Canada’s electric-vehicle policy is entering an unusual transition: Ottawa is moving to dismantle its existing national sales mandate before the regulation intended to replace it has been written and published. A federal proposal released in the Canada Gazette on August 15 would remove the Electric Vehicle Availability Standard, which had set steadily rising zero-emission vehicle requirements through 2035.
The government insists electrification remains the destination. Its new target is for EVs to represent 75% of new sales by 2035 and 90% by 2040, supported eventually by tougher vehicle-emission standards. But those replacement rules are still being developed. That leaves Ottawa attempting to give automakers immediate regulatory relief while asking Canadians to trust that a second, yet-to-be-published framework will eventually deliver much of the environmental progress being surrendered by the first.
Ottawa Has Started the Repeal Process
The August 15 proposal is more consequential than another delay to the EV mandate. Environment and Climate Change Canada is proposing to remove the zero-emission vehicle requirements themselves from federal regulations. Once finalized, automakers and importers would no longer have to meet the EV-specific sales percentages or calculate the compliance units and deficits attached to them. The government describes the repeal as an initial step toward a new regulatory system rather than an abandonment of vehicle electrification altogether.
Importantly, the repeal is not yet final. It was published in Part I of the Canada Gazette, beginning a 75-day public-comment period. The federal environmental registry lists the consultation as running from August 15 through October 29, 2026. The amendments would take effect only after being finalized and registered. For automakers planning future product allocations, however, Ottawa’s direction is already unmistakable: the government intends to remove the EV-specific sales obligation before introducing its replacement. The political decision was announced in February; the regulatory machinery needed to carry it out is now moving.
The Rule Being Dismantled Was Much More Than a 2035 Ban
Canada’s Electric Vehicle Availability Standard was frequently summarized as a requirement for all new vehicles to be zero-emission by 2035, but the regulation contained a much more gradual schedule. It called for ZEVs to make up 20% of a manufacturer’s applicable 2026 fleet, rising to 23% in 2027, 34% in 2028, 43% in 2029 and 60% in 2030. Requirements would then climb to 74% in 2031, 83% in 2032, 94% in 2033, 97% in 2034 and 100% from 2035 onward.
The system also had flexibility. Automakers exceeding requirements could bank or trade compliance units, while certain plug-in hybrids could earn partial or full credit. Manufacturers could generate a limited number of credits through investments in qualifying fast-charging infrastructure. The policy therefore did not mean every dealership had to sell exactly the prescribed percentage of battery-electric cars in a particular calendar year. Ottawa’s new proposal would dismantle that entire EV-specific compliance structure. Vehicle greenhouse-gas regulations would remain, but the mechanism designed specifically to guarantee an increasing minimum supply of ZEVs would disappear.
Why Ottawa Says the Market Changed
The federal government argues the economic circumstances of 2026 bear little resemblance to those prevailing when the EV mandate was finalized in 2023. Canada’s auto industry is extraordinarily integrated with the United States: Ottawa says more than 90% of Canadian-made vehicles and roughly 60% of Canadian-made auto parts are exported south. Since April 2025, Canadian vehicles have also faced a 25% U.S. tariff on their non-U.S. content, although U.S. content in CUSMA-compliant vehicles is exempt. Those pressures have made competitiveness and manufacturing employment central to the government’s argument.
Consumer demand has also weakened. Statistics Canada reported that ZEVs accounted for 9.5% of new registrations in 2025, down from 14.6% in 2024. Battery-electric registrations fell 43.1% year over year, while conventional hybrids rose 36.1%. Federal data indicate ZEV sales began recovering in early 2026, averaging roughly 10% from January through April and reaching about 12% in March. That rebound was still well below the original 20% requirement for model-year 2026 vehicles, strengthening industry arguments that regulation had moved ahead of near-term demand.
The Replacement Exists as a Goal, Not Yet as a Regulation
Prime Minister Mark Carney’s February automotive strategy set out the broad destination for the new system. Instead of forcing manufacturers to reach specific percentages of zero-emission vehicles, Ottawa plans to introduce stronger fleet-wide greenhouse-gas standards. Manufacturers would have greater freedom to determine how to hit those emissions requirements using battery-electric vehicles, plug-in hybrids, conventional hybrids, efficiency improvements and potentially other technologies. Ottawa says the standards will be designed to put Canada on a path toward 75% EV sales in 2035 and 90% in 2040.
