Canada finalized its new Electric Vehicle Availability Standard in support of achieving its national target of 100% zero-emission vehicle sales by 2035. Interim targets are at least 20% of all sales by 2026, and at least 60% by 2030.

The regulations define ZEVs as battery-electric vehicles (BEVs) fueled only with electricity; fuel-cell vehicles (FCVs) that operate using hydrogen; and plug-in hybrid electric vehicles (PHEVs) that can run exclusively on electricity for a specified minimum distance before they transition to operating as hybrid vehicles, using both liquid fuels and electricity.

Compliance flexibilities. To provide flexibility as manufacturers transition their fleets to meet the ZEV targets, the regulations include a credit system. Some of the flexibility provisions in the final regulations were modified from those in the proposed regulations in response to feedback from manufacturers and other stakeholders in order to create incentives for early deployment of ZEVs and to ease the transition to the regulated targets, given the different starting points of various vehicle manufacturers.

The main structure of the credit system has not changed from the proposed regulations. Companies that perform better than their ZEV targets generate credits which they can bank for up to five model years or trade. Companies that do not meet their targets generate a deficit, which must be discharged within three model years. No accumulated or banked credits can be used to offset a deficit in model year 2035 and beyond.

The final version of the standard includes a new set of provisions that enable manufacturers to obtain early action credits (EACs) for ZEV sales in model years 2024 and 2025. To qualify, a company’s fleet must have had at least 8% ZEVs in model year 2024 and 13% in model year 2025. Qualifying manufacturers can claim EACs between the annual minimum and 20% in both model years. EACs may not be traded and cannot be used after model year 2027.

The final version of the standard also includes a revised approach to obtaining credits for investments in charging infrastructure, with a clearer focus on fast-charging infrastructure and the early years when it counts the most. Credits generated through investments in fast-charging infrastructure can be traded, but cannot be used after model year 2030. Companies may generate one credit for each $20,000 invested in new fast-charging infrastructure projects that meet certain conditions.

The combined value of EACs and compliance units from investments in charging infrastructure cannot exceed ten percent of a company’s ZEV target in any year.

Credits for different vehicle types. Battery electric vehicles, fuel cell electric vehicles, and PHEVs with an all-electric range of 80 km or more generate one credit in all years, including 2035 and beyond. The treatment of these vehicles is unchanged from the proposed regulations.

The final version of the standard includes a set of changes to the crediting of PHEVs with an all-electric range of less than 80 km to reflect the capability of PHEVs on the market today. Partial credits for the lowest range PHEVs have been eliminated, and credits for medium range PHEVs have been increased (from what was originally proposed).

In addition, PHEVs can earn EACs in model year 2024 and 2025 based on the all-electric range and seating capacity criteria in model year 2026. The amount of a company’s compliance obligation that can be met by PHEVs is capped at 45% in 2026, 30% in 2027, and 20% in 2028 and later.

The following table lists the credits generated by PHEVs with an all-electric range of less than 80 km.

Background. Announced in draft form on 21 December 2022, the Standard applies to light-duty vehicles (passenger cars, SUVs, and light trucks). These vehicles account for about half of Canada’s greenhouse gas emissions from the transportation sector, while the transportation sector overall accounts for about 25% of Canada’s overall greenhouse gas emissions.

While about 80% of current electric vehicle owners choose to charge their vehicles at home, the Government of Canada is investing $1.2 billion to build 84,500 chargers across the country by 2029, which adds on to efforts by businesses and other governments to further expand the charging infrastructure across the country.

According to S&P Global, the share of new registrations of light-duty zero-emission vehicles in Canada in third quarter 2023 reached 13.3% (or one in eight new vehicles). This is up by 40% from third quarter 2022.

To date, the Government of Canada’s incentives for Zero-Emission Vehicles (iZEV) program has helped more than 300,000 drivers make the switch through incentives of up to $5,000.

Today there are about 25,000 public chargers in Canada, of which the Government of Canada funded more thean 10,000. Since 2016, the Government of Canada has selected more than 42,000 electric vehicle chargers for funding and is expected to deploy 84,500 by 2029.

More than 50 models qualify for the federal iZEV purchase incentive in 2023—an 80% increase from 2019.

The automotive sector contributed $14 billion to Canada’s gross domestic product in 2022 and is one of the country’s largest export industries. The automotive sector supports the employment of more than 500,000 Canadians.