Adam Chamberlain: Okay, well, maybe well we'll start to get going. Now it seems that numbers have leveled off a little bit. morning or good afternoon depending on where you are. My name is Adam Chamberlain. I'm a partner in the Toronto office of Gowling WLG. And we're here today to talk a little bit about vehicle vehicle emissions in the UK and Canada and some details of where things are going and trends of where things are going. Today, we're joined by two of our colleagues, my colleagues from both the UK and from Canada. Ben Stansfield is a partner in our London office and Alex Sadvari, because so far, he is an associate in our Toronto office. And of course, none of us are in our offices. So that part of the details sort of academic, but we're here from Canada and from the UK. And we're going to spend a little bit of time speaking about vehicle emissions and trends in such where we're going. So what we're going to do today is start with Ben and then go to Alex. And we've got presentations from each, then we'll be having time for questions and answers at the end of the presentation. So if you have questions, feel free to use the Q&A function on your screens to pose them and I will make sure that any questions get to get good pose to Alex and Ben. But why don't we start off with Ben now I'm going to ask each of Ben and Alex to introduce themselves and just explain their practices a little bit before we get going, or before they get going. And so we'll start with Ben.
Ben Stansfield: Thank you, Adam. Good afternoon, everyone. Good morning. So yeah, so when I'm not in my study, I'm based in goings London office, and our Environmental Law Group is pretty broad. We cover a lot of stuff. So we go from the soil and groundwater remediation contamination issues. We do a lot of chemicals regulation, permitting and various compliance matters. But in recent months, we've been looking pretty closely at tailpipe regulations, tailpipe emissions regulations. And of course, Brexit has turned turned matters on their head somewhat in the UK. So I'm gonna cover at warp speed, the emissions regulations in the UK and in the EU. And I'm going to focus on passenger cars, the regime for light commercial vehicles is very, very similar, albeit the allowable emissions are that much higher. But I'm not going to cover the regime for HGVs and buses, if that's, if that's your bag. I'm really sorry. We're short on time. Just drop me a line. And we'll we'll have a coffee and we'll talk about that. If I have the next slide, please. But I want to set the scene a little with some facts and figures that I've borrowed from the Society of motor manufacturers and traders, the excellent smmt, please do look them up. And first of all, apologies for the my drawing of a car, I had a bit of a panic about using a picture of a real car. So I drew one using PowerPoint shapes. It's not it's not a work of art, I'm afraid. But anyway, the average car emissions in 2018 in the UK were 124 grams of co2 per kilometer traveled. Now remember that figure because it's going to be relevant when I talk about the EU target, Van emissions were a bit higher at 167 grams of co2. And emissions have crept up just a little bit in the last year or so. But overall, you know, the auto sector has made phenomenal progress and emissions have dropped by something just under a third in the last 20 years. So great progress has been made. And in terms of trends, well, certainly in the UK and possibly overseas. You know, the trend is for us to be buying consumers to be buying larger, heavier cars, which by almost definition emit more co2. And we're moving away from diesel probably because of air quality issues in the UK, which have been pretty, pretty significant. Certainly in London, a number of high court and court cases on air quality. So we've been moving away from diesels getting larger cars. And so consumers are making this really hard for manufacturers. So I own a diesel four by four. So, so I'm as bad as any to blame. But we are making life harder for manufacturers who have got these really difficult rules to comply with. If I could have my next slide, please Shannon. So the EU have been regulating car and Van emissions since June 2009. So just about sort of 12 years, and that regulation has been repealed. And the current regulation was adopted in April 2019, which came into force just over a year ago in January 2020. And I'm going to summarize some of the The key aspects of the 2019 regulation. So, first box, there is an EU why target and the regulation sets an EU fleet wide average emission target for new passenger cars, ie, all new cars in the EU, when averaged out, should they should be hitting 295 grams of co2 per kilometer traveled, some will be greater and some will be less. But you will remember that slide just a moment ago, the figure from the previous slide, we're averaging 124 grams of co2 per kilometer in the UK. So that's nearly a third higher than the target. So there is there is quite the Gulf from 2025, that target is going to tighten it's going to be a 15% reduction against 2021 levels and from 2013 It's going to be 37 and a half percent reduction. The reason I'm not put the actual figures in there is because from 2025, the European Union will move towards the worldwide harmonized light vehicles test the W LTP. And I understand that represents real world conditions. So they talk about percentage reductions rather than actual numbers at the moment.
