Car prices to soar as Ottawa takes aim at emissions

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New rules aimed at protecting the environment will drive up the price of new cars and trucks by thousands of dollars but save motorists money at the pump.

The federal government has hitched its wagon to U.S. President Barack Obama's aggressive new vehicle fuel standards, which would slash greenhouse gas emissions from tailpipes after 2020 but elevate the cost of vehicles.

Environment Minister Peter Kent said Tuesday that Ottawa will match a proposal from the U.S. Environmental Protection Agency to require that, by 2025, cars and light trucks be 50-per-cent more fuel efficient and emit half as much greenhouse gases as current models.

The new regulations for cars built between 2016 and 2025 would mean both environmental and economic benefits for motorists by reducing pollution and lowering the fuel costs of operating their vehicles, Mr. Kent said.

"These actions prove that we can both tackle climate change and save at the pump at the same time," he said during a press conference at a GM dealership in Ottawa.

Officials estimated the cost of an average car would climb by $700 in 2021 and by $1,800 by 2025 when the rules would be fully phased in, though some industry analysts say the price tag could be as much as $5,200 per vehicle depending on the technology needed to achieve the efficiency gains. But Canadian officials also say the motorists would save $900 annually in fuel costs at today's gasoline prices.

Mr. Kent will leave this weekend for the United Nations' annual climate summit, held this year in Qatar. Canada has been widely criticized both at home and abroad as a laggard in taking action on climate change, particularly after its decision early this year to withdraw from the Kyoto Protocol, the 1997 agreement that set ambitious 2012 emission reduction targets that Canada has failed to achieve.

Instead, the Conservative government has committed to put Canada on a path to reduce emissions by 17 per cent from 2005 levels by 2020, identical to the target adopted by the U.S., which never ratified Kyoto. Critics such as the federal environment commissioner have said Canada will be hard-pressed to meet that commitment with its sector-by-sector regulatory approach.

The government is working with industry on draft regulations that would govern the oil and gas sector, including the oil sands, which represent the fastest growing source of emissions in Canada. However, Ottawa is expected to follow Alberta's lead and set standards on a per barrel basis, meaning overall emissions would soar as production is set to double and even triple.

Mr. Kent noted that Ottawa has already acted in two sectors that produce the most emissions in Canada: transportation – which accounts for 24 per cent of the total – and the coal-fired power sector. In both cases, however, the biggest impact on emissions will come after 2020.

But critics say Ottawa has far more to do, and needs to adopt an economy-wide approach to battling climate change.

"The sector-by-sector approach is the slowest, weakest and most costly way to reduce greenhouse gas emissions," said John Bennett, president of the Sierra Club of Canada.

The proposed new vehicle regulations for the 2016 to 2025 period build on tougher standards already in place for 2012 to 2016, and would improve the average fuel efficiency to 4.3 litres per 100 kilometres (or 54.5 miles per U.S. gallon).

Mark Nantais, president of the Canadian vehicles Manufacturers Association, said it is not clear how companies will meet the new regulations, though they will rely on a mix of advanced power-train technology, new light-weight materials and increasing sales of hybrids and electric vehicles. Mr. Nantais said it is critical for Canada to move in tandem with the Americans so the industry faces a single, continent-wide set of standards, rather than a patchwork of regulations imposed by federal governments, provinces and states.

The Center for Automotive Research , an auto industry think-tank based in Ann Arbor, Mich., estimates the cost of the average new vehicle will rise by $5,200 in 2012 dollars as auto makers add expensive new technologies to meet the higher miles per gallon standard.

"The [auto makers'] research and development departments tell us the true cost is more like $10,000 per vehicle by 2025," Sean McAlinden, CAR's executive vice-president of research and chief economist said Tuesday.

The costs are expected to cut demand for new vehicles during the 2016-2025 period, Mr. McAlinden said.

"Vehicles on the road will continue to get old and older … until [we get] the Cubanization of the U.S. and Canadian vehicle fleets."