Canada to Require 100% of New Cars Sold to be Zero Emission Vehicles by 2035

Canadians have been clear: they want clean air, good jobs, and a strong economy. Since 2015, the Government of Canada has led the fight against climate change and done more than any previous government in history to build a clean economy. The proposed regulations help to reduce emissions from our transportation and are a key component of the 2030 Emissions Reduction Plan, which puts Canada on a path to achieve at least a 40 percent reduction in emissions by 2030.

The government announced the proposed regulations on December 21, 2022, and will officially launch a formal 75-day consultation period upon their publication in the Canada Gazette, Part I, on December 31, 2022.

Light-duty vehicles (passenger cars, SUVs, and light trucks) account for about half of Canada’s emissions from the transportation sector. Canada’s Passenger Automobile and Light Truck Greenhouse Gas Emission Regulations have helped drive down emissions in this sector by establishing progressively more stringent greenhouse gas standards over the 2017 to 2025 model years.

The proposed regulations would supplement the emission standards by adding requirements for manufacturers and importers to meet annual ZEV sales targets. These would begin for the 2026 model year, with a requirement that at least 20 percent of new light-duty vehicles offered for sale be ZEVs, and would increase annually to at least 60 percent by 2030 and 100 percent for 2035.

Achieving Canada’s goal of net-zero emissions by 2050 requires ensuring that all new light-duty vehicles sold are ZEVs by 2035. Given the average age of a vehicle is 15 years, putting in place a 100 percent ZEV sales target by 2035 will help end the use of these polluting vehicles by 2050.

The regulations were informed by extensive engagements with stakeholders over the last year, and follow a phased-in approach that allows for a gradual and orderly transition to a 100 percent zero-emission future, as recommended by many stakeholders.

What are zero-emission vehicles (ZEVs)?

• ZEVs are typically considered battery-electric vehicles that are fueled only with electricity; fuel-cell electric vehicles that operate using hydrogen; and plug-in hybrid electric vehicles that can run exclusively on electricity for a specified minimum distance before they transition to operating as hybrid vehicles, using both liquid fuels and electricity.
• Plug-in hybrid electric vehicles are likely to play a key role in northern and remote communities in the near-term as they enable some use of electricity, while maintaining the use of fossil fuels where necessary.
• Pickup trucks, SUVs, and hatchbacks with two-wheel drive and four-wheel drive options are all available as ZEVs now, with even more coming in the next few years. Electric vehicles can be driven in very cold weather. ZEVs are common in countries with cold winters like Norway, were over 70 percent of new car sales are ZEVs.
• New light-duty gasoline or diesel-fueled vehicles will still be available after 2026. Companies offering new vehicles for sale will be required to offer a growing percentage of their fleet as ZEVs starting in 2026, increasing annually to 100 percent in 2035. Gasoline- and diesel-fueled vehicles can still be driven after 2035 and can be bought, or sold, as a used vehicle.

Why are there regulations proposed?

• The proposed regulations would apply to all companies that manufacture in Canada, or import into Canada, for the purpose of selling vehicles to the first retail purchase. They will apply to manufacturers and importers of new passenger cars, SUVs, and pickup trucks, and will exclude emergency vehicles and fire-fighting vehicles.
• The evidence from other countries, as well as from provinces such as Quebec and British Columbia, is clear: when combined with supportive investments, a regulated zero-emission vehicle sales target increases consumer choice and accelerates the transition away from internal combustion engine vehicles. That is why the Government of Canada is also increasing financial support for purchasing ZEVs, investing in charging infrastructure, and helping build a Canadian battery supply chain that includes critical minerals and manufacturing.
• Automakers have made it clear that the transition to electric vehicles is now firmly underway. Many have set their own ZEV sales targets. According to Statistics Canada, the share of new registrations of light-duty ZEVs in Canada was 2.9 percent in 2019, 3.5 percent in 2020, and 5.2 percent in 2021, amounting to 85,000 vehicles. In the first half of 2022, 7.2 percent of new light-duty vehicles sold were ZEVs.
• ZEV regulations spur the private sector to invest in charging infrastructure and allow utilities to plan for the generation and transition lines to provide charging, and for those investing in hydrogen for fuel-cell vehicles.
• The regulations will help ensure that the supply of ZEVs keeps up with consumer demand.
• Within Canada, zero-emission vehicle regulations are already in place in Quebec and British Columbia, which represent roughly 35 percent of the nation’s new light-duty vehicle market. California has had zero-emission vehicle rules in place since 1990. California significantly strengthened its ZEV sales requirements in 2022, and several other US states have adopted them.

See related article: GM Opens Canada’s First Full-Scale EV Plant to Build BrightDrop Zevo Fully Electric Delivery Vans

Alignment with the United States Environmental Protection Agency and California

• Canada’s policy is to align its Light-Duty Vehicle Regulations with the most stringent performance standards in North America post-2025, whether at the United States federal level or state level.
• That means aligning with the fleet average greenhouse gas requirements of the United States Environmental Protection Agency, and the ZEV sales requirement of California.
• In addition to implementing ZEV regulations, Canada will continue to align with the United States’ national greenhouse gas performance standards and technical requirements to ensure an integrated North American auto manufacturing sector, so that vehicles can be manufactured and sold in either country.

