Canada Gazette, Part I, Volume 150, Number 24: Regulations Amending the Off-Road Small Spark-Ignition Engine Emission Regulations

June 11, 2016

Statutory authority

Canadian Environmental Protection Act, 1999

Sponsoring department

Department of the Environment

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Executive summary

Background

The Off-Road Small Spark-Ignition Engine Emission Regulations (the Regulations) were published in the Canada Gazette, Part II, on November 19, 2003. (see footnote 1) The Regulations aligned Canadian emission standards with the United States Environmental Protection Agency (EPA) Phase 2 emission standards for the 2005 and later model year off-road small spark-ignition (SSI) engines. (see footnote 2) These engines are defined as those off-road engines using a spark plug or other sparking device and producing no more than 19 kW of power. SSI engines are typically found in lawn and garden machines (hedge trimmers, brush cutters, lawn mowers, leaf blowers, garden tractors, snowblowers, etc.), in light-duty industrial machines (generator sets, welders, pressure washers, etc.), and in light-duty logging machines (chainsaws, log splitters, shredders, etc.).

The Regulations contribute to improving air quality by reducing emissions of air pollutants and other toxic substances in Canada through the establishment of standards for emissions from off-road SSI engines and machines powered by such engines (hereinafter collectively referred to as “SSI engines”). These engine standards reduce emissions of nitrogen oxides (NO_x), hydrocarbons, carbon monoxide (CO) and selected air toxins listed on the List of Toxic Substances in Schedule 1 to the Canadian Environmental Protection Act, 1999 (CEPA). (see footnote 3) These reductions contribute to improved human health and help to reduce negative environmental impacts. Also, the reductions in emissions due to the Regulations contribute toward meeting targets established in the Ozone Annex of the Canada–United States Air Quality Agreement (2000), in which the Government of Canada and the Government of the United States agreed to reduce emissions of ozone precursors (e.g. NO_x and VOCs). (see footnote 4)

In 2008, the EPA published Phase 3 emission standards for SSI engines. (see footnote 5) These standards have been progressively introduced in the United States, beginning in 2009. (see footnote 6) In Canada, SSI engines of the 2005 and later model years must currently comply with the Phase 2 standards. All of these engines in Canada are imported, as there is no domestic engine production presently. Around 65% of the engines are imported from the United States and they are expected to already be compliant with the Phase 3 standards. The next largest share of these engines in Canada comes from China and other Asian countries, excluding Japan (about 20%). An additional 15% (approximately) comes from Japan, Mexico and the European Union. Many of the imported engines that do not come from the United States, particularly those from China and other Asian countries (excluding Japan), are not expected to be compliant with the Phase 3 standards. Overall, it is currently estimated that around 75% of the SSI engines imported into Canada on an annual basis comply with the Phase 3 standards, even though it is not mandatory to meet these standards at this time in Canada.

Issues

Emissions from mobile sources, including SSI engines designed to be used in lawn, garden and various other small machines, contribute to environmental and human health problems. Substances such as NO_x and VOCs are emitted to the surrounding air through the combustion and evaporation of the fuel that is used to power these engines. These substances are then involved in a series of complex reactions activated by sunlight that result in the formation of ground-level ozone, a respiratory irritant and component of smog. Smog is a noxious mixture of air pollutants, primarily ground-level ozone and particulate matter. It can often be seen as a haze in the air, especially over urban centres, and leads to numerous negative impacts relating to human health and the environment.

In the Ozone Annex to the Canada–United States Air Quality Agreement, Canada committed to developing and establishing standards for emissions from new engines that align with the corresponding U.S. standards. This commitment was reaffirmed by the mandate and principles of the Canada–United States Regulatory Cooperation Council. However, emission standards in Canada are not currently aligned with the U.S. EPA Phase 3 emission standards for SSI engines. Without changes to align the Regulations with these standards, there are risks that the import into Canada of SSI engines that meet the Phase 3 standards could decrease, in favour of the import of less-expensive SSI engines that only meet the Phase 2 standards and produce relatively more air pollutant emissions per engine. Such a scenario would result in incremental adverse impacts on the environment and the health of Canadians.

Objectives

The objective of the proposed Regulations Amending the Off-Road Small Spark-Ignition Engine Emission Regulations (the proposed Amendments) is to reduce smog caused by air pollutant emissions from SSI engines, which has a significant adverse impact on the health and environment of Canadians and, as a result, on the Canadian economy. In addition to providing important health and environmental benefits, the proposed Amendments aim to restore common Canada–U.S. standards for air pollutant emissions from SSI engines, and contribute to minimizing the administrative burden costs of companies importing these engines into Canada.

Description

Proposed exhaust and evaporative emission standards

Emissions of NO_x, hydrocarbons and CO released to the atmosphere from the exhaust systems of engines typically result from the combustion of fuel. The proposed Amendments would incorporate into the Regulations the U.S. EPA Phase 3 exhaust emission standards for machines powered by SSI engines. (see footnote 7)

Evaporation within the fuel system of an engine can cause fuel components to permeate through or escape from fuel line or fuel tank materials. These evaporative emissions are generally composed of VOCs. The proposed Amendments would incorporate into the Regulations new evaporative emission standards for SSI engines that have complete fuel systems attached. Such engines designed to be used in handheld or non-handheld machines would have to meet emission standards for fuel line and fuel tank permeation, as well as standards for the design of the fuel tank inlet to reduce refuelling emissions. Engines designed to be used in non-handheld machines would have to meet additional evaporative emission standards for running losses caused from engine heat during operation, and additional evaporative emission standards relating to the installation of fuel caps, air vents and carbon canisters. Optional standards for evaporative emissions resulting from daily changes in temperature (i.e. diurnal emissions) could be applied by companies in lieu of the permeation standards that would otherwise apply to engines designed to be used in non-handheld machines.

The Department of the Environment (the Department) is also proposing to extend existing optional standards for emissions from “wintertime” engines, that is, engines used to power machines that are designed exclusively to be used in snow or on ice, such as snowblowers and ice augers. This proposal would be consistent with the approach taken by the EPA.

Further, the Department plans to update the emission standards for SSI engines designed to be installed on bicycles. In Canada, these engines are typically imported and supplied to consumers as kits that include the engine, fuel system, and hardware required to convert a conventional bicycle to one that is motorized. The proposed Amendments would align Canada's standards for emissions from engines designed to be installed on bicycles with the applicable U.S. emission standards. (see footnote 8)

Submission of importation declarations

Under the existing Regulations, companies that import 500 or more SSI engines into Canada in a calendar year may be allowed to submit a single importation declaration to the Minister of the Environment (the Minister) for each year in which they import engines. On the other hand, companies that import fewer than 500 engines in a calendar year are currently required to submit a declaration at a customs office for each shipment of engines. To facilitate the administration of the Regulations and to reduce administrative burden costs assumed by companies that import SSI engines, the proposed Amendments would modify the requirements related to the submission of declarations. The Department is proposing that only companies importing 50 or more engines in a calendar year would be required to submit a single declaration to the Minister for each year in which they import engines. Each declaration would have to be submitted no later than February 1 of the calendar year following the calendar year during which the import occurred. No submission of an importation declaration would be necessary for companies importing fewer than 50 SSI engines annually.

Other proposed changes to the Regulations

The following paragraphs summarize other changes to the Regulations that would be established by the proposed Amendments:

• Altitude adjustments: The Department is proposing to include provisions that would allow a company to rely on an altitude adjustment kit to demonstrate compliance with exhaust emission standards. (see footnote 9)
• Rules establishing the model year: In order to accommodate seasonal production periods which may end in the calendar year preceding the year that the manufacturer would designate as the model year for an SSI engine, the proposed Amendments would modify the rules establishing the model year. The proposed Amendments would allow the manufacturer to choose that the model year correspond to either the calendar year during which the period of production occurs or the calendar year immediately following the calendar year during which the period of production occurs. This proposed change would result in an approach consistent with that of the EPA.
• Engines not part of an emission family listed on a certificate of conformity to U.S. emission standards issued by the EPA (an EPA certificate of conformity): It is possible under the Regulations for SSI engines that are not part of an emission family listed on an EPA certificate of conformity to be covered by such a certificate under certain circumstances. Consistent with similar changes made to other transportation-related regulations administered by the Department, the proposed Amendments would remove this possibility due to difficulties encountered with respect to its administration.
• Engines designed for “niche” or specialized handheld applications: It is possible under the Regulations for SSI engines designed to be used in handheld machines to meet less stringent emission standards if fewer than 2 000 engines of a given model and model year are sold in Canada. The Department is proposing to remove this feature of the Regulations because it is rarely used and results in challenges with respect to compliance verification.
• Unique identification number: The proposed Amendments would introduce a requirement for a unique identification number to be present on every prescribed SSI engine. The use of a unique identification number is already a common industry practice and would facilitate effective reporting of defects.
• Changes to labelling requirements: The Department is proposing modifications to the labelling requirements of the Regulations to facilitate the identification of prescribed SSI engines. Any engine that is not covered by an EPA certificate of conformity and not sold concurrently in Canada and the United States would require a unique Canadian label. The proposed changes would be consistent with current labelling practices in Canada, and the inclusion of proposed text specifying details relating to labelling would help clarify the labelling requirements in the Regulations. In addition, the proposed Amendments would require that engines specifically excluded from the Regulations be appropriately labelled as a condition of exclusion. This label of exclusion would indicate that the engines are only to be used for the specific applications, thus permitting the exclusion.

