Canada’s Electric Vehicle Availability Standard (regulated targets for zero-emission vehicles)

Regulations Amending the Passenger Automobile and Light Truck Greenhouse Gas Emission Regulations will be published on December 20, 2023, in the Canada Gazette, Part II.

Regulations Amending the Passenger Automobile and Light Truck Greenhouse Gas Emission Regulations will be published on December 20, 2023, in the Canada Gazette, Part II.

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. The 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 below 2005 levels by 2030

The Electric Vehicle Availability Standard

Announced in draft form on December 21, 2022, the Standard applies to light-duty vehicles (passenger cars, SUVs, and light trucks). These vehicles account for about half of Canada’s greenhouse gas emissions from the transportation sector, while the transportation sector overall accounts for about 25 percent of Canada’s overall greenhouse gas emissions.

Under the new Electric Vehicle Availability Standard, auto manufacturers and importers must meet annual zero-emission vehicle (ZEV) regulated sales targets. The targets begin for the 2026 model year, with a requirement that at least 20 percent of new light-duty vehicles offered for sale in that year be ZEVs. The requirements increase annually to 60 percent by 2030 and 100 percent for 2035.

Figure 1: Annual ZEV regulated sales targets

Given that 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 polluting light-duty vehicles by 2050.

The Electric Vehicle Availability Standard was informed by extensive engagement over the last two years, and follows a phased-in approach that allows for a gradual and orderly switch to a 100 percent zero-emission future.

The Standard ensures a growing supply of zero-emission vehicles for Canadians and is part of a comprehensive plan by the Government of Canada to develop a robust electric vehicle (EV) supply chain and infrastructure. It builds upon the existing Passenger Automobile and Light Truck Greenhouse Gas Emission Regulations, which have helped drive down emissions in this sector by establishing progressively more stringent greenhouse gas emission standards since 2011.

What are Zero Emission Vehicles (ZEVs)?

The regulations apply to all companies that manufacture new passenger cars, SUVs, and pickup trucks in Canada, or import those vehicles into Canada for the purpose of selling them to the first retail purchaser. Manufacturers and importers have the option to exclude emergency vehicles. All companies have the same targets.

The regulations define ZEVs as battery-electric vehicles (BEVs) fueled only with electricity; fuel-cell vehicles (FCVs) that operate using hydrogen; and plug-in hybrid electric vehicles (PHEVs) 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.

Pickup trucks, SUVs, sedans, and hatchbacks with two- and four-wheel drive options are all available as ZEVs now, with more than 50 ZEV models available in Canada in 2023. This is an 80 percent increase from 2019. The auto industry has announced an additional 41 models expected to arrive in Canada in 2024.

Canada – United States – California

An increasing number of US states are adopting similar ZEV regulations. California requires that 100 percent of new vehicles be ZEVs by 2035, and 10 other states have adopted similar standards beginning in 2026 or 2027: Colorado, Delaware, Maryland, Massachusetts, New Mexico, New York, Oregon, Vermont, Virginia, and Washington. Additional states have adopted California’s current ZEV regulations, and altogether over 40 percent of the North American vehicle market could have similar ZEV requirements by 2027.

Canada’s regulations are similar in structure to those of California and to the other US states in their definition of ZEVs, and in giving partial or full credit to plug-in-hybrids (PHEVs), depending on their electric-only range.

The United States Environmental Protection Agency (US EPA) announced a proposed new rule on April 12, 2023 which, when finalized, will lead to lower vehicle emissions and will help accelerate the North American market switch to ZEVs. The US EPA projects that its new rule, in combination with the incentives offered through the Inflation Reduction Act, would result in the US market transitioning to 60 percent of new vehicles being ZEVs in 2030.

The benefits of the regulations

The regulations will help ensure that the supply of ZEVs being sold in Canada keeps up with consumer demand. It will increase the supply of new and used ZEVs, enhance choice, and reduce wait times. Canada’s approach provides a ramp-up period of more than a decade. Most industry projections show that by the end of the decade or early 2030s, the purchase prices of gas-powered and electric cars will be comparable. This would mean that more consumers would start seeing overall savings due to lower charging and maintenance costs as soon as they drive a new vehicle off the lot.

