Canada-California deal to produce clean cars could get really messy

Move will hinder choice, increase costs for consumers, says auto industry group

Canadian car manufacturers are feeling left behind after the Trudeau government signed a memorandum with California to push forward with eco-friendly vehicles — a proposal that appears to be at odds with the new North American trade treaty.

“It’s putting the cart before the horse,” said Huw Williams, national spokesperson for the Canadian Automobile Dealers Association (CADA). “The government had a choice to wait and encourage the U.S. to come together with California, but this was done for political reasons and not the best technological thinking in mind.”

Canada took a major step toward ensuring free trade and automotive harmonization within North America with the new NAFTA, CADA said, but the “movement away from a harmonized approach will hinder choice and increase costs for Canadian consumers.”

The memorandum of understanding, signed Wednesday, shows Canada plans to have all light-duty vehicles sold in the country to be free of emissions by 2040. It is also hopes to cut emissions by 30 million tonnes in 2030, equivalent to taking seven million vehicles off the road.

“We can build the vehicles of the future here at home, create good jobs, and remain competitive — all while reducing pollution and helping Canadians save hundreds of dollars a year at the pump,” Catherine McKenna, minister of environment and climate change, said in a statement.

The two parties have committed to work together on their respective regulations to reduce greenhouse gas pollution from vehicles such as cars, pickup trucks and SUVs. “Effective regulations, like those currently in effect in California and Canada, help ensure that people can drive fuel-efficient cars that cut down on pollution and save money in fuel costs,” according to the Ministry of Environment and Climate Change.

The announcement is at odds with the Trump administration, which has proposed barring California from regulating vehicle emissions or requiring a rising number of zero emission vehicles. While California has sued the U.S. for trying to prevent its formation of tighter laws that at least nine states have adopted, Canada is reviewing its own vehicle emissions standards.

“The problem is our current regulations for light-duty vehicles references U.S. regulation ... if they change their regulations ours would automatically change too,” said Isabelle Turcotte, the federal policy director at the Pembina Institute, a Canadian think-tank. “Back in the day, I don’t think we ever expected someone would switch them back — they are really common sense and hard to argue with because of lower cost for gasoline, the environment and for our health.”

Under current rules in Canada, 2025 model year light-duty vehicles are expected to burn half as much fuel and emit half as much greenhouse gases than 2008 vehicles — fuel standards that had been harmonized with U.S. But in August 2018, the U.S. proposed freezing fuel efficiency requirements at 2020 levels during their own review, clawing back standards announced during president Barack Obama’s era.

While Canada reviews its own plans on emissions, CADA is worried the divergence between the two countries could create different markets and standards for different provinces, which would slow down or even stop manufacturers from getting the green light to produce new vehicles.

“If a California customers can’t buy our new car, they’ll drive across the border to Nevada,” Williams said in an interview. “If the framework is split into two or three segments, makes it difficult to produce ... We can’t have one jurisdiction in PEI, one for Quebec, it’s a difficult regime for manufacturers and consumers because it gets expensive.”

Not getting it right could by costly. “There is a sensitive balance to strike, millions of Canadians are employed in auto manufacturing, retailing, servicing and fuels,” Automotive Parts Manufacturers’ Association president Flavio Volpe wrote in a statement. “We are all invested in a future with clean air and temperate climate but we don’t have the luxury of risking how we pay the bills today to support it.”

CADA admits the government was in a difficult position with Trump’s changes and acknowledged that something had to be done to improve Canada’s standing in the global automotive sector.

“Canada’s share of the North American and worldwide market has been declining for more than a decade,” Williams said.