The Government of Canada is working on a new Canadian Zero-Emission Vehicle Strategy to be published this year. We have been wondering if this might answer some of the issues that surround the slow uptake of EVs and PHEVs in Canada. In this search we found the “Canada’s ZEV Policy Handbook” This was a really interesting read and but, and this is a a big but, it promotes perhaps the slowest possible transition away from fossil fueled cars to ZEVs. Based on the idea that we should have an ZEV market share of 30% by 2030 and 40% by 2040, by which time India, China, much of Europe and several other jurisdictions will be at 100% market share, by virtue of banning fossil fueled vehicles. Cities across the world are considering banning all fossil fueled vehicles as soon as 2030.
We hope this lack of ambition will not be reflected in the new Strategy. Slow progress will ensure that Canada becomes a dumping ground for fossil fuel vehicles as the rest of the world moves into an electrified future. This will lead to damage to the environment, our pocketbooks and to the auto industry.
Canada is in 20th place for ZEV sales, with less the 1% market share. If we take a look a the electricity grid in the the same group of 20 countries, Canada has the 6th cleanest, with less than 20% of our electricity coming from GHG producing sources.
To put it another way, an EV in Canada is a far more effective way of reducing GHG emissions than an EV in most other countries. It is to our shame that we are not pulling on this very large climate change lever as hard as we possibly can.
It is worth taking a look at the countries that are doing well. Norway, Iceland and Sweden share much of our climate and Norway and Sweden also have a similar population density to Southern Canada.
So climate and population density are not valid excuses, so why are we where we are?
We think a small part of the reason is that Canada is a very conservative country, change happens slowly and we tend to look south for our cues rather than looking to the leaders in an area for ideas. That said, we think the larger part of this slow progress is due to the simple fact that the fossil fuel and automobile sectors will lose out as we transition from fossil to electric vehicles.
In the end state we will have vehicles that cost a lot less than the current fossil-powered ones. As battery costs fall, the simplicity of EVs will take over and manufacturing costs will be less than those of fossil vehicles in the next couple of years. Maintenance costs for EVs are much lower than fossil cars due to very few moving parts.
Car manufacturers are faced with consumers paying less per vehicle, Dealers will be doing less warranty work, oil companies will be selling far less gas and diesel.
Whilst powerful lobbies lose, society wins in this equation: less GHG emissions, less pollution, less particulates and less noise. Individuals win: lower costs of purchasing, far lower operating costs. The power companies win: load on the grid is spread and evened out making management easier, sales are higher, opportunities arise to gain a big advantage from vehicle to grid, to allow EVs to supply power during sudden peaks in demand.
Politics is about the art of the possible and we are sure that car manufacturers and oil companies are lobbying hard to ensure that Canada is the last country to move away from the status quo.
So what might be possible, even in a climate where the government is being told it is too hard a change to make?
This is what is possible for the UK market. Click on the graphic to see a great discussion. We can shift this 2-3 years to the right for a view of what we can do in Canada.
Given that Norway will be above 50% market share for EVs and PHEVs in 2018 we think it is important that Canada set a strong target. 30% by 2030 is not going to address our Paris commitments and will result in consumer demand being ahead of supply and infrastructure.
Proposal: Target 50% ZEV market share by 2028
PHEV market share would be above and beyond the 50% level.
A 50% market share by 2028 will allow Canada to achieve close to 100% electrification by 2050 whilst providing time for infrastructure build out and industry to adapt.
Currently it is not possible to go to a car dealer, test drive an EV and then pick up a new EV a few days later. Waiting lists for EVs are long, 6-12 months depending on the manufacturer. Current Provincial measures have been enough to generate far more sales than the car companies are willing to deal with. Supply management is key to ensuring the availability of EVs from all companies across all vehicle types.
Today there are EVs and PHEVs in most categories, but few choices within a category, providing almost no choice for consumers.
Quebec has introduced a ZEV mandate to try to ensure that supply will be available for the future. Quebec has joined Connecticut, Maine, Maryland, Massachusetts, New Jersey, New York, Oregon, Rhode Island, and Vermont in adopting California’s Air Resource Board (CARB) ZEV Mandate. The CARB mandate is a points system, you get a maximum of 1.3 points for a PHEV and a maximum of 4 points for a pure EV depending on range. For example a Chevy Volt PHEV gets 0.83 points while our e-Golf would get 1.75 points. The CARB requirements are not very ambitious, aiming for about 8% market share in 2020. To meet the 50% goal by 2028 it might be necessary to go beyond CARB’s requirement in 2025 and beyond by reducing the points for PHEVs and increasing the points requirement to get closer to the change required to meet 50% market share.
