Canada postpones electric-vehicle rules as Carney backs auto sector

Carney delays electric car sales mandate

On Sept. 5, 2025, Prime Minister Mark Carney announced in Mississauga that his government would postpone Trudeau-era electric vehicle rules. These rules, set to take effect in 2026, require automakers to meet sales targets for zero-emission vehicles.

Carney said the change was meant to help Canada’s auto sector adjust to new trade conditions. He spoke from the floor of an aeronautical plant in Malton, Ontario, saying the government will remove the 2026 Electric Vehicle Availability Standard. He also ordered a 60-day review of existing rules.

Automakers welcome Ottawa’s sudden policy shift

The Canadian Vehicle Manufacturers Association responded right away on Sept. 5, 2025. In a public statement, it called the policy pause “an important first step” to ease financial pressure on carmakers. The group represents companies that build most of the cars sold in Canada.

The association stated that the electric vehicle mandate would create unsustainable costs and risk jobs and investment. They added that repealing the rules would bring immediate relief and maintain the Canadian auto industry’s competitiveness in the global market.

Rules from 2023 called for steep EV growth

The Electric Vehicle Availability Standard was officially introduced on Dec. 19, 2023. It required automakers to meet yearly zero-emission vehicle targets, starting in the 2026 model year. Light-duty cars, trucks, and SUVs were included.

The rule said 20 percent of new sales must be zero-emission by 2026. That share would increase each year until reaching 100 percent in 2035. Fuel-cell vehicles are treated as ZEVs, while plug-in hybrids earn credits within tightening caps and partial-credit rules.

Financial penalties for missing set targets

Under the original rules, carmakers failing to meet required targets faced hefty fines. Under the standard, shortfalls result in credit deficits; enforcement relies on administrative monetary penalties under federal law, rather than a fixed per-vehicle fine.

The regulation aimed to encourage automakers to adopt zero-emission vehicles more quickly. Meeting or beating quotas allowed companies to avoid heavy losses. Industry groups argued the fine system increased risks at a time when sales of electric vehicles were already slowing across Canada.

Additional support plans revealed by Carney

Alongside changes to the vehicle rules, Carney announced new measures on Sept. 5, 2025. These included a program to retrain 50,000 workers in various skills and changes to employment insurance, allowing long-term workers to receive extra benefits.

He also introduced a $ 5 billion strategic response fund to help businesses transition to new markets. Procurement rules would be changed to favor Canadian products. The Business Development Bank of Canada would increase maximum loan sizes to provide companies with more flexibility to invest.

Carney frames change as response to U.S. policy

Carney said Canada had to adapt to global shifts in trade. On Sept. 5, 2025, he explained that countries needed to “buy access” to the U.S. market through investments and domestic policy changes.

He noted that 85 percent of Canada’s trade with the U.S. was tariff-free. He claimed Canada had the lowest tariff rate of any country worldwide. Still, he warned Canada that it could not rely on the United States in the same way as before.

Automakers warned targets could not be met

On July 3, 2025, Brian Kingston, president of the Canadian Vehicle Manufacturers Association, told CBC News the mandate was impossible under current market conditions. He spoke ahead of a meeting with Carney about U.S. trade talks.

Kingston argued that Canada already had other policies in place to meet its emission goals. He said carmakers could not hit the electric and hybrid sales targets as written. Automakers were asking Ottawa to repeal the rules that required 100 percent zero-emission sales by 2035.

Passenger vehicles’ impact on total emissions

In 2023, transportation produced 23 percent of Canada’s greenhouse gas emissions. Since 1990, these emissions have increased by 33 percent. Passenger light trucks and freight trucks drove most of the rise.

Passenger vehicles alone accounted for approximately 12 percent of emissions in 2023. The Canadian Climate Institute modeled 60 net-zero scenarios and found that electric vehicles played a key role. Researcher Arthur Zhang said that EVs are one of the most reliable technologies for reducing transport emissions.

Electric vehicle sales dropped after rebates ended

In April 2025, electric vehicles made up 7.53 percent of new car sales in Canada. That was down sharply from late-2024 levels. The decline coincided with adjustments to federal and provincial incentives, as well as availability constraints, according to monthly sales data.

