Ottawa has averted a battle with the powerful auto sector by reaching a voluntary deal with car makers that will see them cut greenhouse gas emissions from vehicles by 5.3 million tonnes by 2010, senior federal and industry sources say.
Sources close to the talks say Ottawa will ink a memorandum of understanding with the heads of Canada's two auto manufacturing associations in the next few days or weeks -- a deal that will seal the car makers' obligations under the Kyoto accord.
Ottawa is looking to hold the ceremony in the next two weeks in Windsor or Vancouver.
The deal would see auto makers cut greenhouse emissions -- caused by vehicles burning fossil fuel and by operating air conditioners -- through the following measures:
Developing and deploying fuel-efficient technologies.
Reducing vehicle emissions and improving technology such as air conditioning.
Producing more alternative fuel and gas-electric vehicles.
Launching joint advertising and education with Ottawa to encourage Canadians to buy fuel-efficient vehicles.
Environment Minister Stéphane Dion had previously threatened to impose emissions limits on the sector if a voluntary deal couldn't be reached -- a vow that other federal officials said yesterday would have threatened Ontario's economy and could have prompted a voter backlash.
"The industry and the tax base is important and it would have been irresponsible to jeopardize that," a senior official close to the talks said.
Auto makers employ just under 60,000 Canadians directly, but are a key engine of the Canadian economy, especially in Ontario where all the head offices and assembly plants are located. The industry accounts for 12 per cent of Canada's manufacturing gross domestic product.
Some officials have pushed to sign the deal March 29 at a Vancouver auto show, others are saying it should be signed in Windsor, an auto industry town that has snubbed federal Liberal candidates in the 2004 election and a 2002 by-election.
The deal would cap years of on-and-off negotiations between Ottawa and the auto sector.
In late February, talks broke down after some senior Liberal officials demanded that the auto sector take responsibility in the agreement for changing consumer behaviour so that people buy more fuel-efficient cars.
Industry officials rejected the idea that it's their job to sway drivers through advertising and promotion. Since then Ottawa has softened the language and the auto makers also agreed to a minor increase in the megatonnes of reductions they would make, to 5.3 million tonnes from 5.2 million tonnes.
"As a tradeoff, Ottawa got the extra 0.1 megatonne," a senior federal official said.
In 2002, the federal Liberal government dropped auto makers from the list of heavy industries that would be required to cut plant emissions under Kyoto, on the understanding that the sector would instead boost vehicle fuel efficiency by 25 per cent.
But in recent months auto makers told Ottawa they feared making a percentage commitment could undermine a lawsuit in the United States where car makers are suing to block California's tough vehicle emission standards. That's why Ottawa agreed to switch the auto makers' obligations to 5.2 million tonnes from a 25-per-cent increase in fuel efficiency. The new target reflects the emission reductions that would have resulted from a 25-per-cent increase in fuel efficiency by 2010.
Hybrid gas-electric vehicles greatly improve fuel economy and while they now are offered only by Ford Motor Co. of Canada Ltd., General Motors of Canada Ltd., Honda Canada Inc. and Toyota Canada Inc., auto makers will be bringing more to market in coming years as part of plans to reduce fuel consumption -- and therefore vehicle emissions -- by 2010.
They will also offer more vehicles with systems that reduce the number of cylinders in use in an engine when full power is not needed, such as cruising on a highway.
DaimlerChrysler Canada Inc., for example, offers the multidisplacement system on its Hemi engines. It cuts the number of cylinders in use to four from eight when the vehicle is cruising.
GM offers displacement on demand and said when it announced its $2.5-billion investment in its Canadian operations earlier this month that it will spend $23-million at its St. Catharines, Ont., engine plant to assemble a V8 engine that offers the feature.
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