Canada Ramping EV Policies

Canada’s plug-in vehicle (PEV) market surged in 2018, surpassing 2% share nationally, while Quebec and British Columbia reached well over 3%. The surge was driven by the Tesla Model 3 deliveries and (somewhat counter-intuitively) by Ontario’s sudden abandon of its PEV purchase subsidy. Typically, before a subsidy ends there is a sales surge followed by a significant drop. For example, the removal of Georgia’s PEV incentive. Like in Georgia, PEV sales have retreated significantly in Ontario. However, help for the beleaguered Ontario PEV market may be nigh as the Canada 2019 budget has proposed C$300 million for a C$5,000 zero-emissions vehicle (ZEV) subsidy, enhanced first-year tax write-offs for fleet plug-in hybrid and ZEV acquisitions, and C$130 million for charging infrastructure. 

The budget proposals are the latest in numerous Canadian ZEV policy updates since the beginning of 2018. These include both Quebec and British Columbia adopting ZEV mandates (identical to California’s) and the national government’s announced goal of a 100% ZEV market by 2040. Such goals are becoming popular among governments globally, and foreshadow steadily increasing vehicle emissions efficiency standards beyond existing targets. In this regard, Canada may be forced to make additional policy updates, as its emissions efficiency standards are currently tied to developments in Washington, DC.  

Connection to US Policy 

Since coming to office, the Trump administration has been looking to reduce or end policies driving the US PEV market, including the federal EV tax credit, the 10-state ZEV mandate (soon to be 11), and corporate average fuel economy (CAFE)/greenhouse gas (GHG) standards. The administration’s efforts have yet to materialize into anything actionable; however, that may change soon as a final proposal affecting CAFE/GHG standards is expected by March 31, 2019. Monikered the Safer Affordable Fuel Efficient standard, this policy debuted in August 2018 and would freeze the US existing CAFE/GHG standards at 2020 targets.  

An important component to the existing CAFE/GHG standards is the automotive industry’s desire for alignment between the California Air Resource Board (CARB) and Washington, DC on emissions standards. Consequently, this alignment includes Canada because the country’s standards are aligned to CAFE/GHG. This alignment has made sense given the integration of the automotive markets in the US and Canada; however, differing directions on climate policy may make Canada realign to CARB’s existing efficiency standards. If not, continuing alignment to CAFE/GHG would, as Ben Sharpe of ICCT wrote, “[wipe] out two-thirds of the GHG reductions that are needed for Canada to hit its climate obligations,” stated in reference to the Paris Climate Accord.