Provincial EV mandates foreshadow federal plan

As Ottawa continues to weigh what policy levers to pull to achieve its zero-emission-vehicle sales mandates for 2026, 2030 and 2035, provincial ZEV regulations in British Columbia and Quebec offer a glimpse of how the pan-Canadian mandate is likely to function, industry experts say.

In its 2030 Emissions Reduction Plan, released in March, the federal government pledged to require that ZEV sales reach at least 20 per cent of total new sales of light-duty vehicles by 2026, 60 per cent by 2030 and 100 per cent by 2035.

Environment and Climate Change Canada, the department leading enactment of the mandate, has begun drafting regulations. A new round of consultations with industry stakeholders is planned in the “near future” to help the government iron out the specifics, said Kaitlin Power, the department’s press secretary.

“This includes determining annual requirements, the design of a potential credit system and how to address regional considerations,” she wrote in an email to Automotive News Canada.

The finer details of the policy remain undetermined. Daniel Breton, CEO of Electric Mobility Canada (EMC), which advocates on behalf of ZEV adoption, said every indication points to the federal mandate’s revolving around regulating automakers. This has been the approach since the first ZEV mandate was put in place in California, Breton said, and is the route both B.C. and Quebec have taken.

“It has always been manufacturer-focused, never dealer-focused,” he said.

CREDIT-BASED MANDATE

In B.C., automakers earn credits for consumer sales of battery-electric or plug-in hybrid vehicles, with more credits earned for vehicles with greater electric range. A similar framework governs consumer vehicle sales in Quebec and forces automakers in the province to sell a certain percentage of ZEVs or exchange credits with competitors that do so.

The threshold will progressively rise over the next dozen years until all sales must be ZEV.

“They have to reach a certain amount of credits,” Breton said. “And if they have too many credits, they can exchange them or sell them to other manufacturers who don’t have enough credits.”

For instance, during the first reporting period under Quebec’s ZEV mandate, introduced in 2018, thousands of credits changed hands between automakers. Having earned a large number of credits, General Motors and Tesla each transferred credits to competitors. Meantime, Fiat Chrysler Automobiles, Honda, Mazda, Subaru and Toyota were on the receiving end, a provincial report shows.

David Adams, head of the Global Automakers of Canada (GAC), said his members — overseas automakers in Canada — expect the federal government will follow suit.

“But how that’s going to work is still up in the air a little bit,” he said.

Ottawa confirmed that it is investigating a credit system but did not elaborate.

INVENTORY INCENTIVE

Along with progressively increasing adoption of ZEVs, the federal mandate will help bolster ZEV inventories across the country, Breton said. As evidence, he pointed to a steadier supply of ZEVs in B.C. and Quebec.

Because automakers are required to sell a certain percentage of ZEVs in the two provinces, they allocate ample supply despite ZEVs being in high demand, Breton said. This is in contrast to Atlantic Canada where governments offer provincial ZEV rebates, but no sales mandates are in place.

Sales on the East Coast are “a lot lower” than they are in B.C. or Quebec because automakers have no ZEV sales benchmarks to meet, Breton said. Adams, on the other hand, said the ZEV mandate will not necessarily ensure product and could result in automakers holding back inventory of gasoline and diesel vehicles.

Instead of guaranteeing supply, he said, the mandate could prompt automakers to begin managing their inventory and “put a constraint on the number of overall vehicles” sold.

If automakers are forced to restrict inventory to keep their credit balance in the black, Adams said, the mandate — which many dealers are dismissing as an automaker problem — could “rapidly” become a dealer problem.

TARGET UNCERTAINTY

Ensuring equitable ZEV distribution coast to coast is another major concern as Ottawa pieces together its mandate.

While the federal government has committed to ZEVs accounting for 20 per cent of total sales by 2026, it has not disclosed whether each province must reach that target or if the goal will be tracked cumulatively. That means some provinces could underachieve but be propped up by others that were overshooting the target.

Without a system to distribute EVs throughout the country, Breton said, “[Automakers] could keep sending most EVs to B.C., Ontario or Quebec” and still reach their sales thresholds, potentially leaving Atlantic Canada and the Prairies with predominantly gasoline or diesel vehicles.

Ottawa confirmed it was taking such regional considerations into account but did not elaborate on what mechanisms it was considering to ensure cross-country ZEV supply. Upcoming consultation sessions with the auto industry will address the issue, Power said.

The government is scheduled to release draft regulations laying out the federal ZEV mandate this year or next.