Background
A centerpiece of Canada’s 2030 Emissions Reduction Plan was the Electric Vehicle Availability Standard (often referred to as the “EV Mandate”). The mandate, finalized in December 2023, required automakers to ensure that a specific percentage of their light-duty vehicle sales (passenger cars, SUVs,light trucks) were Zero-Emission Vehicles. This began with a trajectory of 20%of sales starting in 2026, increasing to 60% by 2030, and reaching 100% by 2035.
The purpose of the EV mandate was to support Canada’s goal of achieving at least a 40% reduction in emissions below 2005 levels by 2030 and - given the average lifespan of a vehicle is 15 years - this was intended to be a key lever in achieving the net-zero emissions target by 2050. As the transportation sector accounts for approximately 25% of Canadian emissions, with light-duty vehicles accounting for about half of this total, mandating automakers was thought to be an effective tool at reducing emissions and ensuring sufficient electric vehicles were available to Canadian Consumers for purchase.
Key Changes
On February 5th, Prime Minister Mark Carney announced a new strategy to transform Canada’s auto industry, which included the repeal of the EV Mandate. The new strategy will pivot from strict government mandates to an outcomes-based approach aimed at balancing meeting climate targets with protecting Canada’s manufacturing from global trade volatility. The announcement comes as no surprise considering the compounding pressure the auto industry has faced with U.S tariffs, coupled with lobbying from Provincial Governments, such as Ontario Premier Doug Ford, encouraging a change in policy. In addition, following the pause in the incentive for zero-emission vehicles program, which provided a rebate towards purchase of an electric or hybrid vehicle, consumer interest in EV’s subsequently has dropped. This combination of factors made the initial 2026 sales target for automakers increasingly difficult to reach due to waning demand.
The Path Forward
Under the new strategy proposed, stronger greenhouse gas emission standards will be introduced, with the intended goal achieving 75% EV sales by 2035 and 90% by 2040 respectively. A key change in the new rules is increased flexibility for manufacturers, as they may now use any technology - including hybrids and high-efficiency vehicles - to meet standards while also responding to consumer interest. To increase demand at the consumer level, a revamped $2.3 billion rebate program was also included to simultaneously encourage affordability and revive consumer interest. In an additional step to encourage buying domestic, the rebate will apply to all Canadian made vehicles, with a price cap of $50,000 for foreign made vehicles. Lastly, in a bid to address concerns from auto-makers on meeting these new goals in the current economic environment, an additional $3 billion in funding is being allocated to support the auto industry throughout the transition in adapting to the new standard.
Implications
These changes are aligned with shifting priorities under Carney’s Climate Competitiveness Strategy, and priorities covered in the Prime Minister’s speech at the World Economic Forum in Davos. There has been an emphasis on shifting political strategy towards strengthening Canada’s autonomy through supporting industry while still striving to meet climate targets. A similar example was seen in the recent Memorandum of Understanding between Canada and Alberta, where provincial and federal governments found common ground through invigorating industry while strengthening industrial carbon pricing. This new automotive industry strategy is similarly designed to meet the needs of manufacturers in an increasingly challenging global trade environment while balancing a continuing need to reduce emissions.
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