On March 16 the consultation period for Canada’s ZEV sales regulation closes. It’s a policy lever that is a necessity if Canada wants to successfully transition to non-emitting vehicles, writes Electric Mobility Canada’s Daniel Breton and Clean Energy Canada’s Mark Zacharias
From food to medicine, from baby car seats to airplanes, rules and regulations are adopted to ensure that we live in a safer and cleaner world because the market didn’t provide products and services with proper standards.
Last year the federal government announced it would adopt a zero-emission vehicle (ZEV) sales regulation program. Some people said this was a bad idea and we should let the market handle the transition to electric vehicles.
The truth is that the federal government is using regulation because the market failed — both at providing sufficient supply of electric vehicles to meet growing demand and at lowering Canada’s GHG emissions.
Repeating the sentiment that “the market will handle this” is magical thinking.
Zero-emission vehicle supply
While some say that ZEV supply is complex and won’t be resolved by regulation, facts show the exact opposite.
Here is a story: in 2011, both the federal and Ontario governments financially supported the production of the Toyota RAV4 EV to the tune of $141.6 million. Four thousand units of the RAV4 EV were built (which represents a $35,000 incentive per vehicle).
But even though Ontario and Canadian taxpayers paid for its assembly in Ontario, they couldn’t buy them. The RAV 4 EVs were all shipped directly to the U.S. even though there was an $8,500 rebate in Ontario back then.
Why? Because of ZEV sales regulation in the U.S. that did not exist in Ontario or Canada.
Fast forward to today. Billions of dollars are pouring into a Canadian ZEV supply chain.
Yet, in February, Dunsky published a report commissioned by Transport Canada that found 82 per cent of dealerships across Canada did not have any ZEV in inventory during the survey period in 2022. Is it any wonder Canadian customers looking for a new EV must wait between six months and two years for most models?
We do not want to repeat the mistakes of a decade ago, hence the need for a federal ZEV sales regulation. Because the facts are clear: where stringent regulation is in place, ZEV supply and sales are much higher.
During Q4 2022, Canada’s ZEV sales were at 10.2 per cent nationally. But ZEV sales in Canadian regulated markets were at 14.6 per cent per cent in Quebec and 20.1 per cent in B.C.
In other regulated countries, December 2022 ZEV sales were at 25 per cent in France, 39 per cent in the UK and 55 per cent in Germany.
In 2019, the International Energy Agency published a devastating report for Canada. It calculated that our country’s light-duty vehicle fleet had the worst record in the world for average fuel economy and GHG emissions per kilometre driven.
The reason Canada is in this position comes down to a pivotal policy choice made almost 20 years ago.
In 2005, the federal government signed a voluntary agreement with OEMs where the latter vowed to decrease that their annual GHG emissions by 5.3 megatons by 2010. But because this was voluntary and there was no penalty if the target was not reached.
The industry missed the mark by 95 per cent.
GHG emissions from the light-duty vehicle fleet increased by 8 per cent between 2005 and 2019 (pre-COVID).
Today, Canada’s GHG emission target is a 40 per cent to 45 per cent reduction between 2005 and 2030.
“Market distortion”: yes to subsidies but no to regulation?
Some say that ZEV regulations will create “market distortion.” Yet, those who advocate against regulation want the federal government to:
- Double or even triple EV subsidies;
- Finance EV infrastructure; and
- Support manufacturing.
The fact that all of these tactics also “distort” the market doesn’t seem to bother anti-regulation advocates who want the governments’ subsidies minus the duties.)
Some say that regulation will deter EV industry investment in Canada. That’s false.
Since the federal government adopted a ZEV sales regulation program we have seen an acceleration in EV industry investments. More than $15 billion has been secured for Canada’s ZEV supply chain, thanks to the federal and provincial governments’ will to support the Canadian auto industry in its transition.
Fact: ZEV sales regulation brings market predictability that investors need. It is one of the many reasons why Canada is becoming more and more attractive for EV industry leaders.
Because the market failed, the Canadian government must adopt an ambitious ZEV sales regulation program. This action allows us to finally hope to reach our GHG reduction and ZEV adoption targets.
Daniel Breton is President and CEO of Electric Mobility Canada (EMC), a national membership-based not-for-profit organization dedicated exclusively to the advancement of e-mobility.
Mark Zacharias is the executive director of Clean Energy Canada, a climate and clean energy program housed at the Simon Fraser University Morris J. Wosk Centre for Dialogue whose purpose is to find paths to net-zero that grow the Canadian economy while leaving no one behind.
Let’s look at the real facts:
1. The federal government is moving forward with a ZEV mandate – whether it makes sense or not
2. The more that $16 B in investment in EVs and EV infrastructure was made PRIOR to the issuance of the draft regulation just prior to the Christmas holidays AND we don’t even know what the final regulation will be so to suggest that the certainty of the ZEV mandate drove the investment is a completely disingenuous proposition from the authors.
3. The market has not failed requiring a ZEV mandate. The markets globally – virtually all of them without using a ZEV mandate have pursued a strategy of performance based GHG emissions reductions targets that will drive ZEV uptake without the need for ZEV mandates and with the surety that GHG emissions will be reduced – contrary to a ZEV mandate. Presumably GHG reduction is our collective goal.
4. Are there market distortions with respect to incentives and EV infrastructure – absolutely! Manufacturers do not like purchase incentives either but they are necessary – along with public expenditure on infrastructure – if the government wishes to transition consumers from ICE vehicles to EVs which currently cost significantly more. With respect to manufacturing incentives, they are a reality in terms of trying to secure investment for the new automotive industry of battery powered, electrified vehicles. Would the authors prefer that we not engage in trying to secure this investment and jobs that come with it to Canada? However, there is no point in the government trying to incentivize companies with hundreds of millions of dollars to make EVs in Canada on one hand, if they are going to take potentially the same amount away from companies with the other hand if they cannot comply with the regulation. These companies may well just look elsewhere for more friendly jurisdictions to make their investments.
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