Lots of promises, but what’s the plan?
On June 29, the federal government held a national press conference with three different ministers in three different urban centres across the country to announce that the federal government was advancing its target of banning the sale of internal combustion engine (ICE) vehicles by 2035 instead of 2040.
This was after the government previously announced in the federal budget this year that it was setting more aggressive targets for itself, seeking to achieve 36 per cent reduction from 2005 levels in greenhouse gas emissions by 2030 compared to the previously set 30 per cent.
Shortly after that, during a climate summit with U.S. President Joe Biden and others in April, the Prime Minister announced that Canada would be setting even more aggressive targets of 40 to 45 per cent below 2005 levels by 2030—presumably so as to ensure that Canada did not appear to be a total climate Luddite while President Biden was announcing reductions of 50 to 52 per cent below 2005 levels by 2030 for the United States.
If we add this to Bill C-12 (the Canadian Net-Zero Emissions Accountability Act) that received Royal Assent on June 29 and requires the government to reach net-zero emissions by 2050, there were a lot of announcements and commitments regarding emission reduction targets over a very short period of time.
If we look at the ICE ban that was announced on June 29 for 2035 instead of 2040, much seemed to be made of the fact that this was now going to be a mandatory target instead of a voluntary target.
While I have no intention of being flippant about emission reduction targets, as I do believe that climate change is the defining issue of our time, I get a little frustrated with announcements of new targets that seem to be based more on political science than an actual scientific analysis and an actual plan to achieve the targets. This approach does not bode well when Canada has failed to meet essentially every climate target it has set.
If we look at the ICE ban that was announced on June 29 for 2035 instead of 2040, much seemed to be made of the fact that this was now going to be a mandatory target instead of a voluntary target. The question left unanswered was: how is that target going to be made mandatory?
Will it be under Bill C-12, which is out of necessity going to require sectoral plans and targets? Will it be through a national ZEV mandate that will require an increasing percentage of sales from manufacturers to be ZEVs until we reach the 100 per cent level? What other “regulatory measures” referred to in the press release may be required?
All of these questions remain unanswered, even after a post-announcement briefing by departmental officials.
What we do know is that there will be consultations with the industry some time in late August or early September—probably around the same time as a federal election, which is at least partially why this announcement was made in the waning days of the last session of Parliament.
But beyond the fact that there will be additional consultations, we are left with more questions than answers. It would seem that the government is waiting to see how robust the emissions standards will be from the United States when they are released.
You may recall that one of the very first things that President Biden did after being sworn in, was to put into place an executive order, which essentially would overturn the watered-down Trump fuel economy standards and replace those standards with something more aggressive.
You may also recall that Canada’s GHG emissions regulations are inextricably tied to those of the United States, so much so that we incorporate by reference the U.S. regulations into our own. The hope of our federal government would seem to be that the robustness of the U.S. standards will be such that the principal way for manufacturers to comply with the regulation will be by providing more ZEVs to the market.
It is not at all clear to me that aligning with the U.S. standards—whatever they may be—will get Canada anywhere close to its 100 per cent ZEV by 2035 targets unless the U.S. also adopts that same target. I think my chances of winning the lottery are probably greater than the odds of the U.S. banning ICE vehicles by 2035.
At least one of the other questions that remains unanswered with this particular target is this: what does 100 per cent ZEV sales by 2035 actually mean? Are we talking about all light-duty vehicle sales being pure battery electric vehicles (BEVs) or fuel cell electric vehicles (FCEVs) by 2035, or will plug-in hybrid electric vehicles (PHEVs) still be considered zero emission vehicles (ZEVs) as they are now?
What about remote areas of the country where it seems highly unlikely that even by 2035 that there would be sufficient infrastructure to support ZEVs? The government already seems to have hedged on this issue, noting that discussions would have to take place between indigenous peoples and northern communities regarding the barriers to ZEV adoption in these areas.
Additionally, the current ZEV mandate systems in place operate on a series of credits that facilitate manufacturers’ compliance with the mandates, if they do not have sufficient sales of ZEVs from their own product mix. Will such credits be allowed under the 100 per cent ZEV sales by 2035, as a compliance mechanism?
Again, we do not know the answers to these questions. But a key concern in all of this is what happens if the U.S. does not adopt a similar regulation—which seems highly likely?
It would seem to me that consumers in Canada that still wish to purchase an ICE vehicle would either buy a used ICE vehicle in Canada or in the United States. Unless there is some mechanism put in place to prevent border arbitrage, Canadian dealers required to sell 100 per cent ZEVs will be losing sales to both domestic used car dealers and American dealers selling nearly new ICE vehicles.
Unless by 2035 the merits of ZEVs (and there are many of them) are readily apparent to consumers by 2035, we run the risk of undermining the Canadian retail dealer networks, while also undermining our emission reduction targets as a result of consumers keeping older ICE vehicles on the road for longer.
This is a lose-lose proposition where Canadian new car dealers will lose sales to used vehicle dealers both in Canada and abroad, and Canada will not be any further ahead in meeting its emission reduction targets.
We might be selling 100 per cent ZEVs in 2035, but we might be selling a lot fewer new vehicles unless Canadian consumers come to the party. It has taken a decade to get ZEV sales to a little over 3.5 per cent of overall sales in Canada. Of course, that percentage will expand rapidly as vehicle manufacturers bring more than 130 ZEV models to the marketplace over the coming years. But we still have to go from 3.5 per cent to 100 per cent in less than a decade and a half.
It may not be impossible, but it truly is a very ambitious target, as Transport Minister Alghabra announced during the press conference.
ZEVs are being brought to market, but the awareness and education piece for consumers is a key part of the puzzle that has not been fully addressed. We do know from survey after survey of Canadian consumers that the price of ZEVs and the concerns about charging infrastructure remain two of the key barriers to purchasing a ZEV.
Are governments—federal and provincial—prepared to continue to offer incentives until there is price parity between ZEVs and ICE vehicles (currently estimated to be mid- to late-2020’s)?
We might be selling 100 per cent ZEVs in 2035, but we might be selling a lot fewer new vehicles unless Canadian consumers come to the party.
Will the government and private enterprise advance the timeline and juice the investment for charging and fuelling infrastructure consistent with the government’s advancement of the 100 per cent ZEV target?
If the answer to those last two questions is “no,” then we seem doomed to failure before we get out of the starting gate. Targets are useful only if there are realistic plans established to achieve them.
We’ve seen a lot of environmental targets set this year. Canada runs the risk of continuing to fall short of its established targets unless it brings industries that are the subject of the emissions reduction targets to the table for frank discussion and collaboration on how to achieve them.
