Cap and Trade

Vehicle manufacturers in Ontario have a long history of taking action to reduce energy consumption and their carbon footprint through investment in new processes, energy conservation, and waste diversion and remain committed to further reducing greenhouse gas (GHG) emissions.

This is demonstrated by the publicly available company-wide targets for GHG and/or energy intensity reductions for each of the CVMA member companies 2020-2025.

CVMA supports a broad based, economy-wide approach to reducing carbon emissions. In the absence of this broader approach and despite auto manufacturing contributing to less than one percent of Ontario industrial GHG emissions (Source: MOECC), the sector (vehicle manufacturing and their supply chain) is open to carbon leakage.

Efforts to reduce greenhouse gas emissions should be geared towards supporting, maintaining, and further advancing vehicle manufacturing in the province. Ontario’s Cap and Trade program must recognize important realities in the highly integrated automotive sector:

  1. Designation of the auto sector (including Ontario’s auto supply chain) as high risk for carbon leakage as a result of being very trade exposed.
    Auto manufacturing sector is highly trade exposed and is at risk for carbon leakage due to the high level of product export (more than 97% of vehicles manufactured are exported) and continuing manufacturing cost pressures. Auto manufacturing facilities in competing jurisdictions do not have a carbon policy similar to that in Ontario. Consideration of new investments opportunities requires program certainty beyond 2020, including appropriate allocations beyond the first compliance period.
  2. A cap reduction factor that is reasonable that recognizes auto’s past performance and realistic reduction opportunities.
    For more than four decades, the auto industry has been proactive in reducing energy use and improving the energy efficiency in its manufacturing operations. This historical focus and continuous progress, there remain limited technological opportunities for large emission reductions in the auto sector.

    Even with an assistance factor of 1, a cap adjustment factor, a sustained reduction of 4.57% is not achievable before or after 2020. After the first compliance period in 2020 with requirements to purchase significant allocations, the industry will start the second compliance period well above the anticipated new baseline. This GHG reduction “debt” will be difficult to reduce, even with large investments in future technology advances, if available.

  3. Mitigation of energy pass through and other costs for the industry and means to address the supply base cost increases and impacts.
    Recycling of revenue to support the “hard to do” energy projects (there are no easy ones remaining) is needed.