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The Canadian government is drafting regulations that would dramatically improve fuel efficiency for post-2016 cars.Fred Lum/The Globe and Mail

The Canadian government is preparing new greenhouse-gas standards for post-2016 car models that will force auto makers to dramatically improve the fuel efficiency of their fleets.

Ottawa intends to harmonize its rules with draft regulations that were announced Tuesday by the Obama administration, rules that would require an 80-per-cent improvement in mileage by 2025 from the current standards.

Details of the Canadian regulations are still in development, "but our approach is definitely to take common standards on both sides of the border as much as possible," Adam Sweet, a spokesman for Environment Minister Peter Kent, said Wednesday.

The new regulations represent another hurdle to the recovery of the still-fragile auto sector. Yet adopting the same standards as the United States will be essential if the Canadian industry hopes to remain competitive with U.S.-based manufacturers.

The proposed regulations will be "extremely challenging" for the industry to meet, said Mark Nantais, president of the Canadian Vehicle Manufacturers' Association, which represents the Detroit-based industry.

But Mr. Nantais said the industry wants Canada to pursue continent-wide regulations, rather than attempt to go its own way and fragment the market.

"The single national standard, harmonized between Canada and the United States, is what we support," he said. "That allows the standard to become in effect a continental standard and allows us to amortize our costs across the larger North American market."Mr. Sweet said the proposed regulations will be released in the coming months, and are an important part of the government's strategy to reduce greenhouse gas emissions.

The federal government is following the U.S. lead in establishing tougher fuel efficiency standards for light-duty vehicles – cars, vans and sport utility vehicles – for the model years 2012 to 2016.

The proposed U.S. rules would represent "the single most important step we've ever taken to reduce our dependence on foreign oil," President Barack Obama said in a statement this week.

Republican presidential nominee Mitt Romney has slammed the planned regulations, saying they would deprive American drivers of choice and drive up the cost of vehicles. He vowed to cancel the new rules if elected in November.

The Obama administration counters that the higher sticker prices will be more than offset by lower operating costs from the fuel savings.

Under the Obama administration plan, the so-called Corporate Average Fuel Economy standard – which covers an auto maker's entire fleet of light-duty vehicles – would rise to 54.5 miles per gallon in 2025, from the industry's current commitment of 35.5 mpg by model year 2016.

In Canadian terms, that would be equivalent to improving fuel efficiency to 4.4 litres per 100 kilometres from 6.6 litres/100 km.

Mr. Nantais noted that there will be a review of the planned regulations before they go into effect in 2017, and the industry then will have a better idea how it intends to meet the standards, and whether they are realistic.

To achieve those goals, North American consumers will have to change their purchasing habits – a trend that would be reinforced if gasoline prices stay high or even rise further, said Eric Lundin, a senior analyst at PFC Energy Group in Washington, D.C.

Each manufacturer will pursue its own strategy – some marketing smaller cars more heavily, some pursuing advances in the internal combustion engine, and others relying on hybrids and electric vehicles such as General Motors Corp.'s Volt.

"It is a very big increase in fuel economy," Mr. Lundin said of the new guidelines.

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