At a crucial moment of transition for automakers and policy leaders, should Canada’s government decide to mandate zero-emission vehicle production levels?

With a new federal budget due in a few weeks — and Prime Minister Trudeau already signaling his government’s desire to do more to stimulate the market for electric vehicles and EV infrastructure — there is much speculation about what specific EV-related policies, programs or commitments will be introduced.

Last April, Transport Canada launched a $300-million electric vehicle incentive program that provides rebates of up to $5,000 for consumers buying an eligible EV, and capital cost write-offs of up to $55,000 for business EV purchases. The initiative has been so popular that nearly half of the ministry’s three-year rebate budget has already been paid out.

Yet with national EV sales now at about 3 per cent of total vehicle sales — and with at least some dealers admitting to long waits to fulfill EV orders — that still leaves a wide gap to hit the government’s goal of 10 per cent market share by 2025.

Might a move already in place in a number of provinces, U.S. states and countries abroad — imposing a zero-emission vehicle (ZEV) mandate compelling automakers to sell a certain percentage of electric vehicles — be next on the menu?

Nothing definite

“I’ve heard talk that something might be coming, but nothing is definite,” says Catherine Kargas, vice-president at Marcon, a Montreal-based consulting firm specializing in transportation electrification.

The case for a ZEV mandate is two-fold. The first is simply that a legal requirement with penalties leaves no room for slippage. The second is to prevent the Canadian market from getting shortchanged on vehicle supply — the argument being that car makers will divert more of their EVs to markets where they have to hit quotas and leave buyers in non-mandate markets facing longer delivery times and fewer models to choose from.

This week’s announcement that the UK is bringing forward its deadline for banning all gasoline and diesel cars to 2035 is a further signal that such market pressures are growing.

As for the worry that mandates elsewhere will impact vehicle availability here, there are examples of this already taking place. In December, for example, Mercedes-Benz announced it was delaying the Canadian and American launch of its first EV, a compact crossover called the EQC, by at least a year.

Strategic decisions

The company blamed the delay on a strategic decision to first meet strong demand in Europe. But in meeting that demand, the company is also helping to ensure it will meet stringent new European Union regulations — a de facto ZEV mandate — on vehicle CO2 emissions that took effect January 1 of this year. Under the new rules, no more than 5 per cent of EU car fleets can emit more than 95 grams of carbon dioxide per kilometre driven. In 2021, no new vehicle can exceed that level. Fines, potentially running into the hundreds of millions or even billions of euros, will be imposed on automakers that don’t meet the threshold. Further out, the rules target a 15 per cent reduction in overall CO2 emissions from cars by 2025, rising to 37.5 per cent in 2030.

https://twitter.com/auto_schmidt/status/1224357864338313218?s=20

The new European standard has caused manufacturers to scramble to produce more electric vehicles and other car makers to re-distribute supplies of fully electric and plug-in hybrids. Some are also handing out large bonuses to dealerships in return for increasing sales of vehicles with lower CO2 output.

ZEV mandates are already in effect in British Columbia and Quebec, the only two provinces that also offer incentive rebates. They also lead the country in sales, with 10 per cent and 7 per cent EV market penetration respectively.

Elsewhere, 10 U.S. states have ZEV mandates, while China recently adopted a modified version called a New Electric Vehicle (NEV) mandate that requires manufacturers to offset the carbon footprint of all the vehicles they sell by 12 per cent by 2020 or else they won’t be able to sell any of their products there.

Previously rejected

In 2017, even before the federal government heard recommendations from an advisory panel struck to advise it on EV policy, Transport Minister Marc Garneau announced that quotas were off the table. So, if the government is thinking differently about the issue today, it knows it will have a contentious debate on its hands.

Mark Nantais, president of the Canadian Vehicle Manufacturers’ Association, doesn’t believe that a ZEV mandate would increase electric vehicle sales in Canada.