The federal government said a new rebate plan was being prepared. Until then, many buyers delayed EV purchases. Automakers reported that sales suffered as customers waited in line. Industry leaders said that this uncertainty made meeting the required zero-emission quotas even more challenging.

Rules aimed to boost car availability nationwide

The mandate was meant to fix the problem of low EV availability across Canada. In many provinces, buyers were unable to find electric cars to test drive. The only exceptions were Quebec and British Columbia, which already had their own mandates.

Plug’n Drive’s CEO, Cara Clairman, has emphasized that in-stock vehicles and test-drive access meaningfully raise EV adoption. She explained that if electric models are on lots, sales naturally rise, showing how supply strongly drives adoption.

Study finds emissions cut by eight percent

Economist Ross McKitrick modeled the long-term impact of the EV mandate. His study predicted that by 2050, Canada’s greenhouse gas emissions would be reduced by about eight percent compared to a base case without the rule.

He explained that the short-term impact would be negligible because cars typically stay on the road for years before being replaced. Over time, however, switching to electric models would make a significant difference. Without the rule, he said Canada would lose that eight percent cut.

Cost per tonne higher than carbon tax system

McKitrick also compared the mandate with the federal carbon tax, which Carney canceled in March 2025. He found the EV mandate was about 10 times more costly per tonne of emissions reduced.

However, he noted the relative cost would drop once gas cars and EVs reached equal prices. In some foreign markets, that parity was already a reality. This meant the expense of reaching emission cuts would decrease over time as technology and markets shifted.

Sales targets could raise gas vehicle prices

McKitrick’s analysis also said gas car prices could rise as automakers cross-subsidize EVs to meet quotas. This would lead to fewer total cars being sold. By 2050, Canada’s vehicle fleet size could shrink by about 0.6 percent.

Manufacturers could also earn credits early by overselling EVs or building charging stations. Credits helped reduce pressure from annual targets. Still, companies missing their goals, even with credits, would face penalties. The credit system was designed to provide flexibility in compliance.

Consumer savings claimed under 2023 rules

In December 2023, the government announced that EV owners could save 40 to 50 percent on maintenance costs compared to gas-powered cars. The Canadian Automobile Association reported that Canadians spend nearly $3,000 CAD yearly on fuel, while charging an EV costs only a few hundred dollars.

Ottawa estimated the rules would save Canadians $36.7 billion CAD in energy costs by 2050. The government also stated that the mandate would enhance public health by reducing air pollution from gasoline and diesel engines.

Grid impact of future electric demand modeled

The federal government projected that zero-emission vehicles would use about five percent of Canada’s electricity supply by 2035. By 2050, this demand is expected to rise to 9.5 percent. Officials said the grid could handle the increase.

They also noted that the environmental benefits would shrink if electricity generation were not green. To support adoption, automakers could earn credits by building new public charging stations with a capacity of at least 150 kW between 2024 and 2027. Stations must stay open for five years.

Slowing EV growth in the U.S. could soon impact Canada’s auto market. Full story in America’s EV slowdown might slam Canada next.

Automakers highlight charging and cost issues

When Ottawa introduced the rules in 2023, Hyundai Canada said program success depended on charging access and EV affordability. The company stated that more public charging sites were needed before adoption could expand nationwide.

They also said high vehicle prices remained a barrier. Over 50 zero-emission models were already for sale in Canada, with 41 more planned for 2024. Still, experts agreed that infrastructure and cost were the two biggest challenges for EV growth.

Mexico has surpassed the U.S. to become Canada’s leading auto exporter. Read more in Mexico overtakes U.S. as top exporter to Canada’s car market.

What do you think? Is it a smart move for the job market or a setback for the climate? Drop your comments below.

Read More From This Brand:

• How to plan long trips with an electric car
• Hagerty joins Aviva in offering new policies for young drivers
• How robotaxis could change the future of car ownership

Don’t forget to follow us for more exclusive content right here on MSN

If you liked this story, you’ll LOVE our FREE emails. Join today and be the first to get stories like this one

This slideshow was made with AI assistance and human editing.