In the meantime, consumer purchases of ZEVs will be supported by $2 billion invested by the Government of Canada in the Incentive for Zero Emissions Vehicle Program (iZEV). This program offers consumers up to $5,000 in new electric vehicle purchase incentives. The iZEV program combined with available provincial/territorial incentives brings the purchase price of some new ZEVs within the purchase price range of comparable gas and diesel vehicles.

ZEVs have much lower operating and maintenance costs than gas and diesel vehicles, making their total cost of ownership lower than comparable gas-powered vehicles, even with the current purchase price differences. The total cost of ownership of ZEVs is lower than their gas counterparts because of their significantly smaller fueling and maintenance costs. ZEVs have fewer moving parts than other vehicles, do not require oil changes or engine tune-ups, and do not contain spark plugs or engine air filters that require replacement. The Canadian Automobile Association (CAA) estimates that the average electric vehicle owner would save 40 to 50 percent in maintenance costs compared to a gas-powered vehicle.

The CAA also estimates that the average Canadian spends close to $3,000 dollars per year on gas, whereas the annual cost of electricity to power an average electric vehicle is only a few hundred dollars. For example, a ZEV sedan with a 400-kilometre range costs about $10 to charge with a home charger, while the fuel for a comparable gas vehicle costs around $50 to travel the same 400 kilometres. In total, it is estimated that Canadians will save about $36.7 billion in energy costs between now and 2050 as a result of the regulations.

According to experts, when federal and provincial purchase incentives are combined with the reduced costs of vehicle charging and maintenance, many ZEVs hit a break-even point with comparable gas-powered vehicles within a few years, and some in under a year. After 10 years, the overall savings can be significant. One study from Clean Energy Canada compared the total cost of ownership of a small electric hatchback vehicle costing $39,000, and a comparable gasoline model costing $30,000. The total cost of ownership for the gasoline vehicle was estimated to be over $80,000, versus less than $49,000 for the electric vehicle.

The regulations will be phased-in over the next 12 years. New light-duty gasoline or diesel-fueled vehicles will still be available after 2026. Gasoline and diesel-fueled vehicles can still be driven after 2035 and can be bought or sold as used vehicles. However, manufacturers have made it clear that the transition to electric vehicles is now firmly underway. Many have set their own EV sales targets that align closely with the federal targets.

The evidence from Quebec and British Columbia and other countries is clear: when combined with supportive investments, a regulated ZEV target increases consumer choice, improves air quality, and accelerates the transition from gas-powered engine vehicles.

Health Benefits

Moving towards ZEVs will have significant beneficial health impacts from the reduction of harmful air pollution. Almost half of Canadians live near high-traffic roads, and about half of schools and long-term care facilities are also located near high-traffic roads. Children, the elderly, individuals with underlying health conditions, and people living in high-exposure areas are all impacted by the adverse effects of air pollution, which can include childhood asthma and leukemia, as well as greater risk of lung cancer in adults.

Health Canada analysis shows that the air pollution from on-road vehicles in Canada contribute to an estimated 1,200 premature deaths and millions of cases of non-fatal health outcomes annually, with a total estimated economic cost of $9.5 billion each year. The emissions from light-duty vehicles contribute a little over a third of those health impacts. By 2050, the regulations are projected to reduce various air pollutant emissions from light-duty vehicles, including reducing fine particular matter (PM_2.5) by 36 percent, nitrogen oxide (NO_x) by 50 percent, volatile organic compounds (VOCs) by 61 percent, and carbon monoxide (CO) by 68 percent.

Charging Infrastructure

In Canada, efforts to build more charging infrastructure are accelerating, and technologies are improving and being standardized. Other countries that are moving toward an EV future are in similar positions.

The regulated ZEV targets will spur private sector investment in charging infrastructure and enable utilities to plan for the power generation and transmission to provide charging.

There are over 25,000 public EV chargers in Canada. The Government of Canada has allocated over $1.2 billion to support the deployment of more charging stations across the country. This support is provided through the Zero Emission Vehicle Infrastructure Program (ZEVIP), Canada Infrastructure Bank’s Charging and Hydrogen Refueling Infrastructure Initiative, and the Electric Vehicle and Alternative Fuel Infrastructure Deployment Initiative.