“The doubling of EV sales in Quebec occurred before the ZEV mandate went into effect there. It’s incentives that drive sales,” says Nantais. “Price differential is still an issue for many people. Look at the Ontario example, EV sales dropped off a cliff after the provincial government cancelled its incentive program.”

Nantais says that his organization, which represents the major North American manufacturers, prefers a “collaborative approach” to promoting consumer demand for EVs — a three-legged stool composed of incentives, infrastructure (improved charging systems) and consumer education.

Catherine Kargas disputes the assertion that ZEV mandates don’t influence the sales of electric vehicles. “We are seeing that in markets when automakers have EVs for sale they tend to sell in larger numbers when ZEV mandates are in place.”

Kargas argues that incentives “do not encourage any carmaker to bring an EV into a particular market.” She notes that Nissan has several electric models, but only sells one — the Nissan Leaf — in Canada. “The point of a ZEV regulation is to bring some of these other models into the Canadian market. Incentives drive demand, but ZEV mandates secure supply.”

Consumer demand key

George Bousioutis, senior manager, government affairs at KIA Canada, says that if it adopted a ZEV mandate, the government would be essentially telling manufacturers what to produce. It’s not how the car business usually works, says Bousioutis. “We respond to consumer demand. I think the larger challenge is how do you persuade the majority of the population to participate.”

David Adams, president of Global Automakers of Canada, believes that any current lags in the supply of EVs to meet market demands lie more with technology rather than with the automakers. In his experience many consumers aren’t interested in the EV models that are available.

“SUVs and pickup trucks represent 75 per cent of the market in car sales today and the industry has had trouble producing electrified versions of these models because of the limits on battery technology,” says Adams.

Not everyone sees it the way, however. Simon-Pierre Rioux, spokesman for the Association des Véhicules Électriques du Québec (AVÉQ) says Quebec car dealers are selling all the EVs they receive. “They all have waiting lists. The demand is much higher than what is available.” In Rioux’s view, ZEV mandates are necessary because “car makers simply won’t comply on their own. They need to be prodded into it.”

A related wild card is the pending arrival of electric pickups from Ford, Tesla, newcomer Rivian, and GM, which used the platform of the Super Bowl and the star power of LeBron James to unveil plans for an electric Hummer. The first of these electric pickups will debut in 2021.

Higher targets?

Quebec’s mandate requires 10 to 12 per cent of vehicle sales be EVs by 2025. However, current rules allow automakers to use partial credit from sales of hybrids and conventional low-emissions vehicles towards meeting their ZEV quotas.

Rioux feels the government needs to get more aggressive, and there are signs this might be happening. In a recent interview with Electric Autonomy Canada, Philippe Dunsky, president and founder of Dunsky Energy Consultants, who headed up a recent Quebec task force on electrification, said that the group recommended setting a higher target.

Meanwhile on the west coast, B.C. introduced in April 2019 what many call the world’s strongest ZEV mandate, a program for light-duty vehicles that requires 10 per cent ZEV sales by 2025, 30 per cent ZEV sales by 2030 and 100 per cent in 2040.

That mandate only took effect this year, so there are no figures on its impact. Asked about the potential addition of a federal ZEV mandate, the B.C. Ministry of Energy, Mines and Petroleum Resources provided a statement saying the province believes that ZEV mandates can be successful without a federal counterpart.

At the same time, it added that a federal ZEV mandate would make “a stronger case” for automakers to increase the overall ZEV supply to Canada to meet both national and provincial targets.

Buyers in provinces without mandates might also stand to benefit from a federal move, as it could reduce the likelihood of automakers pulling vehicles from other provinces to meet the mandates in B.C. and Quebec.

A final argument against mandates is that from a climate perspective, as long as automakers are producing as many EVs as is possible, ZEV mandates in certain areas don’t make any difference in the global fight against rising CO2.

In response to that, proponents argue that the numerous additional benefits that come with EVs are worth realizing sooner rather than later. And in that department, Canada needs to be at the front of the line.