Mr. Chair and honourable members, thank you for the opportunity to appear on behalf of the Energy Futures Institute regarding the electric vehicle availability standard, better known as the federal EV mandate. I will address a number of pressing issues.
One is the declining market for EVs. Statistics Canada reports a significant drop in market share for EVs. In the first quarter of this year, zero-emissions vehicles—fully battery electric and plug-in hybrids combined—accounted for about 9% of new vehicle sales, down from 12.5% in the first quarter of last year. In the second quarter of this year, the news got worse, with the share slipping further to 8.6%. This represents a one-quarter drop in 12 months and should be a flashing warning sign for policy-makers.
No battery electric passenger vehicles are currently assembled in Canada. The one EV assembly line in our country—for GM's BrightDrop electric delivery van—was recently shut down due to weak demand.
Meanwhile, Toyota and Honda continue to assemble regular hybrid vehicles here in Ontario, such as the Honda Civic and CR-V and the RAV4, many of which I see around the streets of Ottawa, but under both the federal and B.C. mandates, these vehicles don't count towards zero-emissions targets and could face penalties of up to $20,000 per vehicle in B.C. and Quebec.
While Quebec recently announced plans to award partial credit for conventional hybrids, mandates penalize vehicles that are currently built in Canada while encouraging EV imports, strengthening U.S.-based automakers such as Tesla at our expense. Does this make sense?
Second, the compliance credit system transfers money out of Canada. The EV availability standard allows automakers exceeding the sales target to earn credits that can be banked or sold. Those below target must purchase credits. As mentioned under the B.C. and Quebec programs, they may pay large penalties of up to $20,000 per vehicle if they don't get enough credits. In practice, this directs millions of dollars to high-volume EV producers such as Tesla. We recommend redesigning the system so that credits reward Canadian industrial investment, rather than sending money out of our country.
The third issue is electricity demand and infrastructure. Studies estimate that fully electrifying Canada's passenger fleet will increase national electricity consumption by 7.5% to 15%. That equals up to 19 more Site C dams—that's the recently completed $16-billion project in northeastern British Columbia—or up to four more Darlington-sized nuclear power stations just for vehicles.
Recently, hydro-based provinces have been importing power. BC Hydro's latest annual report shows they imported 8,356 GWh, the equivalent to 14.7% of total domestic load, at a cost of $861 million. While that's down from 24% of imported power last year, which cost $1.5 billion, it still means that one in seven electrons used in British Columbia came from imported power, mostly from the U.S., where roughly 60% of electricity continues to come from fossil fuel generation. Hydro-Québec was also a net importer in 2023, bringing in about 7% of required supply. Manitoba Hydro has at times imported electricity in dry years. Let's not deepen our dependence on the United States, for either vehicles or electricity.
The fourth issue is consumer affordability and inequality. EV mandates risk deepening social inequality. An analysis by Jerome Gessaroli of the B.C. Institute of Technology shows that aggressive EV mandates can raise prices by 20% or more by restricting the supply of non-EV vehicles, with a ripple effect pushing up the prices of used cars that lower-income households rely on. Apartment dwellers also face greater challenges and costs, and rural Canadians face longer travel distances with less public charging infrastructure.
Here are our recommendations.
Rather than using mandates that dictate a specific technology, a proven approach is to continue using Canada's Motor Vehicle Fuel Consumption Standards Act, similar to the U.S. CAFE standards, requiring progressive improvements to average fuel economy across manufacturers' fleets. If some form of mandate remains, we recommend giving at least partial credit to regular hybrids and considering full credit if they're assembled in Canada. We should not allow a desire for the perfect to become the enemy of the very good.
Let's remove the cap on plug-in hybrids so that they can count for 100% compliance provided they have at least a certain minimum all-electric range, and 75 kilometres would cover the daily commute of more than 90% of Canadians. Let's reward Canadian value chain investment, such as critical mineral processing, batteries, charging networks and vehicle assembly, with compliance credits. Also, let's align any targets with infrastructure and affordability; consider changing the target years; require percentages to reflect reality; and work with provinces to ensure the grid keeps pace with EV-related growth.
In closing, vehicle electrification can support Canada's climate goals, but government policy needs to be affordable and aligned with industrial and energy reality.
Thank you.