As of this month, the Government had committed funds for the installation of over 43,000 chargers across the country, with more than over 10,000 built and another 30,000 to be built, more than doubling the existing number of public charging stations. Federal funding is being complemented by the work of provinces, territories, municipalities, and the private sector to continue the momentum to build Canada's network.

Recent announcements from Quebec ($514 million to add over 116,000 public chargers), British Columbia ($26 million), and Ontario ($91 million) will help boost the number of chargers in those provinces. In addition, this past summer seven global auto manufacturers announced that they are joining forces to build a new “high-powered” electric vehicle charger network of at least 30,000 direct current (DC) fast chargers across North America, starting next year.

A majority of manufacturers have announced that they will be transitioning to the North American Charging Standard (NACS) port, which will increase charging access for consumers and avoid having to purchase costly adaptors. Over the next few years, this will enable most, if not all, models to use the same public chargers. In addition, standards being set by Measurement Canada will allow ZEV owners to pay for the amount of electricity they use, rather than the time they are hooked up to the chargers.

Research is being done on solid-state batteries by manufacturers and others that may offer faster charging, along with lighter-weight vehicles.

The government continues to monitor the EV charging needs of Canadians and how to best support the deployment of EV charging infrastructure in Canada, as well as potential measures to improve the reliability of chargers.

Electric Vehicles in Canada’s North and Rural Areas

The Government of Canada has heard the concerns from some Canadians living in rural and northern communities that may currently have less access to public charging infrastructure, as well as concerns expressed regarding the performance of batteries in cold weather.

Electric vehicles can be driven in very cold weather. ZEVs are common in countries with cold winters like Norway, where close to 90 percent of new car sales are ZEVs. Manufacturers are also learning what works in these environments to drive further advancements in technology.

As ZEV technology improves, so does their cold-weather performance, and this regulation will help ensure Canadians have access to the latest affordable and technologically advanced vehicles that are coming to the market. In the meantime, PHEVs can be a good fit for some vehicle owners looking for a ZEV. These vehicles will help bridge the gap while infrastructure for ZEVs continues to be improved in rural and northern regions.

Contributing to Climate Goals

The regulations will contribute to Canada’s climate change goals by preventing 362 megatonnes of cumulative greenhouse gas emissions. The monetized benefits of reducing these greenhouse gas emissions are estimated to be about $96 billion. Even accounting for the higher purchase price of many ZEVs in 2023, these greenhouse gas benefits, together with the estimated $36.7 billion in reduced energy costs over the next 25 years, give these regulations an estimated total net benefit of $78.6 billion.

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

The Government of Canada is confident that the country’s evolving electricity grid will be able to support the large increase in electric vehicles. ZEVs are projected to account for about five percent of total electricity demand in Canada in 2035, and 9.5 percent in 2050.

Overview of the ZEV Compliance Flexibilities

To provide flexibility as manufacturers transition their fleets to meet the ZEV targets, the regulations include a credit system. Some of the flexibility provisions in the final regulations were modified from those in the proposed regulations in response to feedback from manufacturers and other stakeholders in order to create incentives for early deployment of ZEVs and to ease the transition to the regulated targets, given the different starting points of various vehicle manufacturers.

The main structure of the credit system has not changed from the proposed regulations. Companies that perform better than their ZEV targets generate credits which they can bank for up to five model years or trade. Companies that do not meet their targets generate a deficit, which must be discharged within three model years. No accumulated or banked credits can be used to offset a deficit in model year 2035 and beyond.

Early Action Credits

• The final version of the standard includes a new set of provisions that enable manufacturers to obtain early action credits (EACs) for ZEV sales in model years 2024 and 2025. To qualify, a company’s fleet must have had at least eight percent ZEVs in model year 2024 and 13 percent in model year 2025. Qualifying manufacturers can claim EACs between the annual minimum and 20 percent in both model years. EACs may not be traded and cannot be used after model year 2027.
• These provisions will create incentives for the sale of ZEVs in the short-term. They will also create an additional source of compliance options, which will enhance flexibility and smooth the transition of manufacturers to the new requirements.

