Rush hour traffic on the Don Valley Parkway near Wynford Drive, in Toronto, on Feb. 24.Fred Lum/The Globe and Mail
Battle lines are drawn, as Ottawa crafts new regulations that will tackle road pollution by Canadian drivers – and go some distance toward shaping the country’s automotive market for the next decade.
Since Prime Minister Mark Carney announced in early February that his government would jettison his predecessor Justin Trudeau’s requirement that electric vehicles make up a growing share of all car sales, federal officials have been working toward a replacement policy supposed to be drafted by summer.
The policy is to be a renewed emphasis on tailpipe standards, which set industry-wide requirements for reducing greenhouse-gas emissions per vehicle and involve more flexible compliance approaches than just transitioning to EVs.
Canada has used that system for decades, but Mr. Carney signalled that it would be newly ambitious, aiming to ensure that by 2035 the average emissions from a new vehicle will be less than half what they are today. He also projected that the new rules would lead to 75-per-cent EV sales uptake by that date, down from the 100 per cent pursued by Mr. Trudeau’s policy.
But after previously lobbying for a re-embrace of the tailpipe approach because of their dislike for the EV sales requirements, industry representatives are now saying Ottawa’s new plans are also too aggressive.
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In interviews, Global Automakers of Canada president David Adams and Canadian Vehicle Manufacturers’ Association president Brian Kingston – who collectively represent the five multinational companies with vehicle assembly plants in Ontario – warned that hitting Mr. Carney’s proposed targets would still require a level of EV uptake for which the market isn’t ready.
And they suggested that Canadian manufacturing already reeling from U.S. President Donald Trump’s tariffs will suffer further if regulations are much stricter here than south of the border, where Mr. Trump is effectively scrapping efforts to curb road pollution entirely.
Those arguments are being echoed by Ontario’s Progressive Conservative government, which took a swipe at the federal plans in last week’s budget, warning that automakers in the province could “face disproportionate compliance costs, investment risks and logistical challenges.”
On the other side are environmental advocates trying to hold Mr. Carney to his initial commitments. They’re framing the regulations as a necessary step to avoid getting stuck on an island opposing a transition to a low-carbon economy still being undertaken globally.
“Canada must take steps to diversify away from the U.S.’s backwards approach and align with a world where 30 per cent of new car sales are expected to be electric this year,” said Joanna Kyriazis, director of policy and strategy at Clean Energy Canada.
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They’re also flagging the policy as a barometer of Mr. Carney’s commitment to national climate goals.
“There’s a particular significance in that it’s the first new climate-related policy of the Carney government,” said Canadian Climate Institute president Rick Smith, noting that other decisions so far have just been about modifying or dropping Mr. Trudeau’s plans. “So, we’ll be watching closely to ensure the details actually put Canada on track for the goal he set.”
Publicly, the government has not diverged from that goal.
But while a spokesperson for Environment Minister Julie Dabrusin said that the plan hasn’t changed since Mr. Carney announced it, neither side of the debate seems under the impression that it’s exactly carved in stone.
“I think they’re open to considering softening it,” was how Mr. Adams put it, while Ms. Kyriazis said that some of the language she’s been hearing out of government suggests the regulations could have a weaker impact than what Mr. Carney indicated initially.
Contributing to uncertainty about where Ottawa will land, and what consequences it will have, is that Canadian governments don’t have much experience writing these sorts of emissions rules despite long using them.
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Previously, the integrated North American market – and sufficient agreement between Ottawa and Washington about the merits of reducing pollution – meant that Ottawa just adopted tailpipe regulations set in the U.S.
In a way, it may still be trying to do so. There is a sense, among some of the industry and environmental advocates, that Mr. Carney’s government is using tailpipe rules planned under then-president Joe Biden – which were to run from 2027 to 2032 – as a starting point.
Those were supposed to get GHG emissions from an average of 170 grams per mile at the start of that period to 85 grams by its end; Mr. Carney, in the February announcement, suggested a decline to 74 grams by 2035. (The use of the grams per mile construct, rather than kilometres, might have been a tell about continued U.S. influence.)
Naturally, that possible modification of the Biden rules wouldn’t satisfy everyone on either side of the issue.
“As much as we’ve been advocating for a [tailpipe] approach, it has to be said that the Biden rules were going to be no easy task as well,” Mr. Adams said.
Conversely, the Pembina Institute recently released modelling that suggested the 74-gram threshold – let alone whatever softened target Ottawa might land on – wouldn’t be enough to achieve Mr. Carney’s purported target of 75-per-cent EV sales, which would require something closer to 40 GHG grams per mile.
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Whatever the exact Canada-only requirements, the bigger unknown might be how industry will meet them.
When needing to achieve synchronized U.S.-Canada standards, automakers to some extent designed vehicles accordingly. It’s highly unlikely they would do that just for the Canadian market, so their response would probably involve adjusting which cars they try to sell most here, versus stateside.
That prospect could, despite industry warnings about reducing consumers’ choice, also have its upsides.
For instance, Toyota’s and Honda’s Canadian assembly plants already make some of the more fuel-efficient gas-powered vehicles on the market. So, rewarding more of those cars being sold in Canada could help with the near-term imperative of bolstering domestic manufacturing amid the cross-border chaos.
From a consumer perspective, as the regulations ramp up, they could encourage automakers to prioritize selling attractively priced EVs here. They could even help attract EV manufacturing, with the promise of greater demand certainty.
That requires getting the trajectory of the policy just right, though, and sorting through lots of complexities. Among them are the extent to which Ottawa allows companies to carry over credits earned for exceeding their compliance obligations under the previous tailpipe system, which could cushion them from the new requirements.
Mr. Carney’s government is navigating all that under a self-imposed time crunch, since it took nearly a year into its mandate to decide what to do about the EV sales mandate and then gave itself months to craft the replacement.
That undertaking isn’t made easier by the fact that it’s happening at a time of massive upheaval for the auto industry, the energy transition and Canada-U.S. relations.
But how Ottawa lands, while making this unprecedented break from continental policy to set its own regulations, will be telling of how it more broadly intends to navigate the new realities in the long run.