So my next box manufacturer, co2 targets are manufacturers are going to be subjected to their own emissions targets and they're going to be calculated in accordance with pretty complex formula set up in the annex to the regulations. It reminds me why I became a lawyer and focused on words rather than anything to do with numbers because they are pretty horrendous. But in essence, it's based on the on the average weight of your manufacturers fleet. Last year, there was a small short phasing period. So only 95% of your of your as a manufacturer, only 95% of your cars were taken into account. So the top 5% of median cars didn't count. But from now on. Every single car you manufacture will go towards that target. There's a relatively new incentive mechanism for deadlifts. So for zero and low emissions vehicles, and Zed LEDs have emissions between zero and 50 grams of co2. And the manufacturers specific emissions target is going to be relaxed if it can exceed certain benchmarks. So from January 25, if 15% of its new cars are said lives, or from January 2030, if 35% of your fleet are Zedd lives, then for every percentage point you exceed, you will get a reduction effectively an increase in your emissions targets. So for example, if in 2025 16% of your fleet is said live, then that 1% will give you an increase of one gram of co2 on your manufacturers target. So you are incentivized as a manufacturer to be producing more sad lives. And derogations. So manufacturers and derogations. And exemptions, I should say. So manufacturers, you know, small manufacturers who are responsible for less than 1000, car sales are totally exempt. And there are derogations If you're between 10,300 1000. Sorry, there are derogations for less than 10,000 car sales, you can get a five year derogation and you can propose essentially agree appropriate specific emissions targets, if you're between 10,300 1000 In less generous derogations are available. And there's some really, really quite big points here. I mean, it seems sort of a small subtlety, but it's all about you know what, you know, what constitutes a group of manufacturers and whether you share your design facilities with other manufacturers. So if you have two small manufacturers within a sort of a same group or holding business, and they're essentially connected or under joint control, that's going to bring them within the scope of regulations. So it's, and we've spent quite a lot of work quite a lot of time recently on some of those issues, making sure that groups are properly separated out. If I can have my next slide, please, Shannon. So just a few more points on the EU regulation. So article 11 of the regulation deals with eco innovation. So manufacturers can benefit from co2 Target increases through innovative technology or innovative technology packages. So the European Commission will consider applications and if your new tech that you put on your car can produce a verifiable, repeatable, comparable co2 reductions then you can get you can get some benefit. So you can get up to seven grams of co2 on your target to if you're producing tech that will overall reduce reduce emission. So, for example, Audi have benefited from LED lighting Bosch has produced a much more efficient tool to Naita BMW has been really going great guns on coasting technology and what have you. I think it's probably fair to say that eco innovation hasn't really yet had major impact on fleet co2 emissions. So most manufacturers are saving naught point one grams or something like that. I think BMW have saved four grams of co2 and Porsche have hit 4.1. But, but overall, it's not having massive impact. Super credits now certain sound like a bit like a game show. But manufacturers can get bonuses called Super credits. So vehicles which have co2 emissions of less than 50 grams of co2, you can you get a certain number of super credit, and it's been on a sliding scale for a while. So each low emission car that you produced in 2022, sorry, in 2020, counted twice.
But from 2021, it's it's 1.67 cars. So how does that work that that's, that doesn't make a lot of sense. So let's say you make four cars, and you have emissions of 5100 150, and 200. So if you add those together, you get 500 grams, you divide it by four, so your average emissions are 125. But let's say well let low emissions can't actually count for more than one car. So you now divide that 500 grams between 4.67. And that gives you your average emissions of 107.6. So you can see that having super credits can be really effective in bringing down your average emissions, there is a cap on how much you can reduce your emissions by so I think it works out it's 7.5 grams over three years, or two and a half grams a year, way more. Sorry, way less than my example. But you get the you get the idea. A pooling is something get lawyers excited. So manufacturers can pool their emissions to meet their obligations. So a manufacturer of high emission vehicles can pull together with a manufacturer of much lower emission vehicles, and then doing so can reduce its average emissions and comply and can comply with a target which otherwise might have very little hope of meeting. So there's a there's a there's a you know, the if you're a producer of low emission vehicles, then you're certainly very attractive to other manufacturers to pull with. And I've got some examples in a minute. But we'll see, for example, Fiat Chrysler Group, forming an open pool with Tesla to reduce emissions and Ford, Volvo and Renault doing similar things to just finally on the regulation. So every member state must record information regarding car sales in its territory. You know, there's specific details as to what's required in the regulation, there's all manner of detail, it's got to be submitted. And that information is submitted to the commission. By the end of February for the preceding year. The Commission crunches that data and by June it calculates for each manufacturer the average specific co2 emissions the preceding year, its target and what the difference between the two is. I've been involved recently with dealing with a commission on the application of their rules and how they treat their data and what have you. And it's difficult, but there is scope. In my experience for discussion and for changes to be made. It's not easy, but it's it's doable. And it's worth doing because the numbers, as we'll see on the next slide, please, Sharon, the numbers can be chairman sorry, numbers can be really significant. So there are penalties, which are called excess emissions premiums, in the words of regulations, and so if a manufacturer exceeds