Credits for investments in fast-charging infrastructure

• The final version of the standard also includes a revised approach to obtaining credits for investments in charging infrastructure, with a clearer focus on fast-charging infrastructure and the early years when it counts the most. Credits generated through investments in fast-charging infrastructure can be traded, but cannot be used after model year 2030. Companies may generate one credit for each $20,000 invested in new fast-charging infrastructure projects that meet certain conditions, including:
• Projects must install new DC fast-charging stations.
• All stations must have a rated power of at least 150 kW.
• Stations must be operable for at least five years after installation.
• All stations must be available to any ZEV with a compatible charging port (or compatible adapter).
• Stations must be opened between January 1, 2024, and December 31, 2027.
• The combined value of EACs and compliance units from investments in charging infrastructure cannot exceed ten percent of a company’s ZEV target in any year.

Credits for Different Vehicle Types

Battery electric vehicles, fuel cell electric vehicles, and PHEVs with an all-electric range of 80 km or more generate one credit in all years, including 2035 and beyond. The treatment of these vehicles is unchanged from the proposed regulations.

The final version of the standard includes a balanced set of changes to the crediting of PHEVs with an all-electric range of less than 80 km to better reflect the capability of PHEVs on the market today. Partial credits for the lowest range PHEVs have been eliminated, and credits for medium range PHEVs have been increased (from what was originally proposed). In addition, PHEVs can earn EACs in model year 2024 and 2025 based on the all-electric range and seating capacity criteria in model year 2026. The amount of a company’s compliance obligation that can be met by PHEVs is capped at 45 percent in 2026, 30 percent in 2027, and 20 percent in 2028 and later.

The following table lists the credits generated by PHEVs with an all-electric range of less than 80 km.

Building a robust Canadian EV supply chain

The manufacturing of zero-emission vehicles, their components, including batteries and the acquisition and refining of the critical minerals they need, represent huge opportunities that are already paying dividends for the Canadian economy. With historic investments, the Government of Canada is building on Canada’s record of having among the best autoworkers in the world and being a destination of choice for investment in new supply chain manufacturing. Canada’s auto sector is a key sector of our economy: it’s our second largest exporter, supports 500,000 Canadians jobs, and contributed more than $14 billion to Canada’s economy in 2022.

The Electric Vehicle Availability Standard is part of a comprehensive plan by the Government of Canada to support the full supply chain of Canada’s ZEV auto industry. Since 2020, Canada has secured more than $34 billion in investment in the battery and automotive supply chain. These include new battery manufacturing facilities by Northvolt Batteries that will bring a $7 billion investment and up to 3,000 jobs to regions around Saint-Basile-le-Grand and McMasterville in Quebec, and up to $13 billion (federal and provincial) for the project with Power Co SE in St. Thomas, Ontario, which will generate an estimated 3,000 highly-skilled jobs. In March 2022, the Government of Canada and province of Ontario secured a $15 billion project between Stellantis N.V and LG Energy Solutions to manufacture EV batteries, bringing 2,500 new high-paying jobs to Windsor, Ontario. The Government of Canada has also made investments of $131.6 million in Honda Canada to retool its manufacturing operations for the next generation of hybrid-electric vehicles in Alliston, Ontario. Recently, Michelin announced a $300 million investment plant, creating an estimated 70 new jobs that will manufacture tires used by EVs in Bridgewater, Nova Scotia.

The Government of Canada is advancing the Canadian Critical Minerals Strategy to accelerate the development of the critical minerals needed to produce clean technologies, like EVs. For example, in October 2022, the Government invested $222 million in mining group Rio Tinto Fer et Titane to boost production of critical minerals in Sorely-Tracy, Quebec, creating up to 150 jobs in that community. Recently, several critical mineral projects have received regulatory approval, including the James Bay Lithium Project in northern Quebec, and Foran Mining’s polymetallic (copper) McIlvenna Bay project from the province of Saskatchewan.

In October 2023, the government announced an agreement with Umicore that will create up to 600 new permanent jobs in Loyalist Township, Ontario, supporting the production of more than 800,000 new EVs per year.

Other recently announced projects include a $750 million project with Volta Charging in Granby, Quebec, a $1.2 billion project with ECO Procam Canada in Quebec, and an $87 million project with E3 Lithium plant in Alberta.

Additional Information

• News release
• Zero-Emission Vehicles Information Portal