After Joe Biden takes office next month, one of the earliest cross-border priorities for Justin Trudeau’s Liberals will be gauging the next U.S. president’s interest in setting continental quotas for electric-vehicle sales.
For months, there has been speculation about Mr. Trudeau’s government imposing a zero-emissions vehicle mandate, addressing auto manufacturers’ perceived failure to meet demand for EVs. Its new plan for meeting the country’s climate-change targets, released last Friday, didn’t go that far. But it laid the groundwork, pledging to work on “supply-side policy options” that include “regulations and investments to accelerate and expand” the availability of ZEVs.
In an interview that day, Environment Minister Jonathan Wilkinson indicated what Ottawa is waiting for.
“With the election of Joe Biden, it provides an opportunity to engage that conversation on a North America-wide basis,” he said. “This is something that we are going to be engaging very early on with president-elect Biden, and [Mr. Biden’s climate envoy] John Kerry and others, to ensure that we sort out whether this can be done together in a manner consistent with the integrated nature of the auto market.”
His message was that Ottawa may need to proceed with a supply mandate regardless, but would prefer not to go it alone. “The best way to do it is to engage the Americans,” he said. “It doesn’t mean we won’t move in that direction if the Americans aren’t interested.”
Mr. Wilkinson was implicitly pointing at a major tension in Canada’s climate policy – between the need to reduce transportation emissions and junior-partner status in a continental auto sector – which the Liberals hope the new administration will help alleviate.
With emissions from Canadian passenger vehicles having significantly risen in recent decades, owing to more vehicles on the roads and the popularity of SUVs and pickup trucks, the trend needs to be reversed for Ottawa to make good on its climate goals. And while it’s increasingly clear from sectoral investment that EVs will eventually take over, they’re currently hovering around 3 per cent of Canadian sales.
That’s too slow an uptake to help reduce all Canadian greenhouse gas emissions by more than 30 per cent by 2030, as the Liberals have pledged, which is supposed to involve ZEVs making up 30 per cent of new vehicle sales by then. And it may impede hitting emissions-reduction targets thereafter. An oft-overlooked reason why the EV shift needs to be expedited is that manufacturers have greatly improved vehicles’ durability in recent decades, so each gas guzzler sold today could well be on the road 15 or 20 years from now.
Regulating sales isn’t the only way for the federal government to encourage swifter EV uptake. The Liberals have committed to continuing purchase rebates (although they’re too inefficient to move large swaths of the market) and charging-infrastructure investments. If seen through, the scaleup of the national carbon price that’s the centrepiece of the new climate plan should incentivize drivers to switch from fossil fuels.
But the refrain from advocates for a national ZEV mandate – backed by a report commissioned by Transport Canada, which found barely any EVs available for purchase in many parts of the country – is that supply isn’t meeting even relatively modest current demand. By this analysis, manufacturers are mostly shipping EVs to countries (primarily in Europe and Asia) that already have strong markets for them, usually driven by regulations. Meanwhile, they’re maximizing North American sales of internal combustion engine, or ICE, vehicles with higher profit margins for as long as possible.
With British Columbia and Quebec now having provincial ZEV mandates, there is some danger of that dynamic within Canada, with EVs becoming even scarcer elsewhere in the country. So there is a mounting case for the federal government to follow those provinces’ leads by requiring automakers to meet a growing target for national EV sales or buy credits from competitors.
The reason Ottawa has not done so already is concern about antagonizing an industry that directly employs more than 100,000 Canadians, but has no great allegiance to this country.
Most of the major automakers – five of which have assembly plants in Ontario, all still making ICE vehicles despite plans by Ford and Fiat-Chrysler to start EV lines around 2025 – oppose ZEV mandates, contending the policy is too prescriptive.
The underlying threat is that Canada could have a harder time attracting or keeping manufacturing, if it regulates more aggressively than the larger neighbour with which it has an integrated supply chain. There is also a secondary concern that some ICE vehicles would be taken off the sales market in Canada while remaining available in the U.S., angering Canadian consumers.
Mr. Biden’s election victory alone likely makes those worries less pronounced. Coming to office with an extremely ambitious climate agenda, he will clearly try somehow to ramp up EV sales and production. So there is less risk of Canada being stuck out on a limb than if Donald Trump had won another term.
But the president-elect did not explicitly campaign on ZEV mandate. So Ottawa is waiting to see if it can help nudge him in that direction after his inauguration next month.
The Liberals are also waiting to see what Mr. Biden does about tailpipe-emissions standards, on which Canada has long synchronized with the U.S. – and which, if strong enough, could achieve similar effects to ZEV mandates by encouraging automakers to sell more EVs as a way to improve average fuel economy. As Mr. Trump abandoned plans to make those requirements stricter, Ottawa indicated it planned to align instead with California, which was trying to stay on a more ambitious path over the next few years. The Liberals have held off on doing so, committing in their climate plan only to adopt the continent’s most stringent plans after 2025, because they’re hoping that Washington will take the lead again.
That’s probably prudent. But it raises the question of what happens if the talks that Mr. Wilkinson is promising, on continental regulatory policy, don’t go the way the Liberals hope.
In advance of Mr. Biden taking office, Mr. Trudeau’s government had better be readying its best case, about the merits of moving swiftly and ambitiously together.
Otherwise, it could be back to its dilemma of either waging a potentially lonely fight against an important industry or seeing a hole blown in its emissions-reduction plans.
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