The proposed Amendments would come into force six months after the day on which they are registered, and the more stringent standards for air pollutant emissions would apply to the 2018 and later model year SSI engines in Canada.

Regulatory and non-regulatory options considered

Several regulatory and non-regulatory measures have been considered, and descriptions of each are provided below.

Status quo

Under the status quo, all SSI engines entering the Canadian market — estimated to be around 1.5 to 2 million per year — must comply with the U.S. EPA Phase 2 emission standards. It is estimated that around 75% of these engines already comply with the Phase 3 standards, which are not presently mandatory in Canada. The option of retaining the current standards does not take full advantage of the opportunity for continued reductions in emissions from SSI engines. The import of engines that meet the Phase 3 standards could decrease in Canada, in favour of less expensive engines that only meet the Phase 2 standards and produce relatively more emissions per engine. Maintaining the status quo would also be inconsistent with Canada's commitment to align its emission standards with those of the United States, as specified in the Ozone Annex to the Canada–United States Air Quality Agreement and in the mandate and principles of the Canada–United States Regulatory Cooperation Council. Thus, this option was rejected.

Regulatory approach unique to Canada

If Canada adopted regulatory standards that were different from those introduced by the United States, product availability would potentially be reduced in the Canadian marketplace, and the average costs of engines designed to meet unique Canadian standards would likely be greater than the average costs of the analogous engines meeting the Phase 3 standards. Unique Canadian standards would require additional design and manufacturing costs and also require extensive development of testing and certification procedures. The higher costs would be partly passed on to consumers. Adopting unique Canadian standards would conflict with Canada's policy of alignment with U.S. emission standards and the trend towards global harmonization of emission standards. Also, if Canada adopted less stringent emission standards than those introduced by the EPA, environmental and health benefits would not be secured.

Harmonized regulatory approach

The proposed Amendments are consistent with the Government of Canada's commitments to align its emission standards with those of the federal emissions program of the U.S. EPA, as set out in the Ozone Annex to the Canada–United States Air Quality Agreement. The Department is working closely with the EPA to maintain a common Canada–U.S. approach to regulating emissions from vehicles and engines. Under the Canada–United States Regulatory Cooperation Council, the Department and the EPA reaffirmed their commitment to continue collaborating under the Canada–United States Air Quality Committee towards the development of aligned vehicle and engine emission regulations and their coordinated implementation.

The alignment of emission standards in Canada with those of the United States would create a level Canada–U.S. market, allowing for incremental reductions in emissions by means of preventing the import of SSI engines into Canada that do not meet the EPA Phase 3 emission standards. Alignment with EPA standards could thus represent a cost-effective method for Canada to achieve important reductions in emissions from SSI engines. (see footnote 10) For these reasons, a harmonized regulatory approach was selected.

Benefits and costs

Analytical approach and summary of impacts

An analysis of the incremental impacts (benefits and costs) was conducted using baseline and regulatory scenarios. To the extent possible, benefits and costs are quantified, monetized and expressed in 2013 Canadian dollars. Calendar years 2016 to 2031 are used as the time frame for this analysis, with 2016 being the present value base year and the more stringent standards for air pollutant emissions applying to the 2018 and later model year SSI engines. Further, the analysis employs a 3% annual discount rate when values are expressed in present value terms, in accordance with the Canadian Cost-Benefit Analysis Guide: Regulatory Proposals. (see footnote 11) When restricted by a lack of appropriate data, the impacts have been described in qualitative terms.

From 2018 to 2031, the proposed Amendments are projected to reduce air pollutant emissions from SSI engines, including reductions of about 20 000 tonnes of NO_x emissions and 58 000 tonnes of VOC emissions. An analysis of the expected health benefits to Canadians resulting from these emission reductions provides a range of net present values, with the lowest value in this range being around $140 million. Other estimated benefits of the proposed Amendments include pre-tax fuel savings for consumers of SSI engines in the order of $9 million and reductions in administrative costs for companies that import such engines in the order of $3 million. The total benefits of the proposed Amendments are thus projected to be about $152 million.

It is estimated that the total costs of the proposed Amendments would be around $68 million, including about $67 million to domestic importers of SSI engines, $525,000 to domestic machine manufacturers for the testing of evaporative emissions, and $130,000 to the federal government for compliance promotion activities. The net benefits of the proposed Amendments are hence estimated to be approximately $84 million in present value terms, with a benefit-to-cost ratio of more than 2 to 1.

Benefits

Emission reductions

The proposed Amendments would reduce emissions of smog-forming air pollutants in Canada from SSI engines. Engines compliant with the Phase 3 emission standards would gradually replace existing higher-emitting engines as these older engines are removed from service, allowing for progressively greater emission reductions of air pollutants in Canada from the stock of SSI engines.

To provide an indication of the possible emission reductions which may be achieved, the following two emission scenarios were modelled: (1) a baseline scenario in which it is assumed that, in the absence of the proposed Amendments, around 75% of the SSI engines entering the Canadian market would continue to comply with the EPA Phase 3 standards; and (2) a regulatory scenario in which 100% compliance with these standards is assumed. The analysis only considers the incremental emission reductions projected to be generated by the proposed Amendments. Thus, the estimated total emission reductions incorporate the assumption that the following portions of SSI engines entering the Canadian marketplace would not be compliant with the Phase 3 standards under the baseline scenario: 20% of the imported engines designed to be used in non-handheld machines; and 34% of the imported engines designed to be used in handheld machines. (see footnote 12)

The Department forecasted emissions from SSI engines for four reference years (2017, 2020, 2025 and 2030) using the peer-reviewed EPA NONROAD model with Canadian baseline data for the 2010 calendar year. (see footnote 13) Despite the fact that the absence of a comprehensive data set which accurately captures the stock and flow of the SSI engine population in Canada increases uncertainty in forecasting, the forecast depicts an emissions trend that is reasonable and directionally representative based on existing information.

The proposed Amendments would come into effect starting with model year 2018. Linear growth rates between the four reference years were applied to estimate cumulative emissions in the baseline and regulatory scenarios. The incremental results can be interpreted as an estimate of the impacts of the proposed Amendments over the 2018–2031 period. Given the limitations of available data, time and other resources, this approach is considered to be a reasonable method to project cumulative emissions in the two scenarios and overall emission reductions from 2018 to 2031. The annual trends in estimated emission reductions for key air pollutants are shown in Figure 1.

Figure 1: Estimated annual incremental reductions in emissions of certain air pollutants from SSI engines in Canada under a harmonized regulatory approach

The more stringent Phase 3 standards for SSI engines would result in emission reductions of certain air pollutants, namely, NO_x, VOCs, fine particulate matter (PM_2.5) and CO. In particular, the proposed Amendments are projected to reduce NO_x emissions from SSI engines by approximately 350 tonnes in 2018 to about 2 000 tonnes in 2031; VOC emissions are expected to decrease by about 1 200 tonnes in 2018 to approximately 5 700 tonnes in 2031. In total, the proposed Amendments are expected to reduce NO_x emissions by about 20 000 tonnes and VOC emissions by approximately 58 000 tonnes from 2018 to 2031, as shown in Table 1 below.

Table 1: Estimated reductions in emissions of certain air pollutants from SSI engines in Canada under a harmonized regulatory approach

Air pollutant	Estimated emission reductions in tonnes for the four reference years				Estimated emission reductions in tonnes (cumulative)
	2018	2021	2026	2031	2018–2031
NOx	336	1 163	1 723	2 013	19 977
VOCs	1 196	3 503	4 873	5 655	57 735
PM2.5	6	17	23	26	277
CO	4 888	14 439	20 489	23 921	241 740

Source: Department of the Environment (2014)

Health benefits

SSI engines that would be subject to the proposed Amendments contribute to emissions of air pollutants such as NO_x, VOCs, PM_2.5 and CO. These air pollutants are known to cause adverse human health impacts, through inhalation of directly emitted pollutants or via their transformation in the atmosphere to secondary PM_2.5 and ground-level ozone. The health impacts of these pollutants are well documented in the scientific literature and include an increased risk of various cardiovascular and respiratory outcomes, including an increased risk of premature mortality, as well as other welfare effects. In addition, it is recognized that there is no exposure threshold for many of these effects.

