Rapid technological advancements are bringing down the cost of electric vehicles, and as a result, global sales are growing at a rapid pace. By some estimates, EVs are on track to accelerate to 54% of new global car sales by 2040. This presents a critical opportunity to address air quality and pollution in congested cities. Seeing this opportunity, a growing number of countries and sub-national governments are taking bold actions to support the electrification of passenger cars. To avoid falling behind, Canada should seize the opportunity to participate in this movement.
In Canada, air pollution is responsible for 21,000 premature deaths every year and on-road transportation is responsible for about one-fifth of economy-wide carbon pollution. This makes on-road transportation a lynchpin for meeting Canada’s climate targets. While reducing overall demand and shifting to other low carbon transportation modes is critical, a transition to zero-emission vehicles (ZEVs) — meaning battery electric and hydrogen vehicles — in the remaining fleet has to be part of the solution, starting with passenger cars. In fact, Canada has signed on to the EV30@30 campaign, committing to reach a 30 per cent sales share for EVs by 2030. To get to that target, and any aspirations beyond that, we’ll need a combination of incentives, infrastructure investments, and regulations. For example, we’ll need measures that increase the market supply such as Quebec’s ZEV mandate, which requires retailers to sell a minimum percentage of ZEVs annually.
A global movement
A growing number of national and city leaders are stepping up to add an additional market signal to the mix, by announcing an end date for the sales of fossil fuel-powered cars. No less than six countries (India, Netherlands, France, Britain, Scotland, and Norway) have announced such dates, with target years ranging from 2025 to 2040. As an intermediary step, some countries have also adopted clean car targets, with China aiming to have 5 million electric cars on its roads by 2020 and Germany aiming for 1 million by the same year. Both of these countries are also working toward ending sales of fossil fuel cars.
While not reflected in law, these announcements are important because they give industry and consumers greater certainty about market trends to guide their investment decisions. In these countries, the announcements are part of comprehensive strategies to accelerate electrification of the passenger fleet. For example, Norway has the highest per capita number of all-electric cars in the world as a result of policies that make these vehicles the cheaper option. The most recent incentive is an exemption from a 25 per cent value added tax (VAT) on leasing a zero-emissions car. The Norwegian parliament has now set a goal that all new cars sold by 2025 should be zero- or low-emissions (plug-in hybrids will be permitted). Norway distinguishes itself from other countries by using a strengthened green tax system to achieve the goal.
Importantly, countries with major car manufacturing industries are part of the global trend and many car companies have been visibly supportive. France announced in July 2017 that it will end the sale of new gas and diesel-powered vehicles by 2040. The French industry is poised to take advantage of this opportunity, with French manufacturers Peugeot, Citroën and Renault ranking first, second and third on a 2016 list of car manufacturers with the lowest carbon intensity fleets. Beyond France’s borders, several of the major carmakers, including BMW and VW, have declared ambitious plans for producing electric cars, supported with grants from governments. Volvo announced in July 2017 that it would only make fully electric or hybrid cars from 2019 onward.
This global momentum is in stark contrast to this week’s indication from the U.S. EPA that it will reconsider its 2022-2025 greenhouse gas emissions standards for light-duty vehicles, initially adopted in 2012. While a lot of uncertainty remains about what the administration will or won’t do, the trends outlined above show the extent to which this intention — from the only nation that has signalled its intention to withdraw from the Paris Agreement — is out of step with how the automotive industry is evolving around the world.
What can Canada do?
Back in Canada, we have strong policy commitments and some interesting provincial initiatives, such as the earlier mentioned Quebec ZEV mandate, but a long way to go to increase the share of ZEVs in Canada. The Pan-Canadian Framework on Clean Growth and Climate Change commits to staying the course on vehicle emissions standards, a carbon price and a clean fuel standard that will all support electrification. Importantly, a national ZEV strategy is expected this year. In this strategy, we need substantive measures to increase ZEV supply and build out charging infrastructure, particularly where electricity supplies are clean. More work is needed to understand how our robust car and parts manufacturing sectors can position themselves to benefit from these global trends. A Canadian commitment to set an end date for the sales of polluting cars would be an appropriate way to complement these efforts and continue to demonstrate our climate leadership globally.