its specific emissions target, then it's going to get pretty heavily penalized. So the formula is you take your excess emissions and you've seen a minute ago that in the UK, we're looking at about 29 You know, our average is 124 against the EU target of 95. So we're we have excess emissions of 29. Let's say you multiply that by 95 euros, which gives you something like 2800 euros per vehicle, and then you multiply that by the number of registered vehicles. So if you're producing 100,000 vehicles, and you're exceeding the targets that you've been set by 29 or 30 grams, then you're looking at 275 million euros in terms of refining. I've taken the data from the website I've sourced it there, but you can see that you know some folk have run crunched the numbers and predicting that you know, some manufacturers are going to have excuse me excess premiums in excess of a billion euro and the numbers are insane and so that's really driving a reaction in Europe so a lot of the OEMs are you know they're all super focused on reducing their average emissions they're they're investing heavily in Evie rollout. They are open pooling and you know, bringing bringing forward the their electric vehicle vehicles. If I've got the next slide, please. So I've put this table together just so you can kind of see the direction that the EU has been in since 2012. You can see that those trends, and you can see that, you know, on the top we've had the fleet co2 target was much higher at 130, it's going down to 95. And it's going to be reducing again, very soon. We've also had a sort of a phasing period since 2012, as well. So you know, for a short time 65% of the manufacturer's vehicles counted towards the target. And that slowly increased to 100%. Now,
The deadlift benchmark is new. We've had super credits in back in 2012, extremely generous. So a car under 30 grams with comitting, less than 50 grams of co2 would count for 3.5 cars. And he just a few years ago, currently 1.6 7 billion couple of years time, it'll only count for one. And again, you can see at the bottom line there penalties. You know, there are significant prior to the 2019 regulation, but since 2020, the fines have been massive. Okay, homestreet, if I could just have the next slide, please, Shannon, and the next so to the UK. So European directives need to be implemented into local law. So a European directive would be implemented in 2829 different ways across the EU, by it by local legislation, but EU regulations, which they say is or the EU regulation, they apply automatically, so they don't need to be brought into domestic legislation for them to apply. And that caused pretty big issues. For Brexit, we needed our own version of the EU regulation because as soon as we left Brexit, we didn't have our own version of it. So fairly rapidly, the UK government last year consulted on its own approach, and introduced its own regulations. And the system is fortunately, very, very similar to the EU model of government, the British government said, Look, we want to be as at least as ambitious as our colleagues in Brussels, so the system is going to be familiar. But the UK car fleet is on average, heavier than the EU, you know, that's That's me and my diesel four by four again. And so that's impacting our ability to hit emissions targets. But encouraging the UK said, Look, we're going to stick with the same emissions targets, as the as the EU, we don't want it sort of regulatory imbalance, we don't want to make regulation in the UK more demanding or burdensome or have different standards. So it's, it's, you know, it's it's less rigorous over here. So the exemption limits in the EU of 1,000 10,000 300,000, you can't really just divide those by 28. To get the UK number, you'd end up with some pretty crazy figures that you know, a manufacturer of less than 50 cars, for example, wouldn't wouldn't find UK which just isn't really going to work. So there's a balancing mechanism whereby the UK will look at historic shares in the in the UK and if there's a new a new entrant, then they'll just simply say, look, we'll we'll work on the basis of 15.5% of the EU thresholds because that's historically what the UK is car share is pooling is still going to apply eco innovation will still apply super credits will but they will be at 3.75 rather than 2.5 grams a year. Penalties we've gone 86 pounds, because that's equivalent to 95 euros. But the UK has said that they'll review this in 2023 Just to see how it's going. So just if I could have my next and final slide, please just what's the future for emissions? Where do I think this is going? Well? In the UK, we've we've we've legislated to ban the sale of new petrol and diesel cars by 2030. So I think that's pretty far advanced. I suspect other countries will go down that route as well. So it may be on a face basis. It may be that they have a sliding scale. Or they may just have a blanket ban as a line in the sand. There's always me questions around hybrids that were certainly very contentious, I guess when we were considering our ban on internal combustion engine sales. The difficulty being How do you know a vehicle is being used genuinely as a hybrid or whether it's just always been used with petrol or diesel? We're seeing and probably around Europe in the world as well. We're seeing stricter, ultra low emission zones in urban areas. So whether there'll be geographic restrictions on ice vehicles, I don't know.
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greater incentives perhaps for electric vehicles to your whether those be financial government grants where there'll be taxation benefits in terms of low taxes. Like we've had scrappage schemes in the UK in the past which were moderately successful again, whether we're going to see those in the coming years to encourage the likes of me to get rid of my diesel, and encouraged me to buy my electric vehicle. But most critically, I think what we're going to see is a focus on non tailpipe emissions. So brake dust, and tire degradation, in contrast to co2 emissions from cars and trucks. There are no emissions limits currently on brakes and tires. And that's pretty staggering. And you know, the link between air quality, human health and non tailpipe emissions is becoming increasingly prominent and clearer. And certainly in the UK, the government clean air strategy, which it published a couple of years ago has made clear that we are going to be looking at standards for tires and brakes to reduce non exotic non exhaust particulates. So when that happens is anyone's guess. But I think it's, it will be the next big thing. That's my presentation.
