Sustainability Working Group:
CAPC Kyoto SubCommittee

Kyoto Committee Report for CAPC General meeting - May 30th, 2003

Executive Summary

On December 17th 2002, the Government of Canada announced its ratification of the Kyoto Protocol to the United Nations Framework Convention on Climate Change.

Prior to ratification, the Federal Government released the Climate Change Plan for Canada, which proposes a national goal for Canadians to become the most sophisticated and efficient consumers and producers of energy in the world and leaders in the development of new, cleaner technologies. The Plan maps out a comprehensive and detailed approach to reaching Canada's Kyoto target. It is based on clear guidelines: the economy cannot be put at risk; no region will bear an unfair burden; and there must be a favorable climate for investment.

The Kyoto committee originally has developed five key points that it recommended that CAPC adopt. They were:

• That all levels of government work with the automotive industry to develop a plan to address climate change, plans will include voluntary programs and incentives
• That any action taken to address climate change under the Kyoto Protocol does not disadvantage the Canadian Automotive Industry or its workers from global competition, or non-participator Kyoto countries
• That credit be given to the significant investments made to improve the energy efficiency of manufacturing plants and processes
• That no one industry is impacted more than another, thereby weakening the infrastructure of the Canadian automotive industry
• Fuel economy targets be harmonized across North American, thereby ensuring maximum environmental benefit, while minimizing potential economic impact.

Working Group Mandate

Since ratification of Kyoto, the working group has met four times to discuss its mandate. It was agreed that a number of environmental issues will affect the industry, as a result of ratification. The working group agreed to develop a document promoting a "Green Motor Vehicle Industry" and that the fuel economy harmonization issue should be dealt with in the CAPC Harmonization Working Group.

Promoting a Green Motor Vehicle Industry

This document provides an overview of Key Issues within the industry and offers recommendations.

Overview

The Canadian Automotive Industry has three distinct components

1. The manufacturing footprint - 13 assembly plants and heds of supplier plants, mostly manufacturing larger vehicles
2. Marketplace and sales trends
3. Consumers

Canadian public policy directed at the automotive sector must consider and address all three components in a coordinated fashion with realistic timelines, in order to allow Canada to succeed within the intense competition of the global automotive industry.

1. Manufacturing Footprint

• Energy intensity, rather that total energy consumed is the best measure of efficiency.
• Auto assembly and automotive supply chain are low intensity users of energy and as such do not offer much opportunity to reduce emissions at 14 kg of CO2 per $1000 of economic output.
• Auto manufacturing has already reduced energy intensity by 18% from 1990 to 1999 and has a further 1% per year improvement until 2005.
• The biggest opportunity to reduce energy use is in paint operations but a technological breakthrough is required as there is a trade off between VOC emissions and energy consumed.
• Co-generation is not an opportunity because there is little need for steam.

Government Support Needed

• Incentives for energy efficient choices especially at time of capital renewal.
• Training for workers in more efficient technologies
• Demonstration programmes for breakthrough technologies

2. The Canadian Marketplace

• Canadians already purchase primarily small cars and minivans
• Canadian geography requires vehicles that are capable of driving long distances so that short range Alternative Fuel Vehicles (AFVs) and lack of fueling infrastructure for AFVs is problematic.
• The Canadian fleet is 8.5 years old. Removing older vehicles would reduce emissions.
• Gasoline internal combustion engines (ICEs) will dominate the Canadian fleet for many years with Hybrid Electric Vehicles (HEVs) the next probable step.
• Full hybrids have a consumer pay back of 7-9 years, longer than most people keep a vehicle.
• Canadian gasoline prices are too low to allow AFVs to compete with ICEs.
• Diesels are not an option in North America due to higher emissions standards than in Europe and lower quality diesel. Sulphur levels of less than 10 ppm is required for diesels to met Tier 2 emissions standards in 2006.

Government Support Needed

• Incentives to accelerate consumer acceptance of AFVs and Advanced Technology Vehicles (ATVs.)
• Incentives for AFV and ATV fuel infrastructure
• Government regulation to require sulphur below 10 ppm and no ash-forming additives (ie. MMT, metals)
• Reduction in new vehicle taxes and sales taxes that delay turnover of existing fleet

3. The Canadian Consumer

The Canadian consumer is key because they have choices of type of transportation, driving behavior, vehicle age and size, distance traveled and vehicle maintenance. All of these are important in reducing green house gas emissions.

ATVs are a long time horizon to mass production but large improvements are possible with current technologies.

Government Support Needed

• National Drive Clean programme to increase vehicle maintenance and removal of older, less fuel efficient vehicles.
• Education programme to encourage use of the most fuel efficient transportation mode and use vehicles more efficiently.