Canada is starting to come under some serious peer pressure to use coming recovery spending to accelerate the shift away from cars and trucks powered by fossil fuels.
For countries prioritizing transition to a lower-emissions economy, especially in Europe, electric vehicles (EVs) are emerging as an early target of stimulus funds aimed at rebuilding economies shut down by COVID-19.
Germany is leading the way, with its proposed stimulus package including a doubling of purchase rebates (to as much as $12,000) and massive expansion of charging infrastructure. France is also increasing rebates, with extra incentives for trading in old gas guzzlers for new electric models. British Prime Minister Boris Johnson is reportedly planning a generous trade-in program as well.
Meanwhile, China is extending subsidies that prepandemic it intended to stop offering, after already establishing itself as the world’s biggest EV market.
It all seems to be pointing toward similar commitments here, when the federal government eventually rolls out a recovery strategy that is likely to have a significant climate-change focus.
But for Justin Trudeau’s Liberals, the calculus on EV supports may be more uncertain than for those other governments – a result of Canada’s unusual role among developed countries in automobile manufacturing, and ensuing difficulty knowing whether environmental benefits from increased EV usage here would lead to significant economic benefit as well.
Strictly from a climate perspective, as a matter of meeting Canada’s obligations under the Paris Agreement and Mr. Trudeau’s promise to move toward net-zero emissions by 2050, the case for prioritizing EVs in a stimulus package is a very strong one.
Road transportation accounts for about a quarter of Canada’s total greenhouse gas emissions, split between passenger and commercial vehicles. It’s alongside oil and gas extraction as one of the few sectors that has seen emissions go up so far this century, largely as a result of more vehicles on the road than previously, as well as a consumer shift from smaller cars to SUVs and pickup trucks.
COVID-19 threatens to contribute to those emissions soon climbing further. Until the health risk is gone, many Canadians may be more reluctant than previously to use public transit, leading to more commuting by personal vehicle.
That adds to the case for expediting uptake of zero-emissions vehicles, which has been slow so far, accounting for about 3 per cent of new vehicle sales in Canada last year. Absent government intervention, the pandemic could make that shift even slower, if low oil prices help gasoline-powered vehicles maintain their perceived affordability advantage. But as is being demonstrated in Europe, there are plenty of ways to try to make EVs more attractive if governments are also looking to encourage consumer spending during the recovery period.
Those other countries, though, have another impetus that this one does not: manufacturing sectors with homegrown auto companies. The more they create domestic demand for EVs, the more they prepare their companies to compete globally as EVs grab bigger shares of markets everywhere, which most everyone familiar with the industry agrees will happen eventually.
Canada, by contrast, plays host to five automakers – Ford, Honda, Toyota, Fiat-Chrysler and General Motors – that are headquartered elsewhere, and is the junior player in an integrated continental market. So there may not be much correlation between a relatively modest increase in domestic demand for EVs and manufacturing them here.
Before the pandemic, there were even warnings from within the sector that if Canada moved aggressively to prioritize electric vehicles over the internal combustion engine vehicles that are assembled at Canadian plants, it could cause automakers to pull up stakes, taking jobs at smaller companies along the supply chain with them. If that’s a tenuous correlation, it could still weigh on the minds of politicians who don’t want to be blamed for plant closings that could happen regardless.
This unusual circumstance, as a country that makes cars but can’t really engineer its own manufacturing shift, could lead any Canadian stimulus around EVs to focus more on charging infrastructure than purchase incentives. That way, Ottawa could address “range anxiety” (considered a big barrier to EV uptake, alongside price and availability), while directly putting people to work in the short term, without being accused of actively discouraging sales of traditional vehicles, as Germany is doing.
There may also be some inclination on the part of Mr. Trudeau’s government, which is generally slow-rolling long-term stimulus plans as it tries to gauge the pandemic’s lasting economic impact, to wait for November’s U.S. election. If Joe Biden defeats Donald Trump for the presidency, and especially if Democrats win both houses of Congress, a more ambitious Canadian strategy for EVs could fit into a continental push toward clean-economy transition.
Before then, environmental groups whose support the Liberals court will be pointing to what is happening overseas, as evidence that Canada risks being a laggard rather than a leader in cleaner transportation. And Mr. Trudeau’s eagerness to address climate change through his recovery strategy, even when it may not offer the greatest short-term boost to industry, will be tested.
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