Adam Chamberlain:Thanks very much, Ben. That's great. And it's really interesting, actually, from accounting point of view to hear the distinction between what we see here and what the general trends are in the UK. So thanks very much for that. So I'm going to turn quickly now to Alex Sadvari. In our wealth normally in our Toronto office. So Alex, me, perhaps you can introduce yourself briefly and then we look forward to hearing your presentation.
Alex Sadvari: Thanks, Adam. Yes, as Adam mentioned, I'm a lawyer in the Toronto office, but also based out of my third floor office at home here right now, like many of you, I have a broad environmental land use planning practice doing a mix of transactional regulatory, and Administrative Tribunal work for a variety of clients, including corporations and municipal governments. I'm not going to go through a full description of everything I do. But please take a look at my profile on the website if you're interested. My automotive practice tends to focus on very specific questions from clients about regulatory compliance, including with respect to the manufacturer and imported vehicles and engines, but that wouldn't really work in this setting. So today, I'm going to take a broader approach. Next slide, please, Janet. Thanks. So I couldn't resist starting up. I think you may have gone to slides. Yeah. Thanks, Shannon. I couldn't resist starting with this very stereotypically Canadian photo of my zero emissions preferred mode of transport. I can do pictured here on top of my car. But unfortunately, we're not here to talk about canoes. Next slide, please. Canada regulates vehicle emissions at both the federal and provincial levels. But today I'm going to focus on federal regulation, providing a broad overview, and then discussing where we think we're headed in Canada in the US. Spoiler alert, even though I think we're a bit behind the in fact, quite a bit behind the UK and the EU. Based on what Ben's been saying it looks like regulations are going to get more stringent here as well. Next slide, please Shannon. So in Canada, the federal regulator for emissions is E triple C or Environment and Climate Change Canada, and the governing legislation is SEPA or the Canadian Environmental Protection Act. Under Sequa e triple C regulates emissions from on road and off road vehicles and engines. And as you can see on this slide, Division five of SEPA deals with vehicle engine and equipment emissions in particular. Next slide please. These this list here are some of the applicable regulations under Sequa. The top three regulations on the list are based on vehicle type, and apply to companies or persons who manufacture or distribute or import vehicles and engines, the original equipment manufacturers at the bottom of this list, I've included the proposed clean fuel regulations, which are expected to replace the renewable fuels regulations that are currently enforced. That's assuming that the current Canadian federal government remains in power which is yet to be seen. The proposed clean fuel regulations are aimed specifically at the automotive sector and at liquid fuels. They require producers and importers of liquid fossil fuels to reduce the carbon intensity of those fuels. And the proposed regulations will introduce a credit based system to help regulate emissions. They're one of a number of greenhouse gas emission reduction measures that the current federal government has introduced to meet Canada's target under the Paris Agreement and achieve the goal of net zero emissions by 2050. But I'm going to talk a bit more about that net zero emissions issue closer to the end of my presentation. Next slide, please, Shana. So as I'm sure you're aware, the Canadian market for cars and trucks is much smaller than the US market and also very closely connected to the US market. So the general regulatory approach Canada has simply been to align emission standards with US federal standards and incorporate US standards and test procedures by reference. So during the Trump administration, obviously, it's been quite, it has been quite different than hopefully it'll be under President Biden. Although there are other ways of providing evidence of conformity with Canadian federal emission standards. The most common is a vehicles US EPA certificate. An EPA certificate can be provided as evidence of conformity for any vehicle model year sold concurrently in Canada and the US. Next slide. Chana cleaning. Canada has a vehicle emissions credit system that allows companies to generate emission credits if their fleet average performance for a given model year is better than the standard. Companies can accumulate emissions credits for future use to offset emission deficits. The company can then use them if their fleet performance is above the applicable standard in future years. Next slide, please.
