ZEV Sales Mandate for New Light Vehicles

Summary#

This is a proposed amendment to the Passenger Automobile and Light Truck Greenhouse Gas Emission Regulations that would require a rising share of new passenger cars and light trucks sold in Canada to be zero-emission vehicles (ZEVs). The targets start at 20% in model year 2026 and rise to 100% by model year 2035; the proposal is from Environment and Climate Change Canada and was published on December 31, 2022. Comments were invited for 75 days from that publication — this is a proposal, not a final rule.

What it does#

• Sets annual ZEV sales targets for manufacturers/importers for each 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 credit system:
  • Companies that exceed their target earn credits; those that fall short get deficits.
  • Credits can be banked or traded, with limits on how long they can be used (banking ends for credits after the 2035 model year).
• Limits how plug-in hybrid electric vehicles (PHEVs) count toward targets:
  • PHEVs are given partial credit depending on their all-electric range (for example, PHEVs with 80+ km range count as one ZEV).
  • Maximum PHEV contribution to a company’s target is capped (e.g., 45% in 2026, 30% in 2027, 20% from 2028 on).
• Adds a flexibility option to create credits by funding ZEV infrastructure:
  • Companies can pay into eligible ZEV activities (charging, hydrogen stations, related electricity infrastructure).
  • Each created credit is based on $20,000 of contribution (indexed to inflation).
  • The amount of this offset is capped (starts at 2% of a company’s fleet in 2026, rises to 6% by 2030, and remains 6% through 2034; not available after 2034).
• Makes technical and administrative updates to the pre-2026 greenhouse gas rules and to reporting requirements (more detail must be included in end-of-model-year reports).

Who's affected#

• Automakers and importers of passenger cars and light trucks — they must meet the annual ZEV targets or use credits or other flexibilities.
• Car buyers, especially those shopping for new vehicles between 2026 and 2035 — the analysis expects higher upfront costs for ZEVs early on and lower operating (fuel) costs over time.
• People in rural and northern communities and low-income households — the proposal notes these groups may face particular challenges (less charging access, cold-weather range issues, affordability).
• Charging and hydrogen infrastructure businesses, electricians, and related supply-chain firms (demand for chargers and grid upgrades could grow).
• Businesses that currently rely on fuel sales (for example, gas stations) — they may see less fuel demand and shifting business opportunities.
• Provincial and territorial governments and municipal planners — they will be involved in infrastructure and equity concerns.
• Some technical or administrative stakeholders (testing labs, regulators) because of added reporting and conformity checks.

If a specific group you care about is not listed, the source does not clearly say whether it will be affected.

Why it matters#

• It accelerates the shift from gasoline and diesel cars to electric and other zero-emission vehicles, with the goal of reaching 100% ZEV sales by 2035.
• The government’s analysis estimates big changes in costs and benefits for people who switch to ZEVs:
  • Incremental ZEV and home-charger costs of $24.5 billion (2026–2050) and net energy savings of $33.9 billion, giving projected net benefits of $28.6 billion.
  • Estimated cumulative tailpipe greenhouse gas reductions of 430 megatonnes (Mt) of CO2e, valued at $19.2 billion in avoided global damages.
• Real-life impacts to watch for:
  • Higher upfront prices for many new ZEVs at first, offset over time by lower fuel and some maintenance costs.
  • Growing demand for charging and grid capacity, and pressure to build public chargers where they are needed most.
  • Equity concerns: low-income and remote households may need extra support to access ZEVs and chargers.
  • Industry changes: manufacturers will shift model offers and supply chains; service and fuel businesses may need to adapt.
• Note: this was a proposed regulation (Part I notice) and not yet law as of publication; the government sought public comments and expected other federal programs (purchase incentives, infrastructure funding) to work alongside these rules.