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SPEAKING NOTES

CVMA Bill 104 Submission to Quebec National Assembly Committee.

Committee of Transportation and the Environment
2016-08-16
National Assembly of Quebec
Quebec, Quebec

Good afternoon. I am Mark Nantais, President of the Canadian-Vehicle Manufacturers of Canada. I am here on behalf of our member’s companies, FCA Canada Inc., Ford Motor Company of Canada Limited and General Motors of Canada Company. Together these companies produce annually about 60% of all light duty vehicles in Canada. Each one is a full line manufacturer building many different models of passenger vehicles equipped with advance emission reduction and fuel saving technologies, including electric vehicles, to reduce new vehicle greenhouse gas (GHG) and smog-related emissions

I would like to thank the Commission for the invitation to participate in these hearings on Bill 104. Supplementing my remarks is a much more detailed submission which provides considerably more information respecting Bill 104, the industry’s commitment to electric vehicle development, along with and most importantly, our recommendations should the proposed legislation proceed.

***

The general population is more aware than ever of Climate Change and its impacts both locally and globally. At all levels in our society, people are making decisions to reduce the carbon footprint of their day-to-day activities, including personal transportation.on issues like rules of origin, including North American cumulation, and addressing non-tariff barriers to ensure that these trade agreements fortify the North American automotive supply chain and increase North American auto exports. We also call on our governments to take further steps to eliminate Customs procedures that impede efficient vehicle and auto parts commerce between our three countries. Advancing these priorities will promote the competitiveness and continued growth of the North American industry, and the millions of jobs it supports across the continent.

In response, our industry is changing too. Vehicle technology will change more in the next five years than it has in the past 100 years:

All segments of new vehicles are significantly more efficient, use less energy and emit significantly less greenhouse gas and smog-related emissions.

Based on the most recent Environment Canada and Climate Change inventory report from 2014 CY for Québec, light-duty vehicles fleet GHGs are now 7% below 1990 levels and down 21% from the peak in 2005; this emission reduction trend will continue its downward direction as more new vehicles enter the market through 2025 and beyond.

We are investing over $200 Billion in technologies to meet the 2012 to 2025 Federal GHG Regulations with over $100 Billion in developing vehicle electrification technologies – the auto industry is indeed committed to EV technology vehicles.

Since 2011, 25 new plug-in electric (increasing to 29 for the 2017 model year) have been introduced across a growing number of vehicle segments in Quebec; these vehicle offerings have been made available in the absence of a legislative mandate.

***

Quebec is the leader in battery electric vehicle sales compared to other Canadian jurisdictions and even most U.S. state jurisdictions. This success is not due to legislation or regulation, but by proactively instituting policies that help increase the consumer demand for electric vehicles, and enhance the recharging infrastructure in Quebec and public education. We commend Quebec for these efforts.

Several other jurisdictions have established leadership in the sale of electric vehicles where they have chosen to introduce similar consumer focused policies that enhance the demand for electric vehicle and support consumer use of this technology, without regulation. Perhaps the most successful is Norway and in North America, the state of Georgia and Washington.

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Let me turn to BILL 104
The government of Quebec has made its decision to introduce legislation and regulate manufacturers to force an increasing supply of electric vehicles vs conventional vehicles to their dealerships in the province. Bill 104 creates in the province what is otherwise known as a Zero Emission Vehicle or ZEV sales mandate.

A ZEV sales mandate does not address the fundamental issue of limited customer demand for electric vehicles, and alone, it will not entice consumers to purchase electric vehicles at the volumes and timelines announced by the Quebec government. This is a reality that the government itself acknowledges in its recently released briefing materials and why we believe, among other reasons, legislation should not proceed.

Government's policies and/or regulation must be supported by a robust cost/benefit analysis that can only be done with input from stakeholders most impacted, among others. Based on the information released by the government, it does not appear that it has satisfied the principles of its own policy for regulatory and administrative relief or the criteria set out in the regulatory impact analysis guidelines.

The government suggests that the ZEV regulation would generate fewer benefits than costs (a negative ratio) in model years 2018 to 2024 and only a positive marginal cost/benefit in model year 2025 (ratio of 1.01).

The analysis significantly understates costs by about $1billion and makes assumptions and conclusions that are characterized by a high degree of speculation. AND the work of other regulatory agencies that have attempted to assess the cost of Plug-in electric vehicle technologies that were developed in conjunction with the U.S. LDV GHG regulations for the period of 2017-2015, seem to have been ignored.

The government’s analysis also acknowledges and I quote: "Consumers have fears concerning the autonomy of the vehicle, how to recharge the vehicle, the availability of charging stations in Quebec network and vehicle recharging time". These are all genuine sentiments and concerns of consumers that influence their decision to buy or not buy a plug-in electric vehicle – these sentiments cannot be ignored.

***

Considering that the government’s analysis acknowledges that dealers in the province may be negatively impacted only indirectly, and tends to minimize those impacts, we want to provide you with two clear examples of how Bill 104 as presently drafted negatively affects the dealers and our business relationship with them:

Firstly, the legislation states that only by registering vehicles that meet the government’s prescribed criteria may a vehicle manufacturer accumulate credits under the Act. The language as written does not appear to comprehend the reality of the business relationship between dealers and manufacturers. Vehicle manufacturers sell wholesale to the dealer and have no legal or other control over a dealer who is responsible for the retail sale of the vehicle to the retail customers. Under the ZEV program in California and the US NE States, the government recognizes this relationship and assign the responsibility of the manufacturer to produce and deliver for sale (whole sale). Quebec must define the term “sale” in a manner consistent with these jurisdictions and as Quebec has previously done in their existing new vehicle GHG regulation.

