Zero‑Emission Vehicle Sales Mandate to 2035

Summary#

The federal government published proposed Regulations Amending the Passenger Automobile and Light Truck Greenhouse Gas Emission Regulations on December 31, 2022. The proposal would set rising annual targets for zero-emission vehicle (ZEV) sales starting with model year 2026 and require 100% by 2035. This is a proposal (not law yet); people can send written comments within 75 days of publication or file a notice of objection within 60 days (see the Canada Gazette notice).

What it does#

• Sets mandatory ZEV sales targets for each model year. Key targets:
  • 2026 — 20%
  • 2027 — 23%
  • 2028 — 34%
  • 2029 — 43%
  • 2030 — 60%
  • 2031 — 74%
  • 2032 — 83%
  • 2033 — 94%
  • 2034 — 97%
  • 2035 and beyond — 100%
• Creates a compliance credit system for manufacturers and importers:
  • Companies that exceed their target earn credits; those that fall short get deficits.
  • Credits can be banked or traded for limited times (banking limits differ by year; no banking past model year 2035).
• Rules on how different vehicles count toward targets:
  • Battery electric vehicles (BEVs), fuel cell vehicles (FCVs) and plug-in hybrids (PHEVs) with all‑electric range over 80 km each count as 1 credit.
  • PHEVs with a shorter all‑electric range count for a fraction of a credit (for example, 0.75 credits for 50–79 km), with some of these partial-credit rules phased out after early years.
  • Caps on how much PHEVs can contribute: 45% in 2026, 30% in 2027, and 20% from 2028 onward.
• Allows limited flexibility to create credits by funding ZEV-related infrastructure:
  • A contribution of $20,000 (indexed) can generate credits, up to a per-company cap that starts at 2% of the fleet in 2026 and rises to 6% by 2030 (option ends after 2034).
• Makes technical and administrative fixes to the pre‑2026 fleet-average greenhouse gas rules and adds new end‑of‑model‑year reporting requirements (counts of ZEVs, PHEV ranges, credit trades, and any credits created by contributions).

Who's affected#

• Primary: manufacturers and importers of new light-duty vehicles offered for sale in Canada. They must meet the yearly ZEV shares or obtain/offset deficits.
• Vehicle buyers and owners: people who buy new cars and light trucks will see the market shift toward ZEVs and may face changes in vehicle choice and prices.
• Businesses and sectors that build and operate charging and hydrogen refuelling infrastructure.
• Provinces, territories and municipalities, plus organizations running incentives and charging programs (e.g., Transport Canada, Natural Resources Canada) since coordinated infrastructure and rebate programs affect how easily ZEVs are adopted.
• Rural, remote and northern communities, and lower-income households, who the rule itself does not exempt and who the proposal says may face bigger challenges (range, charging access, upfront cost).

Why it matters#

• Climate and air quality: the department estimates the ZEV sales targets would cut tailpipe greenhouse gases by about 430 Mt CO2e from 2026–2050. Those cuts are monetized at about $19.2 billion in avoided global damages under the analysis.
• Costs and savings: the analysis projects incremental ZEV and home charger costs of $24.5 billion (2026–2050), but $33.9 billion in net energy savings (mainly fuel saved). On net the department estimates total benefits of $28.6 billion over that period.
• Real-life effects:
  • Faster availability of electric and hydrogen vehicles in dealerships.
  • More public and home charging capacity will be needed and likely expanded.
  • Upfront prices and limited early-model choices could affect affordability, especially for low‑income and rural buyers; the government points to complementary programs (rebates, infrastructure funding, industrial support) to help.
  • The rules aim to align Canada with similar standards in some provinces and U.S. jurisdictions so automakers can plan for a North American market.
• Process note: this is a proposed regulatory change published for comment. The Canada Gazette notice sets deadlines for submissions (see 75 days and 60 days above).