A new report from the C.D. Howe Institute is sounding alarm bells about the federal government's electric vehicle mandates, warning they could inflict significant economic damage on Canada's auto industry while failing to deliver promised environmental benefits.
Unrealistic Targets Threaten Auto Sector
The study, authored by researcher Brian Livingston, comes as the domestic auto sector faces mounting pressure from U.S. tariffs. While Prime Minister Mark Carney's government has waived the initial requirement for 20% of new passenger vehicles to be electric by 2026, future mandates remain firmly in place.
The federal targets call for 60% of new vehicles to be electric by 2030, reaching 100% by 2035. Livingston's analysis suggests these increasingly aggressive timelines would prove even more economically destructive than the postponed 2026 target.
Concrete Costs and Consequences
Had the 2026 mandate proceeded, Canadian automakers would have faced hundreds of millions in new penalties. Manufacturers failing to meet the 20% target would have been forced to purchase over $200 million in EV credits from competitors.
The report outlines several direct impacts on consumers and manufacturers alike. Complying with the mandate would have required reducing sales of gasoline-powered vehicles by more than 400,000 units next year from an expected total market of 1.9 million vehicles combining both electric and traditional models.
This artificial constraint would have reduced consumer choice, driven up vehicle prices across the board, and significantly increased delivery times for all car buyers.
Competitive Disadvantage and Necessary Reforms
Livingston emphasized that Canada's domestic manufacturers would face particular hardship, needing to purchase credits from foreign-based EV makers and putting them at a significant competitive disadvantage in the North American market.
The researcher recommends major policy reforms, stating that "the waiver of the 2026 target is only a first step." He argues mandates must be recalibrated to reflect actual market conditions, where EVs currently constitute just 8% of sales, rather than imposing unrealistic government targets.
Among the recommended changes: including non-plug-in hybrids in the EV definition, suspending future mandates until trade negotiations with the U.S. and China are resolved, and directing proceeds from excess EV credit sales to government coffers.
The Carney government is currently reassessing the EV mandate program after postponing the 2026 target and is expected to announce its conclusions this winter.