The proposed Amendments would reduce emissions of air pollutants from SSI engines and these reductions are expected to have meaningful benefits for human health, particularly through reductions in NO_x and VOC emissions. The emission reductions resulting from the proposed Amendments are small relative to overall anthropogenic emissions. As a result, detailed photochemical modelling of the impact of these emission changes on Canadian air quality was not conducted. However, the Department of Health and the Department of the Environment have analyzed numerous air quality scenarios conducted in the past and used these results as a proxy method to assess the benefits of the proposed Amendments. Several air quality analyses have been published concerning regulations related to fuels and transportation, and other scenarios have been examined internally as part of the planning and development activities for different air quality programs. By comparing these air quality analyses with emission reductions that are predicted to result from the proposed Amendments, the Department of Health has developed an estimate of the likely health impacts of the proposed Amendments. Based on this analysis, emission reduction benefits could have a value of up to $10 million per year by 2031 for NO_x (undiscounted). Annual benefits from VOC reductions, while less certain given the complex photochemical interactions VOCs undergo in the atmosphere, could result in health benefits of up to about $20 million per year by 2031 (undiscounted). Overall, the proposed Amendments are estimated to result in total benefits ranging from $200 million to $300 million, undiscounted, between 2018 and 2031. The present value of these benefits is between $140 million and $240 million using a 3% annual discount rate. (see footnote 14)

The above discussion of potential health benefits relates to the impact of the proposed Amendments on general air quality in Canada. In addition, during the normal use of SSI engines in machines such as lawn mowers, chainsaws and snowblowers, machine operators can be exposed to locally elevated levels of air pollutants and toxic substances. While personal exposure to exhaust and evaporative emissions can vary considerably depending on the orientation of the operator to the engine, the prevalent wind direction and activities being conducted during engine use, reductions in emissions from SSI engines are expected to result in decreases in the level of personal exposure to exhaust and evaporative pollutants for the operators of machines powered by these engines.

Fuel savings

In addition to the projected emission reductions and health benefits, the proposed Amendments would provide consumers with fuel savings from the increased fuel efficiency of SSI engines resulting from the adoption of the Phase 3 standards in Canada. It is assumed that these standards would be met with technology improvements resulting in improved fuel efficiency. Specifically, since evaporative emissions are primarily fuel that is lost to the atmosphere, fuel savings are estimated based on the VOC emission reductions attributable to the new evaporative emission standards.

From 2018 to 2031, the proposed Amendments are expected to decrease gasoline use by around 14 million litres. To arrive at an approximation of pre-tax fuel savings for consumers, the valuation of this decrease employs pre-tax gasoline prices that were obtained in the fall of 2015 from the Department's integrated Energy, Emissions and Economy Model for Canada (E3MC). The present value of benefits to consumers resulting from pre-tax fuel (gasoline) savings is projected to be about $9 million.

Reductions in administrative costs

The proposed Amendments are projected to result in a net decrease in administrative costs by reducing the submission frequency of importation declarations for most Canadian companies that import SSI engines. (see footnote 15) The present value of the administrative cost savings due to the proposed Amendments is estimated to be around $3 million.

Environmental benefits

Air pollutants such as NO_x, VOCs, PM_2.5 and CO are precursors to the formation of secondary particulate matter and ground-level ozone, which impact air quality and the environment by damaging forest ecosystems, crops and wildlife. Deposition of excess nitrogen on surface waters may also lead to lake and stream eutrophication, which poses a threat to aquatic life. Finally, smog and deposition of suspended particles may impair visibility and result in the soiling of surfaces, respectively, thereby reducing the welfare of residents and recreationists, and potentially increasing cleaning expenditures.

The environmental benefits associated with the proposed Amendments were not monetized as a precise modelling of the air quality impacts has not been undertaken. Nonetheless, the environmental benefits associated with the proposed Amendments, due to reductions in air pollutant emissions, are expected to be positive but of low magnitude compared to the human health benefits estimated in this analysis.

The proposed Amendments may also lead to some emission reductions of carbon dioxide equivalent (CO₂e). However, the relative magnitudes of these potential reductions are projected to be small, averaging about 2 500 tonnes per year from 2018 to 2031, which amounts to a cumulative reduction of less than 0.1% of the baseline total emissions of CO₂e from SSI engines during this period. Given these small magnitudes, the potential decreases in CO₂e emissions have not been monetized. This approach is expected to underestimate the total monetized benefits in this analysis by a small amount.

Costs

Cost to importers, manufacturers and consumers

There are no companies operating domestically that can be classified as manufacturers of SSI engines, therefore all of the engines distributed, sold or used in Canada are assumed to be imported from abroad. By introducing evaporative emission standards, the proposed Amendments would affect an estimated four domestic manufacturers of machines powered by SSI engines that currently do not meet U.S. EPA evaporative emission standards. These companies would carry additional annual costs of about $9,000 for the testing of evaporative emissions. The present value of these costs to Canadian manufacturers is estimated to be approximately $525,000.

Currently, around 25% of the SSI engines imported into Canada are not compliant with the Phase 3 standards. (see footnote 16) The increased engine costs resulting from the proposed Amendments would hence be carried by engine importers and machine manufacturers, as regulated parties would be required to import engines and manufacture machines powered by engines meeting the Phase 3 standards. The present analysis adopts the following estimates of the EPA for the increases in engine costs due to this upgrade:

• In 2018, the weighted average cost increases would be about 3% ($12) and 8% ($17) for machines powered by SSI engines and “loose” engines, respectively.
• From 2018 to 2031, the weighted average cost increases would be about 2% ($10) and 7% ($15) for machines powered by SSI engines and “loose” engines, respectively. (see footnote 17)

Using import data from the Canadian Border Services Agency as input, it is estimated that engine importers and machine manufacturers would carry increased engine costs of about $7 million in present value terms in 2018. The total present value of increased engine costs to these importers and manufacturers from 2018 to 2031 is projected to be approximately $67 million. (see footnote 18) These incremental costs are assumed to be partly passed on to consumers. (see footnote 19)

Cost to Government

No additional costs are projected to be incurred by the federal government due to regulatory administration, compliance verification, laboratory upgrades or enforcement activities. Such initiatives undertaken for the purposes of the proposed Amendments would be incorporated into the existing suite of the Department's initiatives relating to regulatory administration and enforcement. However, the federal government would incur the following incremental costs for compliance promotion activities: a one-time amount of about $75,000 in 2017; and annual amounts of approximately $5,000 from 2018 to 2031. The present value of the costs to Government related to compliance promotion is expected to be up to $130,000.

Competitiveness implications

Given that around 75% of SSI engines sold in Canada are currently designed for both the Canadian and American markets, implementing regulatory provisions harmonized with those of the EPA would create a level playing field for Canadian and American companies marketing these engines and would support the competitiveness of the Canadian machine manufacturing industry.

Statement of benefits and costs

The monetized benefits and costs, and the quantified and qualitative benefits, associated with the proposed Amendments are summarized in Table 2.

Table 2: Statement of benefits and costs (values discounted to present value using a 3% discount rate)

A. Estimated monetized benefits	Annualized Value	Present Value
Health benefits (avoided health issues) due to reductions in air pollutant emissions	$11,150,000	$140,000,000
Fuel savings due to decrease in gasoline use	$700,000	$8,800,000
Reductions in administrative costs	$236,000	$3,000,000
Total estimated monetized benefits	$12,100,000	$152,000,000
B. Estimated monetized costs	Annualized Value	Present Value
Increased costs of SSI engines faced by importers and consumers (compliance cost)	$5,320,000	$66,900,000
Incremental compliance costs to manufacturers for the testing of evaporative emissions	$42,000	$525,000
Incremental costs to Government for compliance promotion activities	$10,000	$130,000
Total estimated monetized costs	up to $5,400,000	up to $68,000,000
C. Estimated monetized net benefits (rounded to the nearest million)	Annualized Value	Present Value
	$6,700,000	$84,000,000
D. Estimated quantified benefits (cumulative)	Amount
NOx emission reductions		20 000 tonnes
VOC emission reductions		58 000 tonnes
Decrease in gasoline use		14 million litres
E. Qualitative benefits	Description
Environmental benefits	The proposed Amendments would indirectly reduce the formation of secondary particulate matter and ground-level ozone, which negatively impact forest ecosystems, crops and wildlife, impair visibility, and result in the soiling of surfaces.

Notes: Costs would be carried starting in 2017. Benefits would be realized starting in 2018. Totals may not sum due to rounding.

The values in Table 2 are calculated using 2013 dollars and an analytical time frame of 2016 to 2031. After 2031, there would be some ongoing incremental costs for new SSI engines complying with the Phase 3 emission standards. Additional health and environmental benefits stemming from reductions in air pollutant emissions would be expected over the lifetime operation of these engines, and it is anticipated that the benefits would continue to outweigh the associated compliance costs. In addition, this analysis does not account for the emission reductions and related health and environmental benefits delivered from 2018 to 2031 model year SSI engines during the portion of their lifetime operation that occurs after 2031.

“One-for-One” Rule

The proposed Amendments are projected to result in an overall reduction in the administrative burden costs imposed by the Regulations by reducing the submission frequency of importation declarations, from once per shipment to once per year, for companies importing fewer than 500 SSI engines into Canada in a calendar year, thereby generating an “OUT” under Canada's “One-for-One” Rule. In addition, companies that import fewer than 50 SSI engines would no longer be required to submit an import declaration. (see footnote 20) The estimated savings are calculated by employing the following assumptions:

• (1) In 2018, all engine importers (approximately 1 120) would each need an average of one hour to become familiar with the administrative requirements of the proposed Amendments.
• (2) Companies that import fewer than 50 engines in a calendar year (approximately 900) would be exempted from submitting declarations. Therefore, these importers are expected to each save an average of about 5.5 hours per year.
• (3) Companies that import at least 50 engines in a calendar year (approximately 220) would be required to submit a single declaration to the Minister for each calendar year in which they import engines. About two thirds of these importers are expected to each save an average of about 10 hours per year. The proposed Amendments are not expected to introduce time savings for importers of 500 or more engines in a calendar year (approximately 75). Under the Regulations, these importers may already be allowed to submit a single declaration to the Minister for each calendar year in which they import engines.

