Canada Rolls Back EV Regulations but Boosts Incentives

Canadian Prime Minister Mark Carney said on Wednesday his government was scrapping a national electric-vehicle sales mandate, while boosting incentives for EV purchases and charging.

Carney said Canada will provide C$2.3 billion ($1.68 billion) to fund incentives of up to C$5,000 on EV purchases or leases by individuals and businesses, while also earmarking C$1.5 billion for EV charging. Canada will also provide up to C$3.1 billion for Canada's auto-manufacturing sector to help it make the costly transition to electric cars.

As part of the strategy, the partnership recently announced with China "will look to drive new Chinese joint venture investment in Canada and allow for a fixed volume of Chinese EV imports into the Canadian market," he said.

The measures follow the European Commission’s recent decision to dial back rules that would have effectively phased out sales of gas- and diesel-engine cars, due to the slower-than-expected pace of EV adoption by consumers. But Canada's fresh incentives offer far more support for EVs than the United States, which recently scrapped key tax breaks for battery-powered cars.

Automakers praised Carney’s announcement, which drew condemnation from some environmental groups.

Canada said it will introduce stronger emissions standards for the 2027-2032 model years, which it says will help achieve a goal of 75 per cent EV sales by 2035 and 90 per cent EV sales by 2040.

By contrast, the United States in September ended its longstanding $7,500 EV tax credit. Since President Donald Trump took office last year, the US has taken a series of steps to make it easier for automakers to sell gas-powered vehicles.

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Replacing Canada's EV sales mandate with stronger vehicle emissions standards "focuses on the results that matter to Canadians, while avoiding undue burdens on the Canadian auto industry," Carney said at a press briefing.

In 2023, under then-Prime Minister Justin Trudeau, Ottawa mandated that 20 per cent of all vehicles sold in 2026 be emissions-free. The push was unpopular with vehicle manufacturers, who said it imposed unsustainable costs.

Carney said he still considered Canada to be "a leader on climate change," noting the country would release its climate-competitiveness strategy in the coming weeks.

Sam Hersh of the advocacy group Environmental Defence called the new EV strategy “a huge setback.”

"This may be framed as short-term relief for automakers, but it will lead to long-term pain and put the industry on an inevitable path to decline," Hersh said.

The Canadian Vehicle Manufacturers’ Association praised Carney's action, saying "funding to support renewed purchase incentives and a robust charging infrastructure strategy will help continue to drive EV adoption."

Ontario Premier Doug Ford called the new strategy a "pivotal" moment as the country's economy and sovereignty are under attack by US President Donald Trump.

The advocacy group Consumer Choice Center also applauded Carney's EV announcement, saying "it was always wrong for the government to try to dictate to Canadians what type of car they ought to buy."

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The 27-member European Commission in December agreed to drop its ban on new combustion-engine cars from 2035.

Carney, citing the damage US tariffs have done to the highly integrated North American auto sector, is pressing the country to diversify its trade and boost domestic manufacturing.

Last November, the federal government scrapped a planned emissions cap on the oil and gas sector and dropped rules on clean electricity, moves designed to spur investment in energy production.

Canada will maintain counter-tariffs on auto imports from the United States and is looking at ways to encourage Canada-based manufacturers to boost production and investment.

Last month, Carney struck an initial trade deal with China to slash tariffs on EVs. Canada will allow up to 49,000 Chinese EVs at a tariff of 6.1 per cent on most-favored-nation terms, with the quota set to gradually increase to about 70,000 in five years.

Carney said Chinese EVs would not be eligible for government incentives.

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