Sales targets comparable to those of California and other US states

• An increasing number of US states are also adopting ZEV regulations. Ten American states have adopted the California ZEV regulations: California, Connecticut, Maine, Maryland, Massachusetts, New Jersey, New York, Oregon, Rhode Island, and Vermont. By 2026, Colorado, Minnesota, Nevada, New Mexico, Virginia, and Washington will adopt ZEV sales targets, bringing a ZEV requirement to about 40 percent of the US vehicle market.
• Canada’s proposed regulations are similar to those of California and the other US states in their scope, their definition of ZEVs, and in giving partial credits to plug-in hybrid electric vehicles, depending on their electric-only range. In the early years, Canada proposes providing for a larger use of plug-in hybrid electric vehicles and lower targets than in those states, reflecting California’s head start and the existence of a large number of early action and environmental justice credits from past California regulations.
• Notwithstanding all of the above, the Canadian standards will require an average annual increase in the deployment of ZEVs of 6.5 percent from this date to 2030 as compared to 4.75 percent for California. They are also expected to result in the deployment of more ZEVs post-2030 given there are fewer proposed flexibilities.

Environmental, health and economic benefits

• From 2026 to 2050, the proposed ZEV sales targets are estimated to save vehicle owners $33.9 billion in net energy costs, with incremental vehicle and home charger costs of $24.5 billion.
• The cumulative greenhouse gas emission reductions from 2026 to 2050 are estimated to be 430 metric tons, valued at $19.2 billion in avoided global damages.
• Regulated sales targets will result in more ZEVs becoming available on the used-vehicle market. As lower-cost ZEVs and more used ZEVs hit the market, more households will be able to benefit from their lower fuelling and maintenance costs.
• ZEVs are a healthier option, reducing air pollution from on-road vehicles. Almost half of Canadians live near high-traffic roads. In addition, about 50 percent of schools and long-term care facilities in Canada are located near high-traffic roads. Air pollution from on-road vehicles increases the risk of developing asthma and leukemia in children as well as lung cancer in adults.

Electric vehicles make sense from an environmental perspective, given Canada’s clean electricity grid

• Canada has one of the cleanest electricity grids in the world, with over 83 percent non-emitting electricity. Canada has also committed to achieving a net-zero electricity grid by 2035, and is actively developing a series of measures, including new Clean Electricity Regulations and complementary measures that will ensure that Canada phases out remaining fossil-fuel generated electricity. 
• Environment and Climate Change Canada does not project a major increase in electricity demand by 2035 related to the federal light-duty electric vehicle targets. Current data indicates that there will be an increase in electricity demand of 1.3 percent by 2035 and 2.2 percent by 2050, which is not expected to lead to significant increases in electricity prices.

Supporting the transition to 100 percent zero-emission vehicles

Meeting these ambitious sales targets will require a concerted effort by governments working closely with industry, utilities, experts, non-governmental organizations, and individual Canadians. Here are some of the key priorities:

• Make sure zero-emission vehicles are available:
  Many Canadians and businesses who want to buy a zero-emission vehicle face limited availability at dealerships or long wait times. Others simply can’t find a model that suits their needs. The federal zero-emission vehicle sales target will require automakers to supply an increasing share of those vehicles.
• Make zero-emission vehicles more affordable:
  Although prices are projected to reach parity in the coming years, currently zero-emission vehicles have higher purchase prices than comparable internal combustion engine vehicles. Despite the lower operating and maintenance costs, incentives will help offset the upfront cost differences between zero-emission vehicles and gas or diesel vehicles.
• Build charging and refuelling stations:
  Canadians want to know that they will be able to get where they need to go, and charge or refuel their zero-emission vehicle in a way that fits their lifestyle or business needs. The Government of Canada has committed to help build 85,000 publicly funded chargers across Canada by 2027.
• Build public awareness and confidence in zero-emission vehicles: Many Canadians still don’t know much about zero-emission vehicles and have limited exposure to them. Awareness, training, and education programs aimed at seeing and experiencing these technologies in action will help consumers discover the benefits of adopting these vehicles.
• Benefitting economically from the global shift toward ZEVs:
  By making investments to support a vehicle manufacturing sector in Canada that is innovative and competitive, while also protecting jobs as the automotive sector transitions. We have already attracted historic investments from companies around the world to build electric vehicles, batteries, and hybrids, securing around 17,000 good jobs for Canadians in 2022 alone. Through Canada’s Critical Minerals Strategy—and investments worth $3.8 billion—we are assembling the building blocks of clean technology, like solar panels and electric-vehicle batteries.
• Support research, development, and demonstration (RD&D):
  Despite significant technological progress in recent years, there is more work to do to accelerate innovative technologies to support the commercialization and uptake of zero-emission vehicles across most vehicle segments, particularly medium- and heavy-duty vehicles.
• Lead by example:The Government of Canada continues to build a cleaner on-road transportation system, while influencing others to follow suit through green procurement.