Altogether, it is projected that the reduction in total annualized administrative costs over a 10-year period beginning in 2018 is approximately $179,000 for companies that import SSI engines, or $160 per importer. (see footnote 21), (see footnote 22)

Small business lens

For the purposes of the small business lens analysis, a proxy value was generated to estimate the number of small businesses that import SSI engines into Canada. (see footnote 23) By analyzing information on imports into Canada for the 2010 calendar year, it was established that, in general, companies that import fewer than 750 engines in a calendar year could be classified as small businesses or “small business importers,” based on the declared values of their imports made under several transportation-related regulations administered by the Department. As a result, it is estimated that the proposed Amendments would have an impact on about 1 000 small business importers.

Also, with the introduction of the new evaporative emission standards, a small number of machine manufacturing companies that install or modify fuel systems on SSI engines in Canada would consequently be considered engine manufacturers under the proposed Amendments and would be required to demonstrate compliance with these standards. It is assumed that all of the small Canadian manufacturers would choose to use engine components that have already been certified by the U.S. EPA to avoid carrying the costs associated with independently conducting emission test procedures to demonstrate compliance with the evaporative emission standards.

Regulatory flexibility analysis statement

An initial option was established for the purposes of analyzing possible avenues through which the costs projected to be imposed on small business importers by the proposed Amendments could be reduced. Under this initial option, the status quo would be maintained with respect to the submission of importation declarations (i.e. all companies that import SSI engines would be required to comply with the existing reporting requirements), and all Canadian importers would be required to import SSI engines meeting the EPA Phase 3 exhaust and evaporative emission standards. As described in the section concerning benefits and costs, regulatory compliance would result in increases in the costs of engines imported into Canada that would be carried by domestic importers of all sizes.

The proposed Amendments do not introduce a flexible option that would allow small businesses to avoid the additional compliance costs by marketing engines in Canada that do not comply with the Phase 3 standards. Such an option would expose engine users and bystanders to relatively higher levels of harmful emissions and would be contrary to Canada's policy of alignment with U.S. emission standards. Nonetheless, a flexible option would be introduced for small businesses that import SSI engines regarding administrative requirements. Under this flexible administrative option, companies importing fewer than 50 engines in a calendar year would be exempted from submitting declarations to the Minister, while companies importing at least 50 engines in a calendar year would be required to submit a single declaration to the Minister for each calendar year in which they import engines. (see footnote 24) Table 3 below describes the three categories of small business importers used in this flexibility analysis, as well as the options considered for these importers with respect to the submission of declarations.

Table 3: Description of options considered for small business importers regarding administrative requirements

Category of small business importers	Status quo	Initial option	Flexible option
Importers of fewer than 50 engines in a calendar year	Importers are required to submit an importation declaration for each shipment.	The status quo with respect to administrative requirements would be maintained.	Importers would not be required to submit importation declarations.
Importers of at least 50 but fewer than 500 engines in a calendar year	Importers are required to submit an importation declaration for each shipment.	The status quo with respect to administrative requirements would be maintained.	Importers would be required to submit a single importation declaration to the Minister for each calendar year in which they import engines.
Importers of at least 500 but fewer than 750 engines in a calendar year	Importers may be allowed to submit a single importation declaration to the Minister for each calendar year in which they import engines.	The status quo with respect to administrative requirements would be maintained.	Importers would be required to submit a single importation declaration to the Minister for each calendar year in which they import engines.

Under the flexible option, a decrease in the number of declarations submitted to the Department is anticipated, given the proposed reductions in the required submission frequencies of declarations from companies that import fewer than 500 engines per year. However, based on import information for the 2010 calendar year, these small businesses are estimated to import only 2% of the total annual number of SSI engines imported into Canada. In addition, through the use of import data from the Canadian Border Services Agency, it would still be possible under the flexible option to identify companies that import engines, even though these importers would not be required to submit declarations. Therefore, the flexible option would still allow for effective compliance monitoring and enforcement of the regulatory requirements. The flexible option is not expected to introduce any additional risks to human health or the environment as a result.

Table 4: Regulatory flexibility analysis (values discounted to present value using a 3% discount rate)

	Initial Option (status quo — the submission of importation declarations is maintained)		Flexible Option (the submission frequency of importation declarations is reduced for small businesses)
Number of small businesses impacted	1 062		1 062
	Annualized Value	Present Value	Annualized Value	Present Value
Engine compliance costs	$130,000	$1,640,000	$130,000	$1,640,000
Administrative costs	$0	$0	-$236,000	-$2,970,000
Total costs	$130,000	$1,640,000	-$106,000	-$1,330,000
Total cost per importer	$120	$1,550	-$100	-$1,250
Risk considerations	No incremental risks exist under the initial option.		There would be a minor loss of information due to the lack of declarations submitted to the federal government by companies importing fewer than 50 SSI engines into Canada per year.

Note: The values in this table are calculated using 2013 Canadian dollars and an analytical time frame of 2016 to 2031.

Table 4 above provides the expected costs to small businesses under the initial and flexible options. Under both of these options, the annualized compliance costs to small business importers are expected to be around $130,000. The initial option would not result in any change in administrative costs carried by these importers, while the flexible option would result in annualized savings in administrative costs of about $236,000. Thus, the increase in total annualized costs to small business importers under the initial option is approximately $130,000, whereas the total annualized cost savings to these importers under the flexible option are around $106,000. For the reasons mentioned above in this section, the flexible option is incorporated into the proposed Amendments.

Consultation

Consultation prior to publication of the proposed Amendments in the Canada Gazette, Part I

In recent years, regulatory standards under CEPA concerning air pollutant emissions from on-road and off-road vehicles and engines have been adopted based on a policy of alignment with the corresponding U.S. EPA standards. (see footnote 25) The consultations associated with the development of each regulatory proposal revealed a broad consensus that Canada's regulatory emission standards for vehicles and engines should be based on such alignment. Most stakeholders have generally identified that the integrated nature of the Canadian and American economies, and the implementation of aggressive national programs for vehicles and engines by the EPA, are two key elements supporting the argument that a policy of alignment with EPA emission reduction programs is a logical approach for Canada to achieve important emission reductions in a cost-effective manner.

In August 2012, the Department signalled its intent to propose changes to the Regulations to further reduce smog-forming emissions of air pollutants from SSI engines by incorporating the current EPA Phase 3 exhaust and evaporative emission standards. Therefore, a consultation package was sent to more than 1 600 stakeholders and made available to the general public through the Department's CEPA Environmental Registry. (see footnote 26) The general list of stakeholders and other key partners that were consulted includes the provincial and territorial governments, other federal government departments, environmental non-governmental organizations, manufacturers and importers of SSI engines (including small businesses), as well as the industry associations representing these manufacturers and importers. In the consultation package issued in 2012, these stakeholders and other key partners were provided an outline of the regulatory changes under consideration, as previously summarized in the “Description” section.

The Department received comments from the two large industry associations representing engine manufacturers and the outdoor power equipment industry in Canada, as well as from four companies, two of which were classified as small businesses. Subsequent discussions with these industry associations and companies were held in March 2013 to clarify specific technical elements outlined in the August 2012 consultation package. In general, the responses received from these stakeholders indicated that there was broad support for the proposed Amendments, for the following reasons:

• the proposed Amendments would align Canadian emission standards with the EPA Phase 3 standards;
• the proposed Amendments would reduce the administrative burden carried by the majority of regulated parties by changing the submission process relating to importation declarations;
• the proposed Amendments would extend the special provisions in the Regulations regarding snowblowers powered by SSI engines; and
• the proposed Amendments would help clarify the current labelling provisions of the Regulations.

Various other comments related to the wording of specific provisions were also submitted by these stakeholders. In general, stakeholders requested that the wording of the provisions in the proposed Amendments be aligned as closely as possible with the wording of the corresponding provisions of the EPA rules. Whenever possible, these requests were accommodated by the Department during the drafting of the proposed Amendments.

In October 2013, the Department held discussions with the two large industry associations representing engine manufacturers and the outdoor power equipment industry in Canada, as well as with one large and two small businesses subject to the Regulations, in order to discuss the proposed measures to reduce administrative burden under the proposed Amendments. During these discussions, the Department explained the assumptions associated with the proposed initial and flexible options for submitting importation declarations, as well as the rationale for proposing to proceed with the flexible option. In general, the stakeholders who were contacted were supportive of the proposed regulatory flexibility of reducing the submission frequency of declarations for companies that import fewer than 500 SSI engines into Canada in a calendar year.

