Federal ZEV sales mandate threatens to concentrate green vehicles in B.C., Quebec

Draft legislation that would require zero-emission vehicles make up at least 20 per cent of new-vehicle sales in Canada by 2026 threatens to concentrate a disproportionate number of ZEVs in a pair of Canadian provinces and leave buyers in other regions with limited access to electrified vehicles, industry experts warn.

Daniel Breton, CEO of Electric Mobility Canada and a backer of a federal ZEV mandate, said that unless amended, the proposed legislation could further distort the market in favour of the two provinces that already have ZEV sales requirements on their books.

“Basically, the manufacturer would get double the credit if they sell in British Columbia and Quebec,” Breton told Automotive News Canada. “It would mean that they would get the credits from the B.C. government [or] the Quebec government, and they would get credits for selling at the federal level.”

Without some sort of “backstop” to prevent automakers from doubling up on credits, Breton said car companies are likely to continue allocating vehicles to Canada’s two leading provinces, leaving others undersupplied.

Ottawa released a full accounting of its proposed legislation that would amend how the Canadian Environmental Protection Act governs light-duty vehicles Dec. 31.

Environment and Climate Change Canada said it left regional requirements out of the draft regulations as “there is no practical way to establish regional sales mandates at the federal level.”

“Moreover, ZEVs continue to gain market share throughout the country, and national requirements would give automakers the flexibility to respond to markets with high consumer interest and infrastructure readiness,” the department wrote in laying out the regulations in the Canada Gazette, a federal publication.

The environment department added that automakers indicated they allocate inventory on a country-wide basis, and that “regional requirements would not generate any additional supply for Canada.”

If the draft regulations are pushed through unchanged, at least 20 per cent of the new vehicles each automaker sells in Canada must be non-emitting by 2026, but car companies will be under no obligation to reach that threshold in all provinces. The same would apply as higher percentages of national ZEV sales are required into the 2030s, meaning some provinces could do the heavy lifting, while others lag on adoption.

This disjointed rollout has been the case so far.

Through the first two quarters of 2022, B.C. and Quebec accounted for 36.5 per cent of all new light-duty vehicle registrations in Canada, but 63.2 per cent of new ZEVs registrations, according to the latest data available from Statistics Canada.

Add in Ontario, and the three provinces made up 93 per cent of all new ZEV registrations, compared to 76 per cent of all vehicle registrations.

David Adams, president of the Global Automakers of Canada, which represents overseas brands in the country, said one of the main goals of Ottawa’s ZEV mandate was to encourage “more ubiquitous availability” of ZEVs across the country.

“As it sits right now, I’m not sure [the mandate] will change the current dynamic where we have a lot of vehicles going into Quebec and B.C.”

Adams, who has been critical about the effectiveness of a federal ZEV mandate since it was first floated last year, said he would prefer to see measures to support ZEV adoption, such as extra credits provided for selling in underserved markets.

Looking to a federal ZEV mandate as a cure-all that will ease supply shortages and lower costs within the ZEV segment is misguided, Adams added.

“All that will happen naturally over the course of time,” he said, noting the automakers he represents are all “moving in that direction,” but the pivot to ZEVs cannot happen overnight.

Breton disagrees that a mandate would not ease vehicle supply challenges.

The combination of ZEV sales requirements and consumer purchase incentives has created both supply and demand for ZEVs in Quebec and B.C., he said. Compare this to Atlantic Canada, where provinces have rebates but not mandates, and there is strong demand for ZEVs, but few available, he added.

Breton worries omitting regional requirements from the federal legislation will exacerbate the challenges on the east coast.

“They have put together rebates, they’re supporting EV adoption, they’re trying to install EV chargers, but if they can’t get any supply, it’s not about heavy lifting. It’s more about the fact that they want more supply, and for them it’s going to become even more of an issue.”

Prince Edward Island and Nova Scotia are already looking at enacting provincial ZEV mandates mirroring those in B.C. and Quebec to head off further availability issues, Breton added.

More provinces with their own ZEV mandates would be even more disruptive for automakers, Adams said, as they would need to comply with different sets of rules in each province, plus the federal regime. If it came down to choosing between patchwork provincial regulations and overarching federal rules, his members would prefer a unified national approach, he said.

But Adams is skeptical the federal government will find a mechanism to add a regional element to its mandate.

The clock is already running on a 75-day consultation period for the draft legislation, with industry input due by March 16.

Breton is more optimistic regionality will find its way into the final regulations. He said there is “still room for discussion.”

“We have to find a way. Otherwise, I’m really concerned about what’s going to happen to Atlantic Canada and the Prairie provinces.”