Some people think that aligning with US standards means that there is no independent Canadian verification and enforcement of emissions. Those people are sadly mistaken. E triple C can still independently verify emissions compliance and has broad powers of inspection investigation and enforcement. Don't get scared by this slide though. It shows all SEPA fines and penalties, not just emissions related ones. If you look to the right hand side of the slide, the white segments of the bar graph on the right are related to air emissions, but that includes stationary sources as well as vehicle emissions. Technically, penalties for non compliance under Sequa can be very high. But in practice vehicle emissions enforcement's rare and penalties have typically been low, obviously, with the notable exception of the Volkswagen scandal, which I'm sure most if not all of you have heard of post Volkswagen E, Triple C maybe leaning towards increased inspections, investigations and enforcement. But it is not yet clear whether they have the budget to follow through. Next slide, please. Looking towards the future of vehicle emissions regulation in Canada, I think as I mentioned earlier, we're behind where BIM has indicated the EU and the UK are. But we see a move towards more stringent regulation. The Government of Canada has pledged to get the country to net zero co2 emissions by 2050. As I said earlier, including the transportation sector. In November 2020, the government introduced the Canadian net zero emissions Accountability Act, but it is not yet law. Well, this puts Canada behind the UK and other countries that have already passed similar legislation. It does put us on a similar track. Of course, as I said, a Canadian federal election could change them. Next slide please. As Ben pointed out in his presentation, electric vehicles are on the rise in the UK. They are in Canada as well, although perhaps not as significantly. zero emission vehicle sales saw gains in the third quarter of 2020. With the number here is 18,700 deaths, but the actual number based on Statistics Canada records is 18,771 new vehicles registered across Canada. As you can see on the slide, the vehicles sold consisted of 67% battery based EVs and 33% plug in hybrid vehicles, and they represent a 3.7 market share of all vehicles purchased in the quarter. I haven't seen the results for the fourth quarter of 2020 yet, but it will be interesting when they are available. Next slide please. Of course, because Canadian vehicle emission standards are aligned with US standards and the markets are so intertwined. We also have to look to the US when considering the future of vehicle emissions in Canada. Under President Biden, the US is moving towards more stringent vehicle emission standards. No surprise. His platform election included strong environmental protection. Biden has directed us agencies to reconsider Trump's 2019 decision to revoke California's authority to set its own more stringent vehicle tailpipe emission standards. And in the past, before Trump made that 2019 decision. California really drove the US emissions data standards. Basically, California set the standards for the whole country. Even though you know, supposed they're supposed to be federal standards. That's probably why Trump had a problem with them. Biden has also made boosting electric vehicles a top priority and has pledged to spend billions of dollars to build Evie charging stations. I recently spoke with a friend of mine who's an environmental attorney at Thomson hind with I have to say, a great American name, Jewel Eagle. I was trying to get the inside scoop on the expected timing of changes under President Biden. But all jewel could say with that more details are expected to emerge in the coming months. So stay tuned. And that's the end of my presentation. Thank you.
Adam Chamberlain: Thanks very much, Alex. And we'll bring Ben back. And through the magic of zoom, we'll open it up for questions. I will say a couple observations in listening to the both of you. I left with the sense that a few things. One is that the distinction between what we see an EU in the UK said there's a focus on a broad suite of tools. And whether it's particular zones for use of vehicles or incentives or penalties for not producing enough for incentivizing productive, more electric or other fields of low income, low emission vehicles. What we see in Canada, and generally North America generally is more of a focus on internal combustion engines efficiencies. And it'll be interesting to see, I think, whether we see more efficiencies or more tools, I should say, brought into the Canadian and American context. So that's an interesting thing. The other thing that I want to observe before I ask the question of you both is that I been I know, regulators never want to pass up an opportunity for a new really good euphemism. And I think the one that you brought up, maybe it's so you've heard it too many times. So you don't realize what a great euphemism it is. But this notion of excess emission premiums, instead of fines, I think it's a really great tool. And I just hope that the North American regulators don't think of it because it's sounds like a great way of trying to sell it, sell a penalty. But I guess the question I'll start with is about the trends. And what again, becomes very obvious when we listen to discussions from people, like the two of you about different jurisdictions is that the different jurisdictions do, are following different trends. I'm curious, a little bit about what how you would see the trends in terms of international harmonization in the UK, and the EU and how they might differ?
Ben Stansfield: Yeah, so I think during Brexit discussions, and what have you, there was a lot of anxiety on behalf of remainders. Of whom, yeah, very proud. So I am one, but no, there's, there was a lot of anxiety, I think, from environmentalist in particular, that standards are going to change, and that the UK would use the opportunity of leaving the EU to, to go light green, and to sort of cut, you know, there's a lot of talk about cutting red tape, but there is a fear that the UK might starting green, start cutting green tape as well. And that doesn't seem to have happened, you know, the UK, you know, we were the first government to declare net zero. We declaring a climate emergency, there have been some pretty good policies generally on environment coming out of the UK Government. So I, I'm, I am optimistic that we're going to be at least as green as the EU, I mean, I do look towards the European Union and see their Green Deal and think that's a really well articulated policy document, you know, we know what the European Union is going to do on all sorts of things. But, you know, credit where it's due, the government and UK has done a pretty good job. So I think, to answer your question, I don't see there's likely to be a significant divergence on environmental standards. If anything, the UK is going a little bit faster, a little bit a little bit earlier than the EU in terms of you know, for example, its ban on the sale of new petrol and diesels. So, you know, wearing my environmentalist hats, Reasons to be Cheerful, wearing my sort of, you know, commercial advisors hat, I think the way the UK approached its consultation with in relation to the banning of the sales of new petrol and diesel, it did a really bad job, because the date was 2040. And they said, well, let's consult on bringing it forward to 2030. And then we had the Committee on climate change, saying, well, could you be a bit more ambitious? It should really be 2032 at the earliest. And then the government said we'll have at 2030 and all the time, you know, how do you run a business internationally that makes cars that don't just get produced overnight? You know, they take years to do the r&d To manufacture to market all this kind of stuff. And and I think the auto sector got a really bad deal from the government on that in terms of this lack of regulatory certainty and not knowing where it was going, you know, the industry is worth billions of pounds. And it was sitting there thinking, Well, look, just tell us what you're going to do. So now we've been told, that's a positive. We just need to, I suppose we could do with the European Union coming out pretty quickly and saying which way they're going to go as well. And then that will give us complete certainty, because they're not clearly they can't be two markets, the UK and Europe. So whichever has the tighter regime? That's, that's the one they'll go with.