In January and February 2016, the Department conducted a follow-up consultation with the stakeholders who were involved in the development of the proposed Amendments or who had inquired about its status. The follow-up consultation sought stakeholder confirmation of continued support for realigning Canadian emission standards with EPA standards and publishing the proposed Amendments. The Department received comments from two large industry associations representing engine manufacturers and the Canadian outdoor power equipment industry, as well as from two companies. The comments received indicated continued support for the proposed Amendments and for realignment of Canadian emission standards for SSI engines with those of the U.S. EPA. One commenter also reiterated the importance of sufficient lead time for industry between the publication of the final Amendments and the coming-into-force date.

Regulatory cooperation

As set out in the Ozone Annex to the Canada–United States Air Quality Agreement, and in compliance with the mandate and principles of the Canada–United States Regulatory Cooperation Council, Canada has committed to develop and implement emission regulations under the CEPA for new off-road engines that are aligned with the federal emissions program of the U.S. EPA. The proposed Amendments are consistent with this commitment and are a cost-effective alternative for Canada to achieve its chosen environmental objectives.

Since the proposed Amendments would align Canadian emission standards for SSI engines with the standards in force in the United States, some exchange of compliance verification and testing information between the governments of Canada and the United States is expected. This regulatory alignment and cooperation are consistent with Canada's responsibilities established under auspices of the Canada–United States Regulatory Cooperation Council. Notably, as a member of this council, Canada has committed to more effective approaches to regulation that enhance the economic competitiveness and well-being of the two countries, while maintaining high standards with respect to public health and safety and environmental protection.

Rationale

Under the status quo, it is assumed that around 25% of SSI engines would not be compliant with the U.S. EPA Phase 3 emission standards, and Canada would be vulnerable to increasing imports of non-compliant engines with corresponding impacts on the health and environment of Canadians. The proposed Amendments are considered to be the best option to address this risk and further reduce the impacts of emissions from these engines in Canada. The proposed regulatory framework would provide a level playing field for Canadian and American engine and machine manufacturing industries because it would prevent any one company from placing other companies under competitive pressure to import or manufacture less expensive engines that do not meet the Phase 3 standards.

Using the analytical assumptions previously discussed in this statement, there would be quantified emission reductions over the first 14 years of implementation of the more stringent standards for air pollutant emissions from SSI engines (2018–2031), including about 20 000 fewer tonnes of NO_x emissions and 58 000 fewer tonnes of VOC emissions being released to the environment. Compared to the baseline scenario, the present value benefit of NO_x and VOC emissions avoided under the regulatory scenario is estimated to be at least $140 million. Also, companies that import SSI engines would realize reductions in administrative costs ($3 million), while consumers of such engines would realize pre-tax fuel savings ($9 million). The sum of these positive impacts yields a total present value benefit of approximately $152 million. Incremental costs would be carried by domestic importers and consumers of SSI engines that are not presently compliant with the Phase 3 standards. The increases in the costs of these engines are expected to result in a present value cost to importers and consumers of about $67 million (2013 Canadian dollars; 3% annual discount rate). The proposed Amendments would also impose comparatively minor costs on domestic manufacturers ($525,000) and the federal government ($130,000), yielding a total present value cost of approximately $68 million. Altogether, the net benefits of the proposed Amendments are estimated to be $84 million in present value terms, with a benefit-to-cost ratio of more than 2 to 1.

The proposed Amendments are structured in a manner that would deliver on the objectives of reducing air pollutant emissions from SSI engines by aligning Canadian standards and test procedures with those of the EPA and of minimizing regulatory administrative burden on companies. The proposed Amendments were developed in consultation with stakeholders from industry, including engine and machine manufacturers, importers and industry associations, as well as with the provincial and territorial governments, environmental non-government organizations, and other federal government departments. Lastly, the proposed Amendments are consistent with Canada's commitment to align its regulatory standards for vehicle and engine emissions with those of the United States, as set out in the Ozone Annex to the Canada–United States Air Quality Agreement and in the mandate and principles of the Canada–United States Regulatory Cooperation Council.

Strategic environmental assessment

The proposed Amendments have been developed under the Government of Canada's Clean Air Regulatory Agenda (CARA). In accordance with the Cabinet Directive on the Environmental Assessment of Policy, Plan and Program Proposals, a strategic environmental assessment (SEA) was completed for CARA. (see footnote 27) A public statement was issued in 2013 for this SEA, indicating that activities under CARA, including the development of regulations to address emissions of air pollutants, would support the Federal Sustainable Development Strategy goals. These goals include minimizing the threats to air quality so that the air Canadians breathe is clean and supports healthy ecosystems. (see footnote 28)

Implementation, enforcement and service standards

The proposed Amendments would come into force six months after the day on which they are registered, while the more stringent standards for air pollutant emissions would apply to the 2018 and later model year SSI engines in Canada. The Department plans to undertake various compliance promotion activities associated with the proposed Amendments, such as providing information to regulated parties concerning the requirements of the proposed Amendments, maintaining a Web site related to the proposed Amendments on the Department's CEPA Environmental Registry, distributing advisory emails and letters, and responding to inquiries, as required. A guidance document would also be published on the Department's Web site to present requirements concerning evidence of conformity and the procedures that should be followed when submitting required documentation to the Minister. For compliance verification purposes, departmental enforcement officers would apply the Compliance and Enforcement Policy for CEPA to the proposed Amendments in the same manner as this policy is applied to the Regulations. (see footnote 29) Lastly, the proposed Amendments would not introduce any new service standard.

Performance measurement and evaluation

As with the Regulations, the monitoring of compliance with the proposed Amendments would be conducted on an ongoing basis. Reporting of incidences of non-compliance by enforcement officers is expected to provide an indicator of the level of compliance with the proposed Amendments. Finally, the proposed Amendments would be administered and evaluated by the Department's Transportation Division. Follow-up assessments would be scheduled in accordance with the Department's regulatory planning cycle.

Contacts

Stéphane Couroux
Director
Transportation Division
Energy and Transportation Directorate
Environmental Stewardship Branch
Department of the Environment
351 Saint-Joseph Boulevard, 13th Floor
Gatineau, Quebec
K1A 0H3
Telephone: 819-420-8020
Email: EC.APRegDevInfo-InfoDevRegPA.EC@canada.ca

Yves Bourassa
Director
Regulatory Analysis and Valuation Division
Economic Analysis Directorate
Strategic Policy Branch
Department of the Environment
200 Sacré-Cœur Boulevard
Gatineau, Quebec
K1A 0H3
Fax: 819-938-3407
Email: ec.darv-ravd.ec@canada.ca

PROPOSED REGULATORY TEXT

Notice is given, pursuant to subsection 332(1) (see footnote a) of the Canadian Environmental Protection Act, 1999 (see footnote b), that the Governor in Council, on the recommendation of the Minister of the Environment, pursuant to section 160 of that Act, proposes to make the annexed Regulations Amending the Off-Road Small Spark-Ignition Engine Emission Regulations.

Any person may, within 75 days after the date of publication of this notice, file with the Minister of the Environment comments with respect to the proposed Regulations or, within 60 days after the date of publication of this notice, file with that Minister a notice of objection requesting that a board of review be established under section 333 of that Act and stating the reasons for the objection. All comments and notices must cite the Canada Gazette, Part I, and the date of publication of this notice, and be addressed to Stéphane Couroux, Director, Transportation Division, Energy and Transportation Directorate, Environmental Stewardship Branch, Department of the Environment, Gatineau, Quebec K1A 0H3 (fax: 819-938-4197; email: EC.APRegDevInfo-InfoDevRegPA.EC@canada.ca).

A person who provides information to the Minister of the Environment may submit with the information a request for confidentiality under section 313 of that Act.

Ottawa, June 2, 2016

Jurica Čapkun
Assistant Clerk of the Privy Council

Regulations Amending the Off-Road Small Spark-Ignition Engine Emission Regulations

Amendments

1 (1) The definitions CFR, emission control system and engine in subsection 1(1) of the Off-Road Small Spark-Ignition Engine Emission Regulations (see footnote 30) are replaced by the following:

CFR means Title 40, chapter I of the Code of Federal Regulations of the United States, as amended from time to time. (CFR)

emission control system means any device, system, or element of design that controls or reduces the emissions from an engine. (système antipollution)

engine means an off-road engine that is prescribed under subsections 5(1) and (1.1). (moteur)

(2) Subsection 1(1) of the Regulations is amended by adding the following in alphabetical order:

bicycle engine means an engine that is designed to be installed on a bicycle. (moteur de bicyclette)

complete fuel system means a fuel system that is attached to an engine and that consists of fuel lines and at least one fuel tank. (système complet d'alimentation en carburant)

CFR 90 means subchapter C, part 90, of the CFR. (CFR 90)

CFR 1051 means subchapter U, part 1051, of the CFR. (CFR 1051)

CFR 1054 means subchapter U, part 1054, of the CFR. (CFR 1054)

CFR 1060 means subchapter U, part 1060, of the CFR. (CFR 1060)

