Ottawa’s EV Mandate to Cost Consumers $17.4 Billion: Government Analysis

A Tesla Model S sedan is plugged into a Tesla Supercharger electrical vehicle charging station in Falls Church, Va., on Feb., 13, 2023. Saul Loeb/AFP via Getty Images

Regulatory amendments to make all new light-duty vehicles sold in Canada zero-emission electric by 2035 is estimated to cost consumers $17.4 billion between 2024 and 2050, government documents show.

The regulatory impact analysis statement, released Dec. 21, says that this switch to zero-emission electric vehicles (ZEVs)—for passenger cars, SUVs, and light trucks—is expected to cost Canadian consumers $54.1 billion but let them save $36.7 billion in energy costs. That represents a net cost of $17.4 billion.

“The Amendments are estimated to have incremental ZEV and home charger costs of $54.1 billion from 2024 to 2050 for consumers who switch to ZEVs in response to the Amendments,” reads the statement. “These same consumers are expected to realize $36.7 billion in net energy savings over the same time period.”

The statement adds that the resulting reductions in greenhouse gas (GHG) emissions are valued at $96.1 billion in “avoided global damages.” It says that along with the $36.7 billion in energy savings, the total benefits would be $132.8 billion, and thus Canadians will see net benefits of $78.6 billion.

Environment Minister Steven Guilbeault announced Dec. 19 that Canadian vehicle manufacturers must ensure at least 20 percent of new light-duty vehicles offered for sale in the 2026 model year are fully battery-powered electric vehicles (BEVs), plug-in hybrids (PHEVs), or fuel cell vehicles (FCVs). That percentage will rise to 60 percent by 2030 and to 100 percent by 2035.

Automakers will be issued credits for the ZEVs they sell. Manufacturers that sell more ZEVs than needed to meet each year’s target will be able to bank those credits to meet targets in future years or sell them to companies that did not sell enough. Auto manufacturers can also cover up to 10 percent of the credits they need each year by investing in public fast-charging stations.

According to the statement, there is an “urgent need to address climate change” by moving to a low-carbon economy, and passenger cars and light trucks account for about 40 percent of the Canadian transportation sector’s emissions. “Reducing emissions in all sectors, including transportation, is necessary to tackle climate change and reach the Government of Canada’s emission reduction target of 40 percent to 45 percent below 2005 levels by 2030 and net zero by 2050,” the statement says.

Costs and Savings

Breaking down the $54.1 billion in estimated cost, the analysis statement says it consists of $38.5 billion for the ZEV chargers, $15.5 billion for the vehicles themselves, and $2.6 million for administration.

“It is expected that these incremental costs will be passed onto ZEV purchasers. These consumers are also expected to incur ongoing costs associated with charging their ZEVs instead of paying liquid fuel costs for non-ZEVs,” the document states. The federal government is not expected to incur any additional costs “beyond the need to inform stakeholders of the Amendments.”

The statement says that although consumers will incur costs to charge their vehicles, savings will come from ZEVs being more energy-efficient than traditional gas- and diesel-powered vehicles.

It cites the U.S. Department of Energy’s estimate that non-ZEVs use only 12–30 percent of their energy from fuel to move, as they lose most of the energy from the fuel they consume to inefficiencies and to powering accessories. Meanwhile, ZEVs are estimated to be 60–73 percent efficient. The statement adds that regenerative braking—which captures kinetic energy that would have otherwise been wasted when a vehicle decelerates—could increase the efficiency of ZEVs to 77–100 percent.

While the total increased costs of buying electricity over the timeframe would amount to an estimated $63.3 billion, these costs are expected to be offset by savings on liquid fuel, estimated at $100 billion. This results in savings of $36.7 billion, according to statement.

The analysis also says the net energy savings will rise over time as more ZEVs are put into operation. Meanwhile, the annual costs of purchasing more ZEVs and chargers will increase from 2026 to 2035 and then “fall in subsequent years as the number of baseline ZEVs increase annually.”

‘Social Cost of Carbon’

The statement says the GHG emissions reduction resulting from the switch to ZEVs amounts to a cumulative 362 megatonnes, which would help Canada meet its climate commitments for 2030 and 2050.

To calculate the benefits, the quantity of GHG emissions avoided each year was multiplied by Environment and Climate Change Canada’s schedule of the value of the “social cost of carbon“ (SCC). Guidance on the SCC, released in April, measures the impact that carbon, methane, and nitrous oxide have on things like food production, human health, energy systems, disaster repair bills, and property values.

While a previous analysis estimated that by 2020 the SCC would be $54 a tonne, Ottawa’s updated model from April estimated that cost to be closer to $247, set to rise to $294 by 2030.

Mr. Guilbeault said in September that Canadians were paying a “very high price tag for the impacts of climate change” and that the federal government’s carbon tax was “one of the best ways to fight” it.

The carbon tax currently adds more than 14 cents to a litre of gasoline and, despite Ottawa giving out rebates to Canadians, the Parliamentary Budget Officer has said most families will see a “net loss” from the carbon tax.

The Dec. 21 analysis statement says that while the medium-sized BEV will become less expensive than its non-ZEV equivalent by 2033, three other ZEV types will not. Battery electric light trucks, medium-sized PHEVs, and PHEV light trucks will be more expensive than their non-electric equivalents by 2035, it says.

The statement also warns that “northern communities are expected to face more difficulties with the transition to ZEVs” because of colder temperatures that may affect the range of battery-powered electric vehicles. Moreover, northern and remote communities, where electricity costs are higher, may prefer PHEVs.

In addition, as ZEVs tend to be heavier than non-ZEVs, due to the weight of the batteries, this could mean accidents could become more fatal, the statement says.