Written By Marshall Eidinger

Federal and provincial policies are creating a new landscape for zero-emissions vehicles (ZEV) manufacturers, importers and suppliers, charging companies and investors to Canada. Opportunities and considerations include:

• a proposed national sales mandate for ZEVs;
• purchase incentives that vary by province;
• new frameworks for ZEV charging infrastructure; and
• a new compliance credit system.

ZEV Sales Targets

The proposed Regulations Amending the Passenger Automobile and Light Truck Greenhouse Gas Emission Regulations (the Regulations) set annual sales targets for new light-duty ZEVs offered for sale in Canada—at least 20% by 2026, at least 60% by 2030 and 100% by 2035. Canada's 2035 sales target aligns with similar ones in British Columbia and Quebec, as well as California and 15 other U.S. states. In 2022, the ZEV market share in Canada increased to 8.9%, up from 5.6% in 2021, according to S&P Global. 

The Regulations list the annual ZEV sales targets as follows:

Canadian ZEV Sales Targets By Model Year

The Canadian Vehicles Manufacturers' Association expressed its support for the 100% ZEV sales target by 2035. Automakers are investing billions of dollars in the rapid and massive transformation of the internal combustion engine industry into a new ZEV one.

Federal and Provincial ZEV Incentives

In its 2022 Budget, the federal government extended the Incentives for Zero-Emission Vehicles (iZEV) Program that provides Canadians up to $5,000 toward the cost of buying a light-duty vehicle. The iZEV Program was also broadened to capture larger ZEV models. An additional $1.7 billion in purchase incentives was included in Budget 2022 to fund the iZEV program until March 2025.

Provincial and territorial incentives are also available in British Columbia, Quebec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland, Northwest Territories and Yukon.

S&P Global says that British Columbia remains at the forefront of ZEV adoption in Canada with 18.1% market share of new light vehicles and 23.9% of all ZEV registrations in Canada. Quebec is at 13.2% market share in ZEV adoption. Ontario stands at 6.9%.

ZEV Charging Infrastructure

Meeting the national ZEV mandate requires a significant build-out of Canada's charging infrastructure. The federal government has announced investments in 50,000 more EV charging stations across the country, for almost 85,000 federally-funded chargers across Canada by 2027. This is in addition to charging stations supported by provincial governments and the private sector.

In a May 2022 report, the CVMA says that for Canada to keep pace with California, an additional 650,000 public chargers need to be built in the next 8 years. Millions of public chargers will be required for 100% ZEV sales.

ZEV Compliance Credit System

Canada's proposed legislation would establish a compliance credit system to determine if a company's fleet meets the ZEV sales target for a given model year. If a company surpasses its target, it earns excess compliance units. If a company misses its ZEV sales target, it would be in a compliance deficit and need to obtain credits. This can be done through banked credits, by purchasing credits from other companies, or creating credits from contributing to designated ZEV activities.

What’s Next

The consultation period for the proposed Regulations Amending the Passenger Automobile and Light Truck Greenhouse Gas Emission Regulations closed on March 16, 2023. Final regulations are expected to be published this year.

To discuss how to navigate the opportunities and requirements in Canada's rapidly growing and evolving EV landscape, please contact Marshall Eidenger.

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