CFR 1068 means subchapter U, part 1068, of the CFR. (CFR 1068)

crankcase emissions means substances that cause air pollution and that are emitted into the atmosphere from any portion of the crankcase ventilation or lubrication systems of an engine. (émissions du carter)

diurnal emissions means evaporative emissions that occur as a result of the venting of fuel tank vapours during daily temperature changes while the engine is not operating. (émissions diurnes)

emission family means

• (a) in respect of an engine of a company or the fuel lines and fuel tanks of a complete fuel system for an engine of the 2018 and later model years of a company that are covered by an EPA certificate, the classification units for which the EPA certificate was issued; and
• (b) in respect of any other engine of a company or the fuel lines and fuel tanks of a complete fuel system for an engine of the 2018 and later model years of a company, the classification units determined in accordance with
  • (i) in the case of an engine of the 2018 and later model years, other than a bicycle engine, section 230 of subpart C of CFR 1054,
  • (ii) in the case of fuel lines or fuel tanks that form part of a complete fuel system for an engine of the 2018 and later model years other than those that form part of a complete fuel system for a bicycle engine, section 230 of subpart C of CFR 1060, and
  • (iii) in the case of a bicycle engine of the 2018 and later model years or the fuel lines or fuel tanks that form part of a complete fuel system for that engine, section 230 of subpart C of CFR 1051. (famille d'émissions)

engine kit means an engine with hardware, fuel lines and fuel tanks that are designed to be assembled. (moteur prêt à assembler)

evaporative emissions means fuel compounds that are emitted into the atmosphere from an engine fuelled with volatile liquid fuel, other than exhaust emissions and crankcase emissions. (émissions de gaz d'évaporation)

fuel line means non-metallic hose, tubing and primer bulbs containing or exposed to liquid fuel, including molded hose, tubing and primer bulbs that transport fuel to or from an engine, but does not include

• (a) fuel tank vent lines;
• (b) segments of hose or tubing in which the external surface is normally exposed to liquid fuel inside the fuel tank;
• (c) hose or tubing that is designed to return unused fuel from the carburetor to the fuel tank for engines designed to be used in a handheld machine; or
• (d) primer bulbs that contain liquid fuel only for priming the engine before starting. (conduite d'alimentation en carburant)

fuel tank means a fuel tank that is not metallic, and includes its fuel cap. (réservoir de carburant)

handheld machine means a machine, other than a bicycle powered by a bicycle engine, that

• (a) is designed to be carried by the operator during its use;
• (b) is designed to operate in more than one position during its use;
• (c) has a dry weight of less than 16.0 kg, has no more than two wheels, and is designed to be carried or supported by the operator during its use;
• (d) in the case of a vehicle, is designed to be used in a recreational application and has a dry weight of less than 20.0 kg; or
• (e) is powered by an engine that has a total engine displacement equal to or less than 80 cm³.

This definition includes an auger that has a dry weight of less than 22.0 kg and a jackhammer or compactor that is designed to be supported by the operator. (machine portative)

non-handheld machine means a machine other than a handheld machine and excludes a bicycle powered by a bicycle engine. (machine non portative)

permeation emissions means evaporative emissions resulting from the permeation of fuel through fuel line or fuel tank materials. (émissions par perméation)

running loss emissions means evaporative emissions that escape from a complete fuel system while the engine is operating but does not include permeation emissions or diurnal emissions. (émissions de pertes en marche)

unique identification number means a number, consisting of arabic numerals, roman letters or both, that the manufacturer assigns to the engine for identification purposes. (numéro d'identification unique)

useful life means the period of time or use in respect of which an emission standard applies to an engine, attached fuel line or attached fuel tank. (durée de vie utile)

volatile liquid fuel means any fuel that is a liquid at atmospheric pressure and has a Reid Vapour Pressure greater than 13.79 kPa. (carburant liquide volatil)

wintertime engine means an engine used to power a machine that is designed exclusively to be used in snow or on ice. (moteur hivernal)

(3) Paragraph 1(3)(a) of the Regulations is replaced by the following:

• (a) “nonroad vehicle” and “nonroad equipment” shall be read as machine; and

2 The Regulations are amended by adding the following after section 2:

Background

2.1 These Regulations set out

• (a) prescribed engines for the purposes of section 149 of the Act;
• (b) requirements respecting the conformity of prescribed engines with emission-related standards for the purposes of sections 153 and 154 of the Act; and
• (c) other requirements for carrying out the purposes of Division 5 of Part 7 of the Act.

3 Paragraph 4(1)(a) of the Regulations is replaced by the following:

• (a) if the period of production of a model of engine does not include January 1 of a calendar year, correspond to the calendar year during which the period of production falls or the calendar year immediately following that calendar year, at the manufacturer's choice; or

4 (1) The portion of subsection 5(1) of the Regulations before paragraph (a) is replaced by the following:

5 (1) The off-road engines that are prescribed for the purposes of the definition engine in section 149 of the Act are those that

(2) Subsections 5(2) and (3) of the Regulations are replaced by the following:

(1.1) In addition, the off-road engines referred to in subsection (1) of the 2018 and later model years with a complete fuel system are prescribed for the purposes of the definition engine in section 149 of the Act.

(1.2) For the purposes of these Regulations, an engine kit is considered to be an engine that is referred to in subsection (1.1).

(2) The engines referred to in subsection (1) do not include an engine that is

• (a) designed exclusively for competition, namely one that has the following characteristics, and bears a label that meets the requirements of subsections 7(3) and (4) and indicates that the engine is a competition engine:
  • (i) its performance characteristics are substantially superior to non-competitive engines, and
  • (ii) it is not displayed for sale in any public dealership or otherwise offered for sale to the general public;
• (b) regulated by the On-Road Vehicle and Engine Emission Regulations;
• (c) regulated by the Marine Spark-Ignition Engine, Vessel and Off-Road Recreational Vehicle Emission Regulations;
• (d) designed to be used in reduced-scale models of vehicles that are not capable of transporting a person;
• (e) designed to be used exclusively in emergency and rescue machines and bear either a label to that effect that meets the requirements referred to in subsections 7(3) and (4) or the U.S. label referred to in section 660(c) of subpart G of CFR 1054;
• (f) designed exclusively to be used in military machines that are designed exclusively for use in combat or combat support during military activities, including reconnaissance missions, rescue missions and training missions and bear either a label to that effect that meets the requirements referred to in subsections 7(3) and (4) or the U.S. emission control information label referred to in section 225(d) of subpart C of CFR 1068;
• (g) being exported and that are accompanied by a written statement establishing that they will not be used or sold for use in Canada; or
• (h) covered by an EPA certificate and bear a U.S. emission control information label that is referred to in section 135 of subchapter U of part 1048, of the CFR.
  

(3) For the purpose of section 152 of the Act, the prescribed engines are those referred to in subsections (1) and (1.1) that are manufactured in Canada, except any engine that will be used in Canada solely for purposes of exhibition, demonstration, evaluation or testing.

5 The heading before section 7 of the Regulations is replaced by the following:

National Emissions Mark and Label Requirements

6 (1) Subsections 7(3) and (4) of the Regulations are replaced by the following:

(3) The national emissions mark and any label required by these Regulations, except for a label referred to in subsections 8.1(4) and 8.2(2) or paragraph 16(d), shall be located

• (a) on or immediately next to the label referred to in paragraph 16(d); or
• (b) if there is no label referred to in paragraph (a), in a visible or readily accessible location.

(4) Except for the label referred to in paragraph 16(d), any label required by these Regulations, including the label on which the national emissions mark appears, shall

• (a) be permanently affixed;
• (b) be resistant to or protected against any weather condition; and
• (c) bear inscriptions that are legible and indelible and that are indented, embossed or in a colour that contrasts with the background of the label.

(2) Subsection 7(5) of the Regulations is amended by replacing “identification number” with “authorization number”.

7 The portion of section 8 of the French version of the Regulations before paragraph (a) is replaced by the following:

8 L'entreprise peut apposer la marque nationale sur les moteurs dont la construction a été achevée avant le 1^er janvier 2005 si les conditions ci-après sont réunies :

8 The Regulations are amended by adding the following after section 8:

8.1 (1) An engine that is imported into or manufactured in Canada — other than an engine covered by an EPA certificate or an engine referred to in section 13 — shall bear a label that sets out

• (a) the statement “THIS ENGINE CONFORMS TO ALL APPLICABLE STANDARDS PRESCRIBED BY THE CANADIAN OFF-ROAD SMALL SPARK-IGNITION ENGINE EMISSION REGULATIONS IN EFFECT FOR MODEL YEAR [MODEL YEAR] / CE MOTEUR EST CONFORME À TOUTES LES NORMES QUI LUI SONT APPLICABLES EN VERTU DU RÈGLEMENT SUR LES ÉMISSIONS DES PETITS MOTEURS HORS ROUTE À ALLUMAGE COMMANDÉ DU CANADA EN VIGUEUR POUR L'ANNÉE DE MODÈLE [ANNÉE DE MODÈLE]”;
• (b) the model year of the engine;
• (c) the date of manufacture of the engine, expressed as month, year;
• (d) the useful life of the engine;
• (e) an identification of the emission control system in respect of exhaust emissions;
• (f) the name of the engine manufacturer;
• (g) the applicable emission family; and
• (h) the total engine displacement.

