When Prime Minister Mark Carney met with automotive sector CEOs Wednesday about U.S. trade negotiations, one of the key issues the industry said they wished to discuss was the government’s zero-emission vehicle (ZEV) mandate.
The mandate requires a certain percentage of light duty vehicles — passenger cars, SUVs and trucks — that are sold to be either fully-electric vehicles or plug-in hybrids, starting with 20 per cent in 2026 and rising to 100 per cent by 2035.
Brian Kingston, president and CEO of the Canadian Vehicle Manufacturers’ Association, told CBC News on the way to the meeting that “The targets that have been established cannot be met” given current market forces.
He later added that Canada already has other policies to meet its greenhouse gas emission targets.
Burning fossil fuels such as gasoline and diesel is the main cause of climate change, and transportation is the second-biggest source of emissions in Canada after the oil and gas industry.
The ZEV mandate is part of Canada’s strategy to accelerate the adoption of electric vehicles and decarbonize the transportation sector.
But if the mandate were scrapped, analysts say that would hurt efforts to fight climate change — and make it harder to find an EV for sale in parts of the country. Here’s a closer look at why.
In 2023, transportation accounted for 23 per cent of Canada’s greenhouse gas emissions. Unlike some sectors that have cut emissions since 1990, transportation emissions have grown 33 per cent, driven by both freight heavy-duty trucks and passenger light trucks.
Passenger vehicles alone accounted for about 12 per cent of Canada’s emissions in 2023.
The Canadian Climate Institute, a climate policy think-tank partly funded by Environment and Climate Change Canada, modelled 60 potential net-zero scenarios and found that switching to zero-emission vehicles was central to every one.
Arthur Zhang, senior research associate at the institute, said EVs are “one of the most reliable technologies we have for reducing emissions in the transportation sector.”
Canada’s plan to phase out gas-powered car and truck sales by 2035
It aims to solve a few problems.
One of the challenges up until now has been the lack of availability of electric vehicles in many parts of Canada.
In a recent interview, Cara Clairman, president and CEO of Plug’n Drive, an organization focused on public education about EVs, said in many parts of Canada, it’s still impossible to find an EV to test drive, due to low availability at dealerships. The exceptions are B.C. and Quebec, which have their own ZEV sales mandates.
“That means more dealers have [electric] cars,” she said. “If the vehicles are on the lots, you know, they sell more EVs. That’s just the reality.”
Zhang said the mandate signals government support for the EV transition and gives manufacturers the push to focus on electric vehicles even during periods of slower demand, such as now.
EVs accounted for 7.53 per cent of all new vehicles sold in April, down from a peak of 18.29 per cent in December 2024, now that federal, Quebec and B.C. rebates are gone. The federal government says a new rebate program is in the works, which consumers are waiting for, and Kingston says that’s hurting EV sales right now.
Electric vehicles are becoming easier to find in Canada, but not easier to afford
And he said it could also potentially lower the price of EVs, as manufacturers and importers boost the price of gas-burning vehicles relative to EVs and “cross-subsidize” them in order to meet sales targets.
Ross McKitrick, an economics professor at the University of Guelph and an unpaid senior fellow at the Fraser Institute, predicted such a markup of gas vehicles in a recent study modelling the economic impacts of the ZEV mandate. However, he found that the extra markup from gas-burning vehicles would be offset by lower overall sales due to higher vehicle prices overall (reducing the size of Canada’s vehicle fleet by 0.6 per cent by 2050).
Manufacturers or importers can also earn credits toward the target by selling more EVs ahead of time, overshooting the target some years, or installing EV charging infrastructure, which could also help boost demand for EVs. However, those who don’t meet the targets even with the credits would face penalties.
Road to EV adoption: Why experts think the future is still electric
McKitrick’s study found that initially, the impact would be modest, as people’s cars age slowly before needing replacement. But by 2050, the EV mandate will have cut Canada’s greenhouse gas emissions by roughly eight per cent compared to a “base scenario” without an EV mandate.
That’s large, considering that passenger vehicles make up 12 per cent of emissions right now, and emissions would already be declining due to some adoption of EVs.
McKitrick said scrapping the mandate would mean forgoing that eight per cent cut to emissions.
Zhang said government subsidies such as funding for EV charging infrastructure and rebates for people buying EVs can make a difference, but those work better as complementary policies: “They are not substitutes to the mandate as far as emissions reductions go,” he said.
He added that subsidies rely on taxpayer dollars, which may be less efficient than a policy to encourage manufacturers to make EVs more attractive.
On the other hand, McKitrick calculated that the ZEV mandate would be roughly 10 times more expensive per tonne of carbon abated than the former federal carbon tax, which Prime Minister Mark Carney eliminated in March – although the ZEV mandate’s “cost” would fall to zero once EVs and gas cars cost the same.
That’s already the case in some places outside Canada, Zhang said.
The North American fight against cheap Chinese EVs, explained | About That
One strategy to boost EV sales and adoption that has been proposed by academics and EV advocates has been to scrap tariffs on Chinese cars, which sell for as little as $13,000 Cdn overseas.
Zhang acknowledged, “In the case where cheaper EVs are available to consumers, the EV mandate may not be as impactful.”