What is missing is the actual rulebook. The August regulatory filing explicitly says the stronger Canada-specific emissions standards will require a future regulatory amendment. Environment and Climate Change Canada also says a separate consultation will be conducted for that proposal. As of August 20, the replacement standards—including their exact stringency, compliance formula and implementation details—have not been published. Even the government’s estimate of how many emissions the future standards will eliminate is currently illustrative; Ottawa says the precise impact will be calculated when those regulations eventually appear in the Canada Gazette.
Automakers Gain Flexibility, but the Consumer Math Is Complicated
For automakers, the attraction of repeal is straightforward. During Ottawa’s earlier review, most traditional manufacturers preferred performance-based greenhouse-gas standards to mandatory EV percentages. Industry associations argued that affordability, charging access, weaker demand and U.S. policy changes made the existing timetable increasingly difficult. The Canadian Vehicle Manufacturers’ Association welcomed the government’s February strategy, saying repeal would provide greater policy stability while supporting continued electrification through incentives, charging infrastructure and revised emissions rules.
For drivers, the trade-off is less simple. Ottawa estimates that fewer EV purchases could avoid approximately $57.6 billion in additional vehicle and home-charging costs between 2026 and 2050 compared with leaving the original mandate intact. But the same analysis estimates consumers would give up roughly $53.8 billion in energy savings because more gasoline and other liquid fuels would be used. Maintenance is another factor the headline numbers do not fully capture. The government cites research estimating an EV can save about two cents per kilometre in maintenance—or roughly $320 annually for a vehicle travelling 16,000 kilometres. Those maintenance savings were not monetized in Ottawa’s central cost-benefit total.
Ottawa’s Own Analysis Attaches a Large Climate Cost
The most striking criticism of the repeal comes from the government’s own regulatory impact assessment. Ottawa estimates that eliminating the EV mandate without immediately replacing its emissions benefits would produce approximately 326 megatonnes of forgone greenhouse-gas reductions between 2026 and 2050. Using the federal social cost of carbon, those lost reductions are valued at approximately $94.2 billion in potential global climate damages. After balancing the costs and benefits included in its model, the government estimates a net societal cost of approximately $90.3 billion.
That figure does not mean Ottawa expects the full damage to occur under its ultimate policy. The government models an illustrative future in which stronger emissions standards delivering 75% EV sales by 2035 and 90% by 2040 could preserve about 145 megatonnes of the reductions otherwise lost. But that still depends on rules not yet written. Ottawa also projects higher air-pollutant emissions under repeal compared with keeping EVAS: by 2050, light-duty-vehicle nitrogen-oxide emissions could be 98% higher and carbon-monoxide emissions 163% higher than under the original mandate scenario. The associated health effects were not assigned a dollar value.
Canada’s EV Slowdown Is Not the Global Story
Canada’s falling EV share helps explain Ottawa’s policy pivot, but it would be misleading to interpret the domestic slowdown as evidence that the global transition has stalled. The International Energy Agency says more than 20 million electric cars were sold worldwide in 2025, a 20% increase from 2024. EVs represented approximately one-quarter of all new cars sold globally. China reached an electric sales share of almost 55%, while Europe also posted strong growth as manufacturers responded to tighter emissions requirements and renewed incentives in several markets.
The picture remained uneven in 2026. Policy changes weakened demand in the United States and China early in the year, contributing to a global first-quarter decline. Sales then rebounded sharply during the second quarter, and the IEA reported year-over-year EV growth in more than 90 countries during the first half. Its updated forecast expects EVs to account for about 29% of worldwide new-car sales in 2026. Canada is therefore navigating two trends at once: a difficult North American market shaped heavily by U.S. trade and regulatory policy, and a global automotive industry that is still moving rapidly toward electrification.
What Happens Before the New Rules Arrive
The immediate next step is regulatory rather than technological. Canadians, automakers, environmental organizations and other stakeholders can submit comments on the proposed repeal during the 75-day consultation. Ottawa would then need to finalize and register the amendments before the EV-specific requirements formally disappear. Only afterward—or potentially while that process is being completed—will attention turn to the separate proposal containing the stronger Canadian greenhouse-gas standards that are supposed to replace them.
Other parts of Ottawa’s EV strategy are already operating. The federal Electric Vehicle Affordability Program began February 16 with $2.275 billion over five years. It currently offers incentives of up to $5,000 for eligible battery-electric and fuel-cell vehicles and up to $2,500 for qualifying plug-in hybrids, with payments scheduled to decline over time. Ottawa has also committed $1.5 billion through the Canada Infrastructure Bank toward charging and hydrogen infrastructure. Those programs may help support demand, but they do not substitute for enforceable fleet-emission rules. Until the replacement regulation arrives, Canada will know what Ottawa wants to remove in considerably greater detail than what it plans to put in its place.