(2) Subject to subsection (4), an engine of the 2018 and later model years with a complete fuel system that is imported into, or manufactured in, Canada — other than an engine covered by an EPA certificate or an engine referred to in section 13 — shall bear

• (a) in the case of an engine that is imported, that bears a label referred to in subsection (1) and whose manufacture is completed in Canada,
  • (i) a label that sets out the information referred to in subparagraphs (b)(i), (iii) and (iv), immediately next to the label referred to in subsection (1), or
  • (ii) a label that sets out the information referred to in paragraph (b); and
• (b) in any other case, a label that sets out the following information:
  • (i) the statement “THIS ENGINE AND THE COMPLETE FUEL SYSTEM CONFORM TO ALL APPLICABLE STANDARDS PRESCRIBED BY THE CANADIAN OFF-ROAD SMALL SPARK-IGNITION ENGINE EMISSION REGULATIONS IN EFFECT FOR MODEL YEAR [MODEL YEAR] / CE MOTEUR ET LE SYSTÈME COMPLET D'ALIMENTATION EN CARBURANT SONT CONFORMES À TOUTES LES NORMES QUI LUI SONT APPLICABLES EN VERTU DU RÈGLEMENT SUR LES ÉMISSIONS DES PETITS MOTEURS HORS ROUTE À ALLUMAGE COMMANDÉ DU CANADA EN VIGUEUR POUR L'ANNÉE DE MODÈLE [ANNÉE DE MODÈLE]”
  • (ii) the information referred to in paragraphs (1)(b) to (h),
  • (iii) the name of the company that installed the complete fuel system, and
  • (iv) the applicable emission family for the fuel line and fuel tank.
    

(3) Paragraph (1)(a) and subparagraphs 2(b)(i) and (iii) do not apply when a national emissions mark is affixed to the engine or the machine in which that engine is installed.

(4) In the case of an engine with a complete fuel system referred to in subsection (2) that is installed in a machine, a label that is referred to in that subsection and that meets the requirements of subsection 7(4) may be affixed on that machine.

Unique Identification Number

8.2 (1) A unique identification number shall be affixed to every engine.

(2) The identification number shall be legible and may be engraved or stamped on the engine or may be displayed on a label that meets the requirements of subsection 7(4).

9 The heading before section 9 of the Regulations is replaced by the following:

Standards

Emission Control Systems

10 Subsection 9(2) of the Regulations is replaced by the following:

(2) No engine shall be equipped with a defeat device.

(3) Subject to subsection (4), a defeat device is an auxiliary emission control device that reduces the effectiveness of the emission control system under conditions that may reasonably be expected to be encountered under normal operation of the engine.

(4) An auxiliary emission control device is not a defeat device if

• (a) the conditions referred to in subsection (3) are substantially included in the emission test procedures referred to in section 13.1;
• (b) it is needed to protect the engine against damage or accident; or
• (c) its use does not go beyond the requirements of engine starting.

11 Section 10 of the Regulations is repealed.

12 Paragraph 11(2)(b) of the Regulations is replaced by the following:

• (b) meets the exhaust emission standards prescribed by these Regulations when crankcase emissions are considered to be exhaust emissions.
  

13 The Regulations are amended by adding the following before section 12:

Adjustable Parameters and Altitude Adjustment Kits

14 Subsection 12(2) of the English version of the Regulations is replaced by the following:

(2) Engines that are equipped with adjustable parameters shall comply with the applicable standards under these Regulations for any specification within the physically adjustable range.

15 The Regulations are amended by adding the following after section 12:

12.1 For engines of the 2018 and later model years, a company may rely on an altitude adjustment kit as specified in section 115(c) subpart B of CFR 1054 to demonstrate compliance with exhaust emission standards.

Emission Standards

General

12.2 An engine of a given model year, except a replacement engine referred to in section 13, shall

• (a) conform to the applicable emission standards set out in sections 12.4 to 12.8; or
• (b) in the case of an engine that is covered by an EPA certificate and that is sold concurrently in Canada and the United States, conform to the following emission standards
  • (i) for an engine of the 2018 or later model year that has a complete fuel system and whose attached fuel lines or attached fuel tanks are covered by one or more EPA certificates, those referred to in each of the EPA certificates, and
  • (ii) in any other case, those referred to in the EPA certificate.
    

EPA Certificates

12.3 (1) For the purposes of subsection 153(3) of the Act, the provisions of the CFR that are applicable under an EPA certificate to an engine referred to in paragraph 12.2(b), correspond to the standards referred to in sections 9 to 12.1 and paragraph 12.2(a).

(2) For the purposes of subsection 153(3) of the Act, the EPA is the prescribed agency.

Engines of 2005 to 2017 Model Years

12.4 An engine of a given model year before the 2018 model year shall conform to the exhaust emission standards set out in sections 103 to 105 of subpart B of CFR 90 that are applicable to engines of that model year and of the same engine class described in paragraph 116(a) of subpart B of CFR 90.

Engines of 2018 and Later Model Years

Engines

12.5 (1) Subject to subsection (2), the following standards set out in subpart B of CFR 1054 apply to engines of the 2018 and later model years:

• (a) for engines that are designed to be used in a non-handheld machine, the applicable exhaust emission standards for HC + NO_x and CO set out in sections 105(a) and (c) that are applicable to engines of the same engine class and for the useful life of an engine set out in section 105(d);
• (b) for engines that are designed to be used in a handheld machine, the applicable exhaust emission standards for HC + NO_x and CO set out in sections 103(a) and (c) that are applicable to engines of the same engine class and for the useful life of an engine set out in section 103(d); and
• (c) for engines with a total engine displacement greater than 80 cm³ that are designed to be used in a handheld machine but used in a non-handheld machine, the standards set out in paragraph (a).
  

(2) In the case of a two-stroke engine that is designed to be used in a snowblower, the company may choose to apply to that engine the standards referred to in paragraph 1(b) applicable to an engine of the same total engine displacement instead of those referred to in paragraph 1(a).

Wintertime Engines

12.6 Any wintertime engine of the 2018 and later model years is exempted from the application of the applicable exhaust emission standards for HC + NO_x set out in section 12.5, unless the company chooses to apply those standards.

Engines with a Complete Fuel System

12.7 (1) Engines of the 2018 and later model years with a complete fuel system shall conform to the following standards:

• (a) for engines that are designed to be used in a non-handheld machine for the useful life set out in section 112 of subpart B of CFR 1054,
  • (i) the fuel line permeation emission standards set out in section 102(d)(2) of subpart B of CFR 1060,
  • (ii) the fuel tank permeation emission standards set out in section 103(b) of subpart B of CFR 1060,
  • (iii) the running loss emission standards set out in section 104(b)(1) or (2) of subpart B of CFR 1060, except for a wintertime engine,
  • (iv) at the company's choice, instead of the standards described in subparagraphs (i) and (ii), the diurnal emission standards set out in section 105(e) of subpart B of CFR 1060, and
  • (v) the evaporative emission standards set out in sections 101(f)(1) and (3)(i) of subpart B of CFR 1060;
• (b) for engines that are designed to be used in a handheld machine for the useful life set out in section 110 of subpart B of CFR 1054,
  • (i) the fuel line permeation emission standards set out in section 102(d)(2) of subpart B of CFR 1060,
  • (ii) the fuel tank permeation emission standards set out in section 103(b) of subpart B of CFR 1060, and
  • (iii) the evaporative emission standards set out in section 101(f)(3)(i) of subpart B of CFR 1060; and
• (c) for engines that are designed to be used in a handheld cold weather machine for the useful life set out in section 110 of subpart B of CFR 1054,
  • (i) the fuel line permeation emission standards set out in section 102(d)(3) of subpart B of CFR 1060,
  • (ii) the fuel tank permeation emission standards set out in section 103(b) of subpart B of CFR 1060, and
  • (iii) the evaporative emission standards set out in section 101(f)(3)(i) of subpart B of CFR 1060.
    

(2) For the purposes of paragraph 1(c), a handheld cold weather machine means any of the following handheld machines: a chainsaw, a cut-off saw, a clearing saw, a brush cutter in which an engine with a total engine displacement that is greater than or equal to 40 cm³ is installed, a commercial drill, an ice auger and an earth auger that is also designed to be used as an ice auger.

Bicycle Engines

12.8 (1) Bicycle engines of the 2018 and later model years shall conform to the following standards set out in subpart B of CFR 1051:

• (a) in the case of a bicycle engine with a complete fuel system,
  • (i) the exhaust emission standards for HC + NO_x and CO set out in sections 105(a)(1) and 105(b), and
  • (ii) the permeation emission standards set out in sections 110(a) and (b); and
• (b) in any other case, the standards set out in subparagraph (a)(i).
  

(2) Despite paragraph (1)(a), a bicycle engine that has a total engine displacement of 70 cm³ or less may conform to the exhaust emission standards set out in section 615(b) of subpart G of CFR 1051.

(3) The standards referred to in subsections (1) and (2) apply for the useful life set out in section 105(c) of subpart B of CFR 1051 as if a bicycle were an off-highway motorcycle referred to in that section.

16 The heading before section 13 of the Regulations is replaced by the following:

Replacement Engines

17 (1) Subsection 13(2) of the Regulations is amended by replacing “sections 9 to 12” with “sections 9 to 12.1 and paragraph 12.2(a)”.

