Mandatory ZEV Sales Targets to 2035

Summary#

These final amendments to the Passenger Automobile and Light Truck Greenhouse Gas Emission Regulations require vehicle makers and importers to sell rising shares of zero-emission vehicles (ZEVs) in Canada, starting in model year 2026 and reaching 100% by model year 2035. The rules came into force on December 15, 2023 and add a system of credits, early-credit options and credits for building high‑power public chargers to help companies comply.

What it does#

• Sets annual ZEV sales targets for manufacturers/importers of new passenger cars and light trucks (share of a company’s combined fleet by model year):
  • 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 system of credits and deficits:
  • Companies that exceed targets earn compliance units (credits) they can bank or trade for a limited time.
  • Companies that miss targets incur deficits they must offset within specified time limits.
• Allows two limited flexibility options:
  • Early compliance units for extra ZEV sales in model years 2024 and 2025 (usable only to offset deficits in 2026–2027 and subject to caps).
  • Charging station units (credits) created when a company invests in a registered public charging project that meets specific rules (chargers must be at least 150 kW, operational between January 1, 2024 and no later than December 31, 2027).
    • Credits are created at one unit per $20,000 of eligible investment, up to a per‑charger maximum of $150,000 (for 150–199 kW) or $200,000 (for 200 kW and above).
    • Charging-station credits can be used to offset deficits through model year 2030 and expire after the company’s 2030 end‑of‑model‑year report.
• Adjusts technical and administrative parts of the rules, including:
  • Adding a definition of “zero-emission vehicle.”
  • Freezing the incorporated U.S. regulations referenced in the Canadian rules to how they read on February 28, 2022 (so future U.S. numbering changes won’t automatically alter Canada’s text).
  • Making various clarifications on rounding, credits timing, reporting and test‑related formulas.
• Requires companies to include ZEV and charging‑project details in their annual end‑of‑model‑year reports.

Who's affected#

• Primary: manufacturers and importers of new passenger automobiles and light trucks that sell vehicles in Canada. They must meet the yearly ZEV shares or use credits/flexibilities.
• Companies that invest in public charging projects can create charging‑station credits (but only if they satisfy the registration and operational rules).
• Vehicle buyers may notice changes in the mix of models offered and (according to the government analysis) possible upfront price differences as the market shifts toward ZEVs.
• Other groups mentioned in the regulatory analysis: governments, charging‑station operators and parts of the auto supply chain. The rule text itself is aimed at the regulated companies; the precise practical effects on dealers, independent garages or small businesses are discussed in the analysis but are not changes to who the rule directly regulates.

Why it matters#

• It is a major step to speed up Canada’s switch from gasoline and diesel light vehicles to electric and hydrogen vehicles, with the legal target of all new passenger cars and light trucks sold in Canada being zero‑emission by model year 2035.
• Government estimates in the regulatory analysis project the Amendments could cut about 362 megatonnes (Mt) of greenhouse gases between 2024 and 2050, and that the net present‑value benefits exceed costs (total benefits $132.8 billion, net benefits $78.6 billion under the central scenario). The analysis also estimates incremental consumer vehicle and home‑charger costs of $54.1 billion, partly offset by $36.7 billion in net energy savings.
• The rules include limited ways for companies to meet obligations without immediately selling that many ZEVs (early credits, charging credits and banking/trading), which affects how quickly different manufacturers must change their product mix.
• The amendments also lock in a specific version of U.S. regulatory text (the CFR as of February 28, 2022) for certain technical parts, so future U.S. rule renumbering or changes will not automatically change the Canadian text.