Adam Chamberlain: Thanks, Ben. Alex, I sort of a similar question about trends and such. I mean, with the in Canada that our prime minister who's has a liberal is, leads a Liberal government, that is portrays itself as being quite progressive and advanced in environmental matters, and certainly speaks aspirationally about doing all sorts of great stuff. Some might say that this government's had a bit of a free ride because of the comparison between it and it's the US federal government or federal administration in the last go round. But things have changed now. And I kind of look at Biden, at least the things we're starting to hear out of Washington. And it seems that there may well be some additional pressure to actually perform at the federal level in Canada. I'm curious if you have any thoughts about that, and the trends of where this might be going.
Alex Sadvari: Thanks, Adam. Yeah, I think I think as I mentioned earlier, I think we're a bit behind maybe because we're so tied to the US. We've we've been behind for the last little while, because we just let them essentially set our standards when it comes to vehicle emissions. Because our markets so tight that there's but I think it's promising for those who want more stringent regulations that Biden is leaning in that direction. And I don't anticipate there being some kind of break between this alignment with our two vehicle emission systems. And I see that going forward and therefore taking us necessarily whether we have the current government or not in Canada, but taking us towards more stringent regulations either way, just because of our concurrent sales handed to us, and, and the alignment of our regulation.
Adam Chamberlain: Thanks very much. There's another area that we would that I wanted to just ask you both about. Ben, you mentioned that there is at least the beginnings of some thinking around particulates and tire dust and things like that, as an other another issue that needs to be addressed or will be addressed. There's a lot of focus, as you both have talked about on emissions themselves from the vehicles, one of the things that sort of strikes me is that building a car or truck has to be a fairly carbon intensive process that the actual construction, the manufacturing part. So it seemed to make sense that the less vehicles are, the less frequently I need to buy a new car, the less that manufacturing will generate, the less emissions the manufacturer will generate. So is there any interest or discussion about length of life of vehicles as a way of somehow also reducing carbon footprints of a vehicle in sort of the grand scheme of things? Just curious if you have any thoughts on maybe we'll start with Ben.
Ben Stansfield: Thanks, I was hoping you're gonna get Alex first to give you some more time to think but no, well, I suppose the short and easy answer, I'm not ready. Think about that. I mean, you know, we are focused, you know, we policy is joined up. So you know, we're talking in the UK much more about, you know, the 15 minutes city whereby you know, you, you work you have fun, you eat out much closer to home, and you're traveling much less. So we're talking about sort of better connection, we're talking about improvements to public transport, all that kind of stuff. But I've not seen anything in relation to, to vehicle length of life. I wish there were my awful diesel is eight years old. And I don't know whether it's better for me to keep it and maintain it for another 10 years and run it into the ground. Or, as you say, to demand a manufacturer producing loads of co2 in give me a new car. I don't know the answer to that. And I think consumers would really benefit from that.
Alex Sadvari: Yeah, I don't know that I have much to add on that as well. But I think in Canada, one of the impediments we have to vehicles lasting for a long time, and it's maybe why we don't see old vehicles on our roads except in the summer is the road conditions salt and snow. Really the salt eroding the metal body of the car, I think is a bit of an impediment. The more we change that for environmental reasons, the way we keep our roads clean that might No, just without vehicle manufacturers doing it on purpose necessarily or being required to do it on purpose, it may just lengthen the lifespan of our vehicles that way.
Adam Chamberlain: Thanks. Thanks very much for both of you. And I know I sprung that on you it was a bit of a zinger. I will say, I like Alex on a red canoe. And I'm in favor of I'm an advocate for credits for canoes on cars. So I think your car should be entitled to, or maybe even the manufacturer of maybe they should sell canoes with the cars.
Alex Sadvari: And that would help as well, with a mounting mechanism.
Adam Chamberlain: Exactly. We have a question that's related to warranty, I'm not sure. It's posed as a as relates to heavy equipment. But so it may or may not be applicable here. But I'm going to pose it anyways. And Ben, I think it's my pose it to both of you. And then we can decide who wants to take a first run on it, but it is related to warranties. And the question is what safety valves with the new CFR have to ensure that fuel that has a higher content of renewable diesel doesn't void warranties for heavy equipment? So it's really I think about the fuel and, and the use of it, the content of renewable fuel, and I do know, but by the way, that my mechanic tells me that I should be buying premium fuel that has very little in the way of renewable or fuel added to it. So I carry I think that this is sort of along those lines, the use of fuels, or Do either of you have comments about the implications of different use of fuels, for warranties of vehicles and other things?
