ZEV Mandates and Climate Policy
With the federal carbon tax now repealed, Conservative Leader Pierre Poilievre has turned his attention to another flagship Liberal climate policy: the Zero-Emission Vehicle (ZEV) mandate. The mandate requires automakers to steadily increase the share of electric vehicles in their sales—20% by 2026, climbing to 100% by 2035.
Poilievre has stated that scrapping the policy will be a priority for the Conservative Party this fall, framing it as a matter of affordability and consumer choice. This move is not surprising. ZEV mandates are highly visible, consumer-facing policies, and that makes them politically vulnerable.
A Familiar Political Playbook
This is another major Liberal climate policy the Conservatives have targeted, following the federal fuel charge, which Mark Carney repealed following the election. Both were framed not specifically as environmental measures, but as affordability issues. While abstract carbon pricing mechanisms or industrial regulations can feel distant, gas prices and the availability of affordable vehicles impact voters more directly, making this framing more tangible and effective.
The ZEV mandate is also under pressure from other directions. Canada’s auto sector faces headwinds from global tariffs and federal EV rebates expired earlier this year. Without incentives, EV adoption and supply in Canada may slow, making it more challenging to meet targets and mandates. Automakers, meanwhile, are lobbying for looser rules or delayed targets, given challenges to the sector from trade tensions with the U.S.
ZEV Mandates in the U.S.
ZEVs are also subject to a political tug-of-war south of the border. From the outset of his second term, President Trump pledged to eliminate California’s ZEV mandates, and within months, congressional actions and the “One Big Beautiful Bill” effectively repealed key state authorities and ended federal EV tax credits of up to USD 7,500, which will expire on 30 September. The result has been a slowdown in EV sales and new legal battles, with California working to override the gap through state rebates, mandates, and the Low Carbon Fuel Standard (LCFS).
Why ZEV Mandates Matter for Carbon Markets
While ZEV mandates are also framed as consumer or affordability issues, they also impact carbon markets, given that transportation is a major source of emissions. If ZEV adoption slows, the sector’s emissions will remain higher for longer. That, in turn, may increase demand for compliance credits in regulated carbon markets.
In California, weaker EV adoption could mean upward pressure on California Carbon Allowance (CCA) prices and on credits under the Low Carbon Fuel Standard (LCFS), given slower emissions reductions compared to the target. In Canada, a rollback of the ZEV mandate could similarly tighten compliance markets by making it harder to meet overall reduction goals. In short, dismantling ZEV policies doesn’t just affect consumers; it reshapes the supply-demand balance in carbon markets.
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