Nate Wallace is clean transportation program manager at Environmental Defence
Around North America (and soon the United Kingdom), a growing number of provincial and state governments have started requiring carmakers to meet annually increasing zero-emissions vehicle (ZEV) sales targets.
In Canada, the federal government has indicated it intends to introduce such a regulation – called a Clean Car Standard – with the hope of phasing out the sale of new gasoline cars by 2035. Meanwhile, car industry lobbyists have been pushing back. The auto industry likes to talk a good game about its recent ZEV investments, usually with the implication that regulating them isn’t necessary. Car industry lobbyists argue that, rather than regulating, Canada can achieve the same results by increasing the federal purchase incentive for ZEVs to $15,000 from $5,000.
We decided to put their proposal to the test in a new report Environmental Defence and Équiterre worked on with the Sustainable Transportation Action Research Team at Simon Fraser University (SFU). The expert team at SFU modelled it, and even when the subsidies were offered all the way up to 2035, ZEVs only reach 65% of new car sales – massively missing the 100% sales target for that year. It’s higher than business as usual, which will only get us to 39% by 2035 – but it just isn’t enough.
The automaker’s recommendation to triple incentives up to 2035 would also cost the federal government more than $54 billion, while the proposed regulation costs virtually nothing. With a Clean Car Standard, the cost of transitioning to electric vehicles is instead shifted onto the auto industry, resulting in a slight decline in profits compared to business as usual.
This should give you a hint as to why automakers are so vocally opposed to this proposal. The auto industry has a financial stake in slowing the transition to electric vehicles, because it makes more money by selling gasoline-fuelled cars.
Our analysis also reveals something far more sinister. Automakers actually capture a significant portion of the value from ZEV purchase incentives by hiking prices. That is, instead of passing the full value of the incentive onto the consumer, they increase the price markup on their electric vehicles to pad profits and slow ZEV adoption.
Furthermore, we found that of the $54 billion cost to taxpayers from a more generous subsidy, automakers would be able to pocket $10 billion through widening their profit margins on these vehicles, a process recently coined as “greedflation.” Here’s the kicker. They actually use a portion of these funds to reduce prices for gasoline-fuelled cars instead, and this is one of the reasons why the incentives approach fails to meet sales targets.
Championing increased incentives is a great way for automakers to appear to be climate champions while lobbying against regulations that would actually make them clean up their act.
The regulation also delivers more affordable electric vehicles – without subsidizing the auto industry. We found that a Clean Car Standard can lead to more than a 20% reduction in electric vehicle prices for the average consumer. This is because automakers would have to bring affordable models to the market and manufacture at scale to meet ZEV sales targets, instead of their current focus on producing a low volume of high-priced luxury models.
The Clean Car Standard results in Canada hitting every sales target outlined in the federal government’s emissions reduction plan, cumulatively reducing carbon emissions by 135 million tonnes by 2035. To put that into perspective, that is equivalent to 57.5 billion litres of gasoline not burned – enough to fill 23,000 Olympic-sized swimming pools.
Automakers have a responsibility to address the role they play in contributing to climate disaster. The first step is requiring them to live up to their own green pledges and deliver more affordable electric vehicles to Canadians, even if it means slightly less for their bottom lines. By shaving the price of a ZEV down by 20% while helping Canadians escape from high gas prices, it’s clear that a Clean Car Standard is both a win for the climate and consumers’ pocketbooks.