Alex Sadvari: And I think the CFR references, the clean fuel regulations reference. I don't have an immediate response to that one. But it's a good question. And certainly something that we'll need to address. Also, the clean fuel regulations are still in draft form. They're still proposed, and they may change. So it's sort of hard to answer. Now they're quite detailed, but it's hard to answer now, because we don't know what they're gonna look like, if and when they come into force. But good question.
Adam Chamberlain: So standby, and we'll see what comes once the regulations are in their final form. I mean, transferring it across to you, Ben, is there is the question of the added addition of renewable fuels to petroleum. Something that is an issue in the UK and EU or is that something is that?
Ben Stansfield: I'm glad Alex, new CFO was because it was one of those horrible moments as you're sitting and thinking, I don't know that acronym. Delighted to have a good excuse not to but it's, you know, you're it raises a good point because biofuels renewable fuels must be forgotten about right. And, you know, they, they don't get the media coverage, they don't get the same sort of glamour that an Eevee does. But certainly in the UK, biofuels are still a significant industry issue. So, you know, we there was a, I think a policy brought in a couple of years ago with the intent that they would be doubling the amount of biofuels added to record for something like sort of 10 or 15%, or something like that. So makes a really significant contribution. But in terms of impact on warranties, and what have you, I've I've not seen or heard of anything, which suggests that that's an issue for either consumers or, or manufacturers to be concerned about.
Adam Chamberlain: Thanks very much Ben. And then we've got another question. And this, again, relates to Canada. And the one of the biggest differences between Canada and the UK, of course, is that Canada is a federal, state. And we have both a federal government with the ability to regulate environmental matters, as well as provincial governments that are able to do that. And so the question essentially, is along the lines of, how will there be interaction between the federal regulations that Alex you just described, and presumably other ones that come? And in terms of provincial mandates? The question really is, do we know if there will be additive, like, are the federal Clean Fuel regulations play to be on top of provincial mandates or provincial initiatives? Are they in addition to how does that how does that interaction work? Alex, perhaps you can give us a thought or two on that?
Alex Sadvari: That's a good question. I also don't have a prepared answer on that one. But I think it may be a similar situation to the greenhouse gas issue, where there's competing interests between federal and provincial regulation and different provinces have different views about whether the federal government can regulate them. And also the federal government may accept provincial regimes that cover the same subject matter if they're stringent enough. So we will see how that plays out as well. But certainly, it is problematic as we've seen with the carbon reference, the Supreme Court Right, that we have this overlapping, provincial federal regime, because it's causing political strife.
Adam Chamberlain: Yeah, it's good point. And the question or the observation, your observation that the wait and see is something that we hear a lot of in Canada, with the advent of new regulations. And sometimes, and you already expressed some frustration or the articulating the frustration of industry, that government doesn't move faster on these things. And, frankly, in my experience over the last 20 years or so, with greenhouse gas regulation, it's has seemed to me that, frankly, businesses waiting for government to catch up to it. And so it at least in North America, that's been a common thing. I have one more question. I don't we don't have other questions on the line. But I do have another one. That is sort of a high level one. So again, it's more about trends. And I preferred, we've talked a little bit about regulations in the past. And if you might have noticed that analysis presentation, the dates on the regulations, the federal regulation started about 2010. And really, that flowed out of the Obama administration and regulations around fleets and the manufacturing of fleets and be there was actually a cap, there's a cap and trade system for emissions, that as between various manufacturers, so that if one manufacturer makes a lot of trucks that earn a lot of fuel, and are not very efficient, and another one, those lots of hybrids, that are they can move emission between them. And as long as the industry comes down over time, they're able to do that. So that's in a nutshell, a cap and trade system that was in effect, it has been effects, since that 2010, those 2010 regulations came into effect both in Canada and in the US federally. And frankly, they were mirrors of each other because that's the way that the industry in North America is so integrated over across across the border that they have to be. But I have found it stunning over the last 11 years now that that cap and trade in auto manufacturing has not been something that's had more airtime in North America. I to be honest, it struck me that our the Conservative Prime Minister of Canada, when this all started, probably didn't even well, he never mentioned it. So I presume he knew about it, but he never mentioned it. So this seemed to be something that just didn't get a lot of airtime. And it didn't was not seen as a big issue. I'm interested in hearing from Ben, if this is if vehicle emissions and transportation emissions generally are a big issue in the UK. And then perhaps Alex, you can talk a little bit about what we're seeing in Canada in terms of the whether these regulations aren't becoming a bigger issue or whether this is still somewhat of a sleeper issue, and maybe with us.
