Now that EVs will be made in Canada, will government force them to be sold here?

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Once it’s done celebrating the decision by Ford Motor Company to become the first automaker to assemble electric vehicles in this country, the federal government has a decision to make about whether to adopt a highly contentious measure to get more EVs onto Canadian roads.

According to those who have been lobbying both for and against it, the prospect of a national zero-emissions vehicle (ZEV) mandate – which would require EVs to make up a growing share of automakers' passenger-vehicle sales – has recently come under serious consideration by Prime Minister Justin Trudeau’s cabinet.

Environmental groups believe that the policy has the support of a growing number of Liberal ministers and caucus members, and came close to being announced in last month’s Speech from the Throne. The pushback within government, they say, is mostly coming from Industry Minister Navdeep Bains, the cabinet member who deals most with an auto sector vehemently opposed to it.

Government officials would not confirm the current level of discussion around ZEV mandates this week. But they also did not rule out the possibility of imposing one – a notable break from during their first term, when Transportation Minister Marc Garneau publicly rejected the idea.

Without incentives, will people buy EVs? Maybe not

There are obvious reasons why the mechanism, which requires each automaker to either meet an annual target for ZEV sales or buy credits from a competitor that exceeds its targets, is at least back on the table. The federal government has set a goal of ZEVs making up 10 per cent of Canadians' new vehicle purchases by 2025 and 30 per cent by 2030, but currently they account for only about 3 per cent. The vast majority of current sales are in the two provinces, Quebec and British Columbia, that have followed the lead of California and some other U.S. states by imposing ZEV mandates at the subnational level.

But deciding on the merits of a national ZEV mandate means sorting through a debate that features two almost diametrically opposed viewpoints about why EV sales have been slower to rise here than in many other countries. And it comes with lots of grim warnings about Canada either failing to move swiftly enough to reduce the transportation emissions that make up about a quarter of the country’s total carbon footprint, or moving too aggressively and driving away manufacturers who still primarily make internal combustion engine (ICE) vehicles here.

From environmental groups and other ZEV mandate proponents, the basic argument is that domestic supply of EVs – and general effort to make their purchases appealing and convenient to consumers – is failing to keep pace with demand. The auto companies, they suggest, are still more interested in selling ICE vehicles (especially light-duty trucks) for as long as they can, because of relatively high profit margins. Local dealerships have additional disincentive to try to move EVs, because they typically have fewer subsequent servicing needs, which normally account for a significant chunk of retailers' revenue.

The effect of only Quebec and B.C. having ZEV mandates, those advocates say, is that almost all the EVs designated for the Canadian market are being shipped there. Combined with automakers also needing to meet ZEV mandates or other stringent emissions-reductions regulations in other jurisdictions, the effect by this account is that other parts of Canada are seeing very few made available.

From automakers and their representative associations, the counterargument is that demand is the issue, more than supply. Having poured billions of dollars into developing EVs, they say, they’re of course eager to sell them. But they can’t force people to buy them. They say that sticker price remains an impediment, and will remain so until EVs reach price parity with ICE vehicles, probably a few years from now. Likewise insufficient charging infrastructure.

As for the Quebec and B.C. examples, they point out that those are also the only places in Canada where there are provincial EV purchase incentives (subsidies for consumers) atop federal ones, reducing the affordability hurdle. Those two provinces also had better EV uptake even before the mandates. So the ZEV mandates are easier to meet there, and by this argument their positive impact is overstated.

Of the two sides, the fans of ZEV mandates come armed with more compelling data. That includes a recent report commissioned by Transport Canada, and produced by the Montreal-based Dunsky Energy Consulting. It found that while EV sales in Canada went up 25 per cent between the fourth quarter of 2018 and the fourth quarter of 2019, EV inventory at dealerships was scarcely any higher earlier this year than previously. Among its other findings were that there are barely any EVs available for purchase in some parts of the country, especially Atlantic Canada, which suggests that any national mandate would have to have specific regional requirements.

The auto sector, though, tends to have more compelling arguments about what will happen if it doesn’t get its way. Considering that the majority of vehicles manufactured in Canada are exported to the U.S., its representatives argue, increasing domestic EV sales won’t necessarily cause more to be made here. But punitive measures could, the argument goes, hurt the ability to keep manufacturers here at all, by creating bad will.

To this point, the latter argument has prevailed. And it could still, with Mr. Trudeau’s government turning instead to emissions-reduction policies, such as “scrappage” programs that reward consumers for turning in old gas guzzlers for EVs or new ICE models, that the industry favours. The Liberals may also be hoping that if Joe Biden wins the U.S. presidential election, he will implement more ambitious fuel-efficiency standards – a policy on which Canada usually aligns with its neighbour, and which gives automakers more flexibility in how they go about reducing their emissions.

Or the government could be emboldened by Ford finally laying down EV-making roots in Canada, with hundreds of millions of dollars in government subsidies.

That manufacturing, whatever its economic benefit, won’t in itself lower emissions here.

Insisting Canadians have better access to those sorts of vehicles, wherever they’re from, might do more on the climate front. But the recent good vibes from the industry would disappear in a hurry.