The federal government recently finalized regulations for its “zero-emissions vehicle” mandate. The mandate requires sellers of light vehicles (passenger cars and light trucks) to sell a rising minimum of zero-emissions vehicles — basically, electric vehicles or EVs — every year, culminating with 100 per cent EVs in 2035, just 11 years from now. Reasonable forecasts of production and sales make clear that Ottawa’s timeline is unrealistic.
The mandate states that new light vehicles must be at least 20 per cent EVs in 2026, 60 per cent in 2030 and, as mentioned, 100 per cent in 2035. The theory is that these requirements will guarantee a market for EVs and therefore encourage imports, construction of domestic manufacturing facilities and phase-out of internal combustion engine (ICE) vehicles. To nail down this last objective, the mandate flat-out prohibits the sale of ICE light vehicles in 2035 and beyond.
Canadians bought about 1.5 million cars and light trucks in 2022, according to Statistics Canada. The breakdown was 56 per cent SUVs and crossovers, 23 per cent pick-up trucks, 18 per cent passenger cars and three per cent vans. As for power sources, “battery electric vehicles” accounted for 6.5 per cent, plug-in hybrids 1.5 per cent, gas engines 82 per cent and diesel and conventional hybrids 10 per cent. Battery EV sales were highest in B.C. and Quebec, at 13.6 and 9.1 per cent of total sales, respectively, likely because of provincial purchase incentives and mandates. In the other eight provinces, battery EV sales were well below the overall Canadian average of 6.5 per cent. (We don’t have complete numbers for 2023, but a forecast using the actual sales in the first three quarters plus an estimate for the fourth shows that battery EV sales were nine per cent of Canada-wide sales, 18 per cent in B.C. and 14 per cent in Quebec).
In a new working paper for the C.D. Howe Institute, I develop a forecast of battery EV sales between now and 2035 using a bottom-up process that looks at the situation of each significant Canadian seller. I examine each supplier’s production and sales plans, make a risk-based projection and then sum the projections. My estimate is that 860,000 battery EVs are likely to be sold in Canada in 2035 — which is 640,000 less than my assumed forecast sales of 1.5 million in 2035. Sales in future years may well be higher due to population growth — for example, sales in 2023 are estimated to have been over 1.6 million. If these higher sales do occur, it means an even larger shortfall of battery EVs.
If this estimate is right and production does undershoot desired sales by more than 40 per cent, that will cause serious disruption in the market. To keep their EV sales at the mandated percentage of total sales, sellers may have to cut back on sales of gas vehicles (until 2035, when they will be required to cease gas sales altogether). If the overall demand for light vehicles does exceed overall supply, possibly by a lot, several undesirable things may occur — importation of slightly used vehicles, longer use of existing gasoline vehicles and an increase in vehicle prices, to name three.
The obvious question is: what is Plan B if the mandate’s rigid objectives can’t be met? Perfect, 100 per cent compliance is a laudable goal, but the world is seldom perfect. The federal government needs to be flexible.
To that end, Ottawa should consider letting plug-in hybrids count as EVs. The current rules cap them at 20 per cent of sales. Ottawa should scrap the cap.
There are serious concerns on the demand side, too. Battery EV sales have faced resistance recently, particularly for pickup trucks. Ford recently announced it would cut production of its F150 Lightning to just one shift as of April 1st, down from three as recently as last summer.
Instead of forcing adoption of battery-powered vehicles, a better policy would be to encourage manufacturers to increase the range of plug-in hybrids (particularly pickups) to say, 200 kilometres. These higher-range plug-in hybrids would be an easier sell, particularly to rural buyers worried about range, insufficient charging infrastructure and long charging times. Plug-in hybrids could well operate more than half the time using batteries rather than gas, which would reduce emissions considerably — a good (but not perfect) result.
Another possibility is to count conventional hybrids as EVs. Canadians bought more than 81,000 of them in 2022, only slightly fewer than their purchases of battery EVs. Conventional hybrids aren’t perfect, but the U.S. Department of Energy estimates they can achieve 35 per cent better fuel efficiency than straight ICE vehicles.
Finally, Ottawa should recognize that some ICE light vehicles probably will need to be sold in and after 2035. Canadian policy should follow the recent decisions of the EU and U.K. and make the phase-out of ICE vehicles more gradual, particularly those that can run on renewable fuels.
After a realistic look at the numbers, it’s hard not to conclude that Ottawa’s current EV plan is rigidly ideological. Policy-makers would be better advised to back off the perfect 100 per cent zero-emissions requirement for 2035 and instead accept that a less ambitious target is more realistic and still yields a good result. “Don’t let the perfect be the enemy of the good” is a rule-of-thumb most Canadians understand. They should remind Ottawa what it means.
Brian Livingston, executive fellow at the School of Public Policy at the University of Calgary, is author of “Time to Reboot: The Federal ZEV Mandate Requires Flexibility,” just published by the C.D. Howe Institute.