Proposal: Adopt CARB ZEV Mandate with enhanced measures from 2025
Additional measures may be required, but these should be considered in concert with provincial programs.
Quebec, Ontario and BC have direct subsidies that have been effective in creating demand but, at least in Ontario created a lot of work and delays in processing individual claims. Any measures aimed at large scale adoption of EVs have to be simpler to implement.
Ontario has proposed removing the provincial portion of HST on all EVs. This mirrors the key measure used so successfully in Norway. With HST at 13% in Ontario compared with 25% in Norway, this lever is not very long, especially if it is limited to the provincial portion. Removing the federal GST portion of 5%, nationwide, would send a strong signal to consumers. This would remove about $2000 from the cost of the average car.
If we are aiming for 50% market share this would create a serious hole in the budget, so we propose increasing the GST portion as the market share rises. GST should increase by 1% each time EVs achieve another 10% market share By the time the 50% target is reached, GST would be restored to the normal level and would hold at that level. PHEVs would not be eligible for the GST reduction.
An important principle for climate change is polluter pays. This is a hard sell for politicians but there is a case to be made for increasing taxes on fossil powered vehicles. We propose that GST on new and used fossil powered vehicles be increased by 0.25% per year until the rate reaches 8%. Each increase will add about $90 t0 the cost of an average car. Combined with the GST relief on pure EVs, this would generate about a $1B per year over time. This revenue should be used to pay for transitional costs such as charging infrastructure, electric buses and garbage trucks etc. PHEVs would maintain the 5% rate.
Proposal: Reduce GST to 0% on pure EVs, reinstating the 5% rate in stages as market share increases. Increase the GST on fossil powered vehicles by 0.25% per year until the rate reaches 8%. Plug-in Hybid EVs should continue to be taxed at 5%.
Canada’s gas and diesel is far cheaper that the G7 average (73% of the average in 2012) Federal excise tax on gas has been 10c/l since 1995 and 4c/l on diesel since 1987. Businesses do not pay GST, it is always passed on to the consumer. Excise tax is paid by all, not just individuals. Increasing excise tax on fuels sends a clear signal to the larger GHG emitters. The excise tax should be raised gradually to give businesses time to move away from fossil fuel. Again this increase in tax should be used to fund electrification.
Proposal: Increase excise tax on gas by 1c/l per year, increase excise tax on diesel by 2c/l per year. This increase should not stop until all 2050 climate change goals are achieved.
Auto Industry Support
Canada spends a lot of money supporting the auto industry. Canada’s auto industry is critical to the economy of Canada and Ontario. Local production and export of vehicles comes close to balancing imports. Canada and Ontario subsidise key projects for all 5 manufacturers. In 2017 Ontario and Canada each invested $100M in an engine plant for Ford This was an investment in the past, and moving forward we need to be clear that we will only provide support for the future. In 2017 over $600M was promised to support the auto industry and not a penny went to moving the industry away from fossil fuels. Under the proposals here, Canada’s electrification rate will lead the US, providing opportunities for Canadian factories to benefit as the US catches up.
Proposal: Any federal auto subsidies should be to support the move away from fossil fuels.
Consumers lack information about the advantages of EVs and the real costs of owning a fossil fuel vehicle. To reach the 50% goal, consumers need to be informed and educated. We can start by forcing manufacturers to compare the emissions and costs of running a fossil powered vehicle with an EV and PHEV in the same class. This should be on the window sticker and in the brochures. This would provide a direct message to the consumer that a fossil powered vehicle is going to cost $2000 more per year to run and emit 4-5 tonnes of GHG per year.
When politicians talk about climate change the language used is often weak and shows a lack of real leadership. We need to lead the public with clear messaging. We need to look at driving a fossil powered vehicle in the future much as we do smoking in public. There will be a time when driving a fossil car will be socially unacceptable.
Over time, governments moved from supporting tobacco companies to telling the public that they should consider giving up smoking. This moved to clearer “Smoking Kills” messages and eventually to government suing tobacco companies for the health costs of smoking. Today, people still smoke, but how many in a particular country depends largely on government action.
The transition from fossil fueled vehicles to EVs will mirror this process, this will require that politicians be both honest and knowledgeable about climate change and the impact of not doing a lot more than we are planning today.
We hope that Ministers Garneau, McKenna and Prime Minister Trudeau understand that we have to move forward with a concerted effort to educate, advise and support consumers in making the right choices.
If you have found this post interesting, can you support this plan by emailing your MP and Minister Garneau, our minister of Transport?
Click here for a starting point for your email, you can find your MP’s email address here. The email includes a BCC to our address so we can see your response. Add your MP to the CC and write your own thought on the subject. Our experience is that Minister Garneau’s staff read the emails and respond, you can make a real difference to the conversation.