Prime Minister Mark Carney unveiled a set of measures on Friday aimed at insulating Canada’s economy from the Trump administration’s escalating trade actions. The strategy is designed to cushion workers and businesses most affected by tariffs, with particular attention given to the auto, transportation, and biofuels sectors.
Electric Vehicle Mandates
As was generally expected, the federal government has paused Canada’s light-duty zero-emission vehicle (ZEV) sales mandate. The suspension halts the 2026 requirement that 20% of new car sales be electric or zero-emission. Carney positioned the decision as a reprieve for automakers grappling with the financial strain of steep U.S. tariffs—50% on steel and aluminum, and 25% on auto parts and finished vehicles.
This adjustment reflects a significant recalibration of Canada’s industrial and climate strategy. While the long-term target of 100% ZEV sales by 2035 remains technically in place, the policy is now under review, with further guidance expected within 60 days.
Biofuels
The government is also turning its attention to biofuels, a sector facing mounting challenges. Shifts in U.S. subsidies and policies have forced some Canadian facilities to cut output or idle operations. At the same time, China’s recently imposed 75.8% tariff on Canadian canola—a key feedstock for renewable fuels—has intensified pressure on producers.
To counter these risks, Ottawa will introduce targeted amendments to the Clean Fuel Regulations (CFR). Among the measures: a time-limited production incentive for renewable diesel and biodiesel, developed in coordination with provinces and territories. The objective is to stabilize domestic production capacity and strengthen Canada’s clean fuels industry, while maintaining the CFR’s core mission of driving emissions reductions.
Carbon Market Implications
For carbon markets, these announcements signal medium-term stability for the CFR program, reaffirming the government’s commitment to the program. Natural Resources Canada will roll out further program details in the coming weeks, while parallel efforts with provinces and territories aim to secure long-term competitiveness for Canada’s low-carbon fuel sector.
From a market perspective, additional federal support for biofuels is directionally bearish for CFR credit prices, while the pause in ZEV mandates could provide modest bullish support, depending on how long the pause endures. ClearBlue’s latest Supply and Demand report offers a deeper analysis of how policy and market dynamics influence CFR balances and credit pricing. To learn more about this report or about how these announcements may impact your organization, please reach out to our team.
Broader Strategy to Manage Trade Disruptions
Beyond the transportation and fuels sectors, Friday’s announcements form part of a larger package to shore up Canada’s economic resilience. Key measures include:
- “Buy Canada” procurement rules requiring federal institutions to prioritize domestic suppliers, phased in starting October 2025 with full rollout by spring 2026.
- A CAD 5 billion Strategic Response Fund to provide emergency assistance to industries hardest hit by tariffs.
- Enhanced employment insurance flexibility, offering extended benefits for workers laid off due to trade-related disruptions.
- Expanded loan flexibility for auto and manufacturing businesses facing elevated input costs.
- An export diversification plan aimed at raising Canada’s non-U.S. trade share to 50% by 2030.
ClearBlue will continue to monitor how these shifts in trade and climate policy shape carbon markets and compliance program outcomes.