard for engines • Optional transition compliance path for medium and heavy heavy-duty engines of model years 2024 to 2026 • Optional standards in the U.S. for tractors designed for heavier payload capacity that would be proposed to be mandatory in Canada to address provincial higher payload allowances in Canada

18. Outline • Background and Context • Proposed Approach • Canada’s Small Business Lens and One-for-One Rule • Next Steps

19. Canada’s Small Business Lens and One-for-One Rule The Government of Canada is committed to reducing the regulatory burden on business: • Small Business Lens: • The objective of the small business lens is to minimize regulatory costs for small businesses without compromising the health, safety, security and environment of Canadians • The lens requires regulators to consider the impact that a proposed regulation has on small businesses at the earliest stages of regulatory design • One-for-One Rule: • ECCC reviewed the administrative burden of the proposed regulations to identify areas in which the burden could be reasonably minimized • Throughout the regulatory development process, ECCC consulted with stakeholders to assess the costs associated with the administrative burden of the proposed regulations

20. Potential Approach for Small Businesses

21. Outline • Background and Context • Proposed Approach • Canada’s Small Business Lens and One-for-One Rule • Next Steps

22. Next Steps • Work is currently underway to develop proposed Phase 2 regulations in Canada that align with the U.S. program while taking into account differences in the Canadian market • The proposed regulations will be published in Canada Gazette, Part I this winter, followed by a 75 day comment period. • ECCC will continue to work closely with stakeholders during the regulatory development process

23. Thank you - Merci • Questions Josephine Davidson, Section Head for HDV Regulatory Development Transportation Division, Environment and Climate Change Canada 819-420-8022 josephine.davidson@canada.ca

24. Greenhouse Gas Emission Regulations End of Model Year Reporting

25. Outline • Current On-Road HDV Regulations • Who is regulated • Who must submit an EOMY GHG Report • Reporting Templates • What to report • Common reporting Issues • Key takeaways

26. Two Emission Regulations For On-Road Heavy-Duty Vehicles and Engines Heavy-Duty Vehicle & Engine Greenhouse Gas Emission Regulations (Phase 1) On-Road Vehicle & Engine Emission Regulations • Establish GHG emission standards for CO2, N2O & CH4 • Administrative Obligations Include: • Evidence of Conformity • National Emission Mark • Notice of Defect • End of Model Year reports • Establish emission standards for HC, NOx, PM and CO • Administrative Obligations Include: • Evidence of Conformity • National Emissions Mark • Importation declaration (including temporary importation) • Notice of Defect

27. Who Is Subject to the Regulations Manufacturer (NEM Required) Regulatee Dealer Purchaser Manufacturer “CEPA company” Importer (distributor/dealer) Regulatee Purchaser Distributor “CEPA company”

28. Who Must Submit a Greenhouse Gas Emissions Report • A company in Canada that manufactured or imported heavy-duty vehicles or engines for the purpose of sale (Regulatee) • An OEM may also submit a report to support a Regulatee that does not have emission data • Report is not required for operators or importers of used vehicles or engines • A report is not required from importers who do not import for the purpose of sale, or import used vehicles or engines

29. Reporting Templates • ECCC developed reporting templates that accommodate both Regulatees and OEMs • Reports due June 30th

30. What to Report

31. What to Report - Example 2016 End of Model Year Report (Due June 30th 2017) • 2016MY 2B & 3 Trucks and Vans • 2016MY Vocational Vehicles and Tractors • 2016MY HD Engines (including those installed in Vocational or Tractor of any model year)

32. Common Reporting Issues: Statements • Conflicting statements These are conflicting statements and should not be simultaneously selected

33. Common Reporting Issues: Statements • Engines: requires 1 statement for CO2 and another for N2O and CH4 (at least 2 statements must be selected)

34. Common Reporting Issues: Signature • The report must be singed be submitted by the due date • You can print, sign, scan and email the report in pdf. In this case the MS Excel version must also be submitted for analysis purposes. • You may also insert your signature into the MS Excel templates

35. Key Takeaways • Determine whether you are required to submit an end of model year GHG report. Contact ECCC if you are not sure • If you are a Regulatee, you still need to file a report, even though an OEM is submitting emission data for you • Be aware of common reporting errors: • Applicable statements must be selected • Report must be signed • Don’t forget to include engines, even those already installed in vehicles (excluding. 2b/3)

36. Contact Information Viliam Glazduri M. Eng. Program Engineer Regulatory Administration Section Transportation Division Environment and Climate Change Canada E-mail: viliam.glazduri@canada.ca or ec.infovehiculeetmoteur-vehicleandengineinfo.ec@canada.ca Tel.: 819-938-4755 Guidance Document http://www.ec.gc.ca/lcpe-cepa/default.asp?lang=En&n=71EF09D7-1

37. THANK YOUQuestions?