Ben Stansfield: Yeah, absolutely. You know, it is a huge issue. And I think, and because it sort of ties in so click air quality. And UK is fairly densely populated and a lot of urban areas and air quality's frequently. Pretty bad, actually. And actually, during the pandemic, it's been much better. And we've had far fewer cases of unpleasant estimates and so forth. So yeah, it's a big issue. We haven't I don't think seen anyone talking about cap and trade in the automotive sector. I mean, you know, we have the EU Emissions Trading, which has been sort of, it's going to apply to shipping. I've heard rumors that they're going to start looking at putting it into commercial property as well. But I've not heard it to be going further than that. But I guess the broader point is, you know, so the UK and other countries have legislated for net zero by 2050. And if we are not on target to do that, and we will know, I guess fairly soon, right, in the next five to 10 years, we'll know whether we're moving in the right direction. There's no doubt in my mind that the government will and the EU will do whatever it has to do. And it will look again at policies and you know, the 2050 day isn't going to move, we will just increase regulation, we will increase tighten the rules until we get the sense that we are going to hit that net zero by 2050. Date. So I think, you know, the days of regulatory certainty. That's my point. Again, the days of regular regulatory certainty for emissions have gone. And government will move quickly, I think from now on to make sure.
Adam Chamberlain: Thanks very much, Ben. Alex, your thoughts?
Alex Sadvari: I think that's probably true here as well, although we're behind and obviously tied to the US. So in terms of it being big news, I think the net zero emissions commitment has been big news with our current government how that's gonna play out. I think it'll be very dependent on our neighbors to the south. How how that's actually going to be implemented even though I think our prime minister is taking the lead on the changes here. When I see it in sort of the mainstream news, I think there are a lot of articles about concern over cost, that all these measures are expensive. And maybe because Canada's more spread out, even though there are air emissions concerns, I think cost concerns seem to be in the forefront. I don't know, Adam, if you had more to talk about that being Canadian lawyer as well.
Adam Chamberlain: No, I think you're right, generally. And those issues do come up that the distance issues are commonly brought up in the Canadian context in a way that you wouldn't ever see or wouldn't see brought up in the UK, I wouldn't think it just there's just the distances aren't nearly the same. So I think we're getting close to time. And I do I do have one more question. Interestingly, it's from the same questionnaire we had before. He swears this little last one. I'm pretty sure it's a he. And but he's asking a question. This is Canadian. So Ben, you can relax. And Alex, I suspect that we're not going to say a lot about this. But you might have something to say. This is a question about the GHG Supreme Court of Canada decision that has yet to come. And a question about prognostication. And whether we can predict the outcome? Do you want to talk a little bit about that for just a second, I don't expect you to prognosticate too effectively. But any thoughts?
Alex Sadvari: Like say that one of our colleagues, Jennifer King was on the side of allowing the federal regulation. So of course I'm and in generally, in general and sort of grow that side. I don't know. Obviously, no one knows how it's gonna turn out. But I am hopeful that the federal government will be permitted to regulate greenhouse gases going forward. No, it's It's dangerous to predict. Adam, I don't know if you had anything.
Adam Chamberlain: Yeah, the only thing I because I equally don't know what the outcome will be. But knowing what the court looks like, and what it said in the past, and, and well, I'm an environmental lawyer. I'm not sort of I consider myself an amateur constitutional lawyer. That is to say, I find it interesting. And I read it. And I have to say, I, my own view is that the federal government's case is probably better. So I sort of from a legal point of view, I would expect, my view is that it's a higher likelihood to come down that way. But I've been surprised before. And so who knows? Anyways, I don't think that we have any other questions at this point. And I so I think with the time coming to a close, it's probably best that we, we call, call us, and perhaps I'll just open it up for any final comments from either the two of you. Whether you've got anything to say for a second or two before we close out. Maybe I'll start with Ben.
Ben Stansfield: No, I mean, thank you for Thank you, Adam, for moderating, and thank you to everyone for dialing in and giving up some of their time today. Appreciate it.
Adam Chamberlain: Thanks, Alex?
Alex Sadvari: Thank you, Adam. Thank you, Ben, I learned a lot about the EU and UK. I didn't know how far ahead you were until we started talking about this presentation. And thank you. And thank you, Shannon, so much for doing the slides and organizing all of us today.
Adam Chamberlain: And I'll just finish by saying thanks very much. We gallon WG appreciate everybody taking the time to listen in and to pose questions and give it some thought. Please watch for future similar events. We do webinars from time to time increasingly these days. So it's the way we do communication with our friends and contacts and colleagues and clients. So expect to see more of it. And we look forward to seeing you again soon. And to talk about other interesting things. If anybody has any particular ideas they'd like to impart or suggestions for other sessions or questions for us. It's easy to find any of the three of us online on the gallon WG website, and we all have email. So just send it all over. And we'll happily respond and look forward to speaking with you and seeing you again sometime soon. So I will pick we'll call it into the presentation at this point. Thank you very much.
Alex Sadvari: Sorry, I was just gonna say I think we're gonna send out a survey after this. For those who wish to fill it in with an option for similar topics or other topics that you might be interested in. So don't be shy and filling out that survey if you want to suggest other topics that are of interest to you.
Adam Chamberlain: Thanks very much, Alex, for fitting that in. That's great and we look forward to seeing everybody again sometime soon. Thank you