Canada: 100% By 2035: Canada Seeks Ambitious Targets

The Government of Canada has announced new regulations that will set ambitious targets related to zero-emission vehicles (ZEVs) (the Regulations Amending the Passenger Automobile and Light Truck Greenhouse Gas Emission Regulations). The amended Regulations establish annual ZEV sales targets and a compliance credit system. Each year as of 2026, an increasing number of new vehicles sold in Canada will need to be ZEVs. These sales target requirements will supplement the emission standards that have already been established by the original Regulations. ZEV manufacturers and importers, as well as Canadian car purchasers, have effectively been placed on notice – the automotive future of Canada will be entirely electric and the market only has a few years to prepare itself.

Sales Targets: 100% ZEVs 2035

The Government of Canada has provided manufacturers and importers of new vehicles with a set timeline to render ZEVs more readily available to the Canadian market. Annual ZEV sales targets established under the proposed regulations are as follows:

ZEV Sales Targets by Model Year

The Regulations establish a method to determine whether the fleet of ZEVs offered for sale in Canada meets the ZEV sales target for a given year. When the draft form of the amended Regulations was first announced a year ago, Parliamentary Secretary Julie Dabrusin, speaking on behalf of Environment and Climate Change minister Steven Guilbeault, described the intent of the regulations as, "wanting to make sure we're not only building these vehicles, we're not only creating all of the pieces that go into making these vehicles, but we also are making sure that Canadians have access to them."

Target Enforcement via Compliance Credits

The annual sales targets will be enforced by the federal Government through the establishment of a compliance credit system. If a manufacturer/importer exceeds its ZEV sales target, it will earn compliance units for excess ZEV vehicles offered for sale. If a company misses its ZEV sales target, it will incur a compliance deficit, which must be satisfied by obtaining credits. Compliance deficits can be satisfied with banked credits, by obtaining credits from other companies or by creating credits from contributing to designated ZEV activities. Early Action Credits (EACs) may also be obtained for qualifying ZEV sales in model years 2024 and 2025. Earn them, bank them or buy them, if a company plans on manufacturing or importing ZEVs in Canada, it will need to have the federally mandated compliance credits to back itself up.

Fast-Charging Infrastructure Credits

In addition to the establishment of ZEV sales targets and a credit compliance system to regulate such targets, the newly amended Regulations provide an added credit incentives for fast-charging infrastructure. Here are the key takeaways regarding the fast-charging aspect of the Regulations' credit system:

• Compliance credits that are applicable up until model year 2030, which may be traded, can be generated by investing in fast-charging infrastructure.
• A company can generate one credit for each $20,000 invested in new fast-charging infrastructure projects that meet certain conditions.
• Amongst such conditions, the stations must be opened between January 1, 2024 and December 31, 2027, must be operable for at least five years after installation, and must be available to any ZEV with a compatible charging port.
• EACs and fast-charging infrastructure credits cannot collectively contribute to more than 10% of a company's ZEV targets in a given year.

The Future is Electric

The Government of Canada has clearly defined the parameters of the electrified future of the automotive industry. With a fully electrified new vehicle industry foreseen by 2035, regulations and programs continue to be established to ensure that the market will align with Government aspirations. Stay tuned as the Dentons Batteries & EVs Bulleting will continue to provide you with a summary and analysis of all of the latest batteries and EV developments.

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