Good afternoon.
AHAM represents manufacturers of major, portable and floor-care appliances in Canada and the United States. Our membership includes over 150 companies. The industry supports 40,000 jobs in Canada, including manufacturing, sales, distribution and retail. In Canada the economic impact of the appliance industry is close to $6 billion annually.
AHAM supports the rapid adoption of Bill C-4 and CUSMA.
Canada is a net importer of home appliances, with the U.S. and Mexico being the predominant trading partners. Manufacturers design appliances for a single North American market. This larger market increases consumer choice, drives down costs and maximizes economies of scale.
We support chapter 11 and chapter 28 of the agreement, which aim to reduce technical barriers to trade and increase regulatory alignment. We also support annex 12-D, which is specific to our industry and calls for energy performance standards and test procedures to be harmonized. It also encourages the use of voluntary programs such as Energy Star, noting that they contribute to improving energy efficiency for a range of products.
This is why we'd like to raise an issue that is of great concern to our members both in Canada and the United States. The Liberal Party has put forward a commitment to make Energy Star certification mandatory for all home appliances by 2022.
If all home appliances are required to be Energy Star, almost half of what's available in the market today will vanish, and in the future that could rise to 75%. Although implementation has not started, this has created great uncertainty in the market for both manufacturers and retailers. If the government moves forward with making Energy Star mandatory, Canada will be going against the intent of CUSMA, but more importantly, Canadians will experience a significant reduction in products available on the market. In fact, a staggering 41% of what is currently sold in Canada today will no longer meet these requirements. Because of the sharply limited model selection, it is likely that low-income Canadians will end up paying more for entry-level models. A price rise could be made worse by the greater cost of manufacturing such products, since more efficient components may be costlier, and in some cases, more fundamental construction changes will be needed. Unfortunately, in certain cases minor energy savings would be achieved.
This is because overall, today's home appliances are very energy efficient, and the cost to further improve efficiency could be significant, depending on maturity of the existing technology.
Both NRCan and the U.S. Department of Energy set mandatory minimum energy efficiency standards that all appliances must meet, and these have become more strict over time. Home appliances have undergone several standards changes. Some products are nearing maximum efficiency under available technology, and in some cases, the basic laws of thermodynamics.
Energy Star is a voluntary program. The purpose is to make it easy for consumers to identify higher energy efficiency products. It is intended to highlight the top 25% to 30%, or best in class, of energy efficiency. This competition motivates manufacturers to find new innovation. Manufacturers, in turn, make significant investments to qualify for the program.
If the Canadian market is limited to Energy Star products, this competition ends and the mark loses meaning. If the government mandates that everything be Energy Star, then it renders the brand meaningless. Article 12.D.5 of CUSMA clearly states its support for voluntary programs such as Energy Star to promote energy efficiency. This is in direct contrast to the government's proposal to make the Energy Star program mandatory.
Another rather significant issue with the Liberal commitment is that the Energy Star brand is not owned by the Canadian government. The brand is owned and trademarked by the U.S. Environmental Protection Agency. The U.S. government administers the program and sets the levels that manufacturers must meet in order to qualify for the designation. The Energy Star brand is highly praised by both NRCan and industry alike. The brand is recognized by 85% of the public, and the logo is used around the world. We want it to continue.
The Energy Star commitment is also inconsistent with the Liberal approach to energy efficiency over the last four years. In Canada the federal, provincial and territorial governments all have important roles to play in setting energy efficiency standards. In 2016 the FPT governments developed a framework encouraging market transformation through collaboration on energy efficiency standards. The framework states that when federal, provincial and territorial governments are not coordinated, manufacturers may have to test an identical product more than once to sell it across Canada. This can lead to unnecessary costs, reduce the product choices available in the market and create barriers to internal trade between provinces.
Making Energy Star levels mandatory is also in stark contrast to the government's approach to energy efficiency harmonization with the United States through the work of the regulatory co-operation council.
In 2018, Canada and the United States signed a memorandum of understanding to formalize the RCC and reaffirm the importance of regulatory co-operation. At the time, the president of the Treasury Board noted that aligning energy efficiency standards through the work of the RCC was the best way forward because it would save Canadians about $1.8 billion in energy costs by 2030. This is exactly why CUSMA commits to regulatory harmonization and supports voluntary programs like Energy Star.
Canada has historically been slow to adopt the stricter energy efficiency standards introduced in the United States. Since 2016, under this government, the two countries have made significant strides towards harmonization and alignment through the work of the regulatory co-operation council. Canada is now finally aligned with the United States. This process took over 10 years. It would be a shame to throw it all away.
Regulatory alignment is critical to avoid unnecessary double testings and barriers to trade, and it maximizes consumer product choice. Instead of making Energy Star mandatory, the government should continue to adopt the regulatory framework that can more quickly update its standards. Bill C-4 and CUSMA create a structure for this harmonization to thrive.
AHAM has been a strong advocate for advancements in energy efficiency standards, but making Energy Star mandatory will have negative consequences for middle-class Canadians.
Thank you.