Secondly, under a ZEV mandate, the sale of conventional vehicles that consumers still want and need to dealers would likely need to be reduced in order to attain the prescribed forced sales ratio. It is estimated that between 100,000 & 200,000 consumers a year may not be able to buy the vehicles they need to meet their family or business needs. In such a case, the government would not realize the commensurate sales tax revenues associated with lost vehicle sales, nor would dealers realize the sales opportunity of such vehicles and the related economic benefit to their business.

Some of our Specific Recommendations Respecting the legislation

We are committed to continuing to work with the Quebec government to improve Bill 104 and make it more effective, practical and balanced for all stakeholders, should it proceed. From this perspective, we offer the following recommendations for the consideration of the Minister and of this committee:

  1. The program must provide for full flexibility with regards to compliant ZEV vehicle type mix
    • The government must allow for the accumulation of credits for defined Plug-in electric vehicles and Battery electric vehicles with no minimum or maximum credit levels restriction in these categories. Furthermore, full compliance must be recognized with PHEVs with no minimum requirement for the specific electric technology types given Quebec’s cold winter weather impact vehicle battery range.
  2. The government must delay implementation for the first effective model year. At a minimum, two calendar years following the calendar year in which the regulations are finalized; an alternative is to make the first few years reporting only.
  3. Incentives for early actions and the establishment of the Credit Bank
    • There is a need to expand early action credits model years and recognize a banking system for credit, beyond 2016-2017MY period currently specified in the proposed Quebec legislation (note, they may sight 2018 MY as well. If they start the regulation in 2018 MY there will be no benefit/early action for 2018 MY). The US NE States provided an average of 5 years of early action credits in advance of the start of their original ZEV regulations. These early actions often included multipliers on the earliest of these early action years’ sales.
    • There is also a need to provide credits for fleet actions (such as OEM owned shared vehicle EV fleets); credits for investment in supporting policies and credits at California values.
    • Finally provide a bank of credits for each vehicle manufacturer proportional to California, and similar to that which some NE States instituted at the beginning of their program.
  4. Our fourth recommendation highlighted today is to incorporate program reviews at a more frequent interval than the legislative proposal of every 5 years
    • We suggest an initial program review after 2 years and then every 5 years once experience has been gained, or every two years like California.
  5. Our fifth recommendation is to minimize the penalty risk for those having to comply with this totally new program
    • We suggest suspending penalty provisions during the first 3 full years of the program and permit greater flexibility to purchase credit balances from the government to cover any credit deficits, as well as unlimited credit carry forward and carry backward provisions, similar to other jurisdictions with ZEV regulations.
  6. Finally our sixth recommendation addresses Fleet phase-in flexibility and Vehicle Definition of motor vehicle.
    • First, government should recognize the real potential growth areas for electric vehicles in major urban areas. Analysis of the Québec automotive market indicates that approximately 65% of the fleet is sold in the 15 largest urban market areas in Québec. We recommend that the proposed program be modified and initially require only 65% of the light duty fleet sales to be regulated in the first year of the ZEV program and gradually increase the percentage of vehicle sales in subsequent years, this would allow the Québec charging infrastructure and consumer demand to mature in line with the Quebec market.
    • Second, the definition of motor vehicle designating 4500 kg GVW for light duty vehicles is not aligned with the existing Quebec GHG regulation, the Canadian vehicle GHG regulation, or the US federal and California definitions: this must be changed. The California and North East U.S. State ZEV programs clearly exclude work trucks over 3855 kg (8500 lb) GVWR in their regulations, whereas Bill 104 does not. This needs to be corrected in the Bill to ensure that the same vehicles are addressed. The wording from California regulation Title 13, California Code of Regulations, would be more appropriate.


Like that of the government, our objective is to promote the consumer adoption of electric vehicles through the development of Plug-in electric vehicles that are meeting consumers’ needs and supported by broad and ready access to recharging infrastructure. Abundant well positioned (work and public locations) recharging infrastructure is critical in providing consumers’ confidence that plug-in vehicles are a viable new vehicle choice for their family and business transportation needs.

What is important is that the environmental benefits accrue not just through the adoption of the electric vehicles but rather the zero emissions kilometres driven that replace kilometers driven by convention vehicles, regardless of the electric technology that the consumers chooses to meet their needs.

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In conclusion

As Bill 104 was not developed with any formal industry input, we are requesting that the government not proceed until appropriate industry-wide consultations and cost benefit analysis are completed. But should the government proceed regardless, we ask that it work with the collective industry in finalizing the legislation and the development of the supporting regulations.

Thank you,
I would be pleased to answer your questions.

CVMA Bill 104 Submission to Quebec National Assembly Committee


For more information, please contact:

CVMA
Mark Nantais
President
Canadian Vehicle Manufacturers’ Association
Tel: 416-364-9333
Cell: 416-560-4005



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