(2) Paragraph 13(3)(b) of the Regulations is replaced by the following:

• (b) as the case may be,
  • (i) paragraph 1003(b)(5) of subpart K of CFR 90 for engines of a given model year before the 2018 model year, or
  • (ii) section 240(b)(6) of subpart C of CFR 1068 for engines of the 2018 and later model years.
    

18 The Regulations are amended by adding the following after section 13:

Interpretation of Standards

13.1 (1) For greater certainty, the standards in these Regulations that refer to the CFR include all the test procedures, fuels and calculation methods referred to in CFR 90, CFR 1051, CFR 1054 or CFR 1060, as the case may be.

(2) In the case of a standard set out in the CFR that is to be phased in over a period of time for a class of engine, or fuel line or fuel tank attached to an engine, the standard comes into effect, for the purposes of these Regulations, in the model year for which the CFR specifies that the standard applies to 100% of that class of engine, or fuel line or fuel tank attached to an engine, and continues to apply until another standard that applies comes into effect.

19 Section 14 of the Regulations and the heading before it are repealed.

20 The heading before section 15 of the Regulations is replaced by the following:

Instructions

21 Subsection 15(1) of the Regulations is replaced by the following:

Emission-related Maintenance Instructions

15 (1) Every company shall ensure that written instructions respecting emission-related maintenance are provided to the first retail purchaser of an engine or machine. Those instructions shall be consistent with the maintenance instructions set out in paragraphs 1104(a) and (b) of subpart L of CFR 90, section 125 of subpart B of CFR 1051, section 125 of subpart B of CFR 1054, or section 125 of subpart B of CFR 1060, as the case may be, for the applicable model year.

22 The Regulations are amended by adding the following after section 15:

Engine Kit Assembly Instructions

15.1 (1) Every company shall ensure that each engine kit is accompanied by written instructions for the engine's assembly — or the address of the place or the website where those instructions may be obtained — for the purpose of ensuring that the engine will conform to the standards prescribed under these Regulations once the assembly is complete.

(2) The instructions shall be provided in both English and French.

23 Sections 16 and 17 of the Regulations are replaced by the following:

Evidence of Conformity

16 In the case of an engine referred to in paragraph 12.2(b), evidence of conformity for the purposes of paragraph 153(1)(b) of the Act in respect of a company consists of

• (a) a copy of each EPA certificate covering the engine and, if applicable, any attached fuel line or attached fuel tank for an engine of the 2018 and later model years;
• (b) a document demonstrating that
  • (i) for an engine of a model year before the 2018 model year or for an engine of the 2018 and later model years without a complete fuel system, it is sold concurrently in Canada and in the United States, or
  • (ii) for an engine of the 2018 and later model years with a complete fuel system, it is sold concurrently with the same complete fuel system in Canada and in the United States;
• (c) a copy of the records submitted to the EPA in support of each application for an EPA certificate and any amended application in respect of an engine, fuel lines or fuel tanks that form part of a complete fuel system for an engine of the 2018 and later model years; and
• (d) a U.S. emission control information label that is permanently affixed in the form and location set out in
  • (i) section 114 of subpart B of CFR 90 for engines before the 2018 model year,
  • (ii) sections 135(b) to (h) of subpart B of CFR 1054 for engines of the 2018 and later model years,
  • (iii) sections 135(a) to (e) of subpart B of CFR 1060 for engines, other than bicycle engines, of the 2018 and later model years with a complete fuel system, and
  • (iv) sections 135(b) to (e) of subpart B of CFR 1051 for bicycle engines of the 2018 and later model years.
    

17 (1) In the case of an engine other than one referred to in paragraph 12.2(b), the evidence of conformity required under paragraph 153(1)(b) of the Act shall be obtained and produced by a company in a form and manner that is satisfactory to the Minister.

(2) The company shall submit the evidence of conformity to the Minister before importing the engine or applying a national emissions mark to it.

24 The Regulations are amended by adding the following before section 18:

Maintenance, Retention and Submission of Records

25 Section 18 of the Regulations is replaced by the following:

18 (1) A company shall maintain a record in writing, or in a readily readable electronic or optical form, of the following information and retain the record for the following periods:

• (a) a copy of any importation declaration referred to in section 19, for a period of eight years after the year of the importation;
• (b) the evidence of conformity referred to in sections 16 or 17, as the case may be, for a period of eight years after the date of manufacture of the engine;
• (c) for a company that imported less than 50 engines during a given calendar year, the number of engines imported, for a period of eight years after the calendar year in question; and
• (d) if applicable, a copy of the declaration referred to in section 20, and information demonstrating that the company has disposed of the engine in compliance with that declaration, for a period of eight years after the day of the disposal.

(2) If a record referred to in subsection (1) is retained by another person on a company's behalf, the company shall keep a record of that other person's name, telephone number and civic address and, if different, their mailing address.

(3) If the Minister makes a written request for a record referred to in subsection (1) or (2), the company shall submit it to the Minister in either official language

• (a) within 40 days after the day on which the request is made to the company; or
• (b) within 60 days after the day on which the request is made to the company, if the record is to be translated from a language other than French or English.
  

26 Section 19 of the Regulations is replaced by the following:

19 (1) Any company that imports 50 or more engines into Canada in a calendar year shall submit a declaration to the Minister, signed by the company's duly authorized representative, that contains the following information:

• (a) the importer's name, telephone number and civic address and, if different, their mailing address and, if any, email address;
• (b) the business number assigned to the company by the Minister of National Revenue;
• (c) for every engine
  • (i) the name of the manufacturer, the number of engines imported, the make, the model and model year of the engine and any applicable emission family, and
  • (ii) one of the following:
    • (A) a statement that each of the engines bears the national emissions mark, or
    • (B) a statement that the company is able to produce the evidence of conformity in accordance with section 16, or has produced it in accordance with section 17; and
• (d) for every engine that is installed in a machine, the number of machines imported, the name of the manufacturer of the machine and its make, model and type.
  

(2) The declaration shall be submitted to the Minister on or before February 1 of the calendar year following the calendar year during which the importation occurred.

27 (1) The portion of section 20 of the Regulations before paragraph (b) is replaced by the following:

20 The declaration referred to in paragraph 155(1)(a) of the Act shall be submitted to the Minister before the importation, signed by the person referred to in that paragraph or their duly authorized representative and shall contain

• (a) the following information:
  • (i) the importer's name, telephone number and civic address and, if different, their mailing address and, if any, email address,
  • (ii) if applicable, the business number assigned to the company by the Minister of National Revenue,
  • (iii) in the case of an engine, the name of the manufacturer, the make, the model and model year of the engine, and
  • (iv) in the case of an engine that is installed in a machine, the name of the manufacturer, the make, the model and type of the machine.

(2) Paragraph 20(c) of the Regulations is replaced by the following:

• (c) the date on which the engine will be imported, and the date on which the engine will be removed from Canada or destroyed.

28 (1) Paragraph 21(b) of the Regulations is replaced by the following:

• (b) the U.S. emission control information label referred to in paragraph 16(d) showing that the engine conformed to the emission standards of the EPA in effect at the time of its manufacture;

(2) Section 21 of the Regulations is amended by striking out “or” at the end of paragraph (b), by adding “or” at the end of paragraph (c) and by adding the following after paragraph (c):

• (d) the label referred to in subsection 8.1(1) or (2).

29 Section 22 of the Regulations is replaced by the following:

22 A company that imports an engine into Canada in reliance on subsection 153(2) of the Act shall, before the importation, submit a declaration to the Minister, signed by its duly authorized representative, that contains the information described in paragraphs 19(1)(a) and (b), and in addition,

• (a) the name of the manufacturer, the number of engines that will be imported in a calendar year, the make, the model and model year of the engine and any applicable emission family;
• (b) for an engine that is installed in a machine, the number of machines that will be imported in a calendar year, the name of the manufacturer, the make, the model and type of the machine;
• (c) a statement from the manufacturer of the engine that the engine will, when completed in accordance with instructions provided by the manufacturer, conform to the standards prescribed under these Regulations; and
• (d) a statement from the company that the engine will be completed in accordance with the instructions referred to in paragraph (c).

30 The portion of section 24 of the Regulations before paragraph (a) is replaced by the following:

24 A company applying under section 156 of the Act for an exemption from conformity with any standard prescribed under these Regulations shall, before the importation or manufacture of an engine, submit in writing to the Minister

31 (1) Paragraph 26(1)(b) of the Regulations is replaced by the following:

• (b) a description of the engine in respect of which the notice is given, including the make, the model, the model year, the unique identification number, the period during which the engine was manufactured and any applicable emission family;

(2) Paragraph 26(3)(c) of the French version of the Regulations is replaced by the following:

• (c) la date où l'avis de défaut a été donné aux propriétaires actuels des moteurs;

(3) Paragraph 26(3)(d) of the Regulations is replaced by the following:

• (d) the total number, or the percentage of, engines repaired by or on behalf of the company, including engines requiring inspection only.

Coming into Force

32 These Regulations come into force six months after the day on which they are registered.

[24-1-o]