Prime Minister Mark Carney announced a major restructuring of Canada’s electric vehicle policy this week, scrapping the sales mandate and introducing outcome-based emission standards as part of an overarching strategy to build the Canadian supply chain and position Canada competitively in next-generation vehicles.
The announcement covers considerable ground, ranging from consumer rebates to charging infrastructure to workforce support to geopolitics. What stands out most is the explicit integration of environmental policy and industrial policy.
The government has presented a clear comprehensive framework that would, if done right, keep the country on the path to electrification while building out the whole made-in-Canada EV supply chain.
The proposed approach would use trade policy as a stick to incentivize investment in the Canadian automotive and battery supply chain. It complements this with supply-side carrots for manufacturers in the form of Strategic Response Fund grants and tax credits as well as demand-side levers like the return of the consumer zero-emissions vehicle credit ($5,000 for an EV in 2026).
The ambition and scope of the strategy demonstrate that the government understands the global stakes of the challenge and the need to integrate multiple policy tools into a coherent framework.
Meeting the Current Moment
The Electric Vehicle Availability Standard was designed in a different moment. In 2018, policy conversations treated 30% EV sales by 2035 as ambitious. The Biden era accelerated global targets. Sales mandates seemed like the viable path to ensure adequate vehicle availability and send market signals for infrastructure investment. In 2022, EVAS was announced and pushed for 100% zero-emission sales by 2035—a target that reflected the policy ambitions of that period.
But the context has shifted significantly. Trump’s tariffs upended North American auto trade. Consumer adoption hasn’t matched early projections. EV costs didn’t come down as much as expected, keeping vehicles out of reach for many buyers. The auto industry lobbied hard against the mandate citing profitability concerns linked to compliance costs (effectively purchasing credits from Tesla, a company with no Canadian assembly plants). The political and economic sustainability of the mandate eroded.
More fundamentally, the EVAS didn’t connect to industrial strategy. It created environmental compliance obligations without building domestic capacity that would ensure Canada reaped the benefits of compliance. Canadian manufacturers were importing expensive battery components from Asia and passing those costs to consumers, while compliance credits flowed to foreign competitors.
It was a policy for a different moment.
The trend toward electrification remains clear. But how we navigate the transition determines whether Canada builds industrial capacity and benefit economically or manages decline. The government is now focusing on outcomes—emissions reduction and industrial capacity—rather than prescriptive process.
EVAS versus GHG Standards
The announcement replaces sales mandates with greenhouse gas emission standards targeting 75% EV sales by 2035 and 90% by 2040. The environmental ambition remains in the same ballpark to the EVAS targets. The difference is flexibility in how manufacturers meet those targets.
The GHG standards accomplish what EVAS aimed for: ensuring adequate vehicle availability and sending market signals for infrastructure investment. But they avoid the political liability of prescriptive mandates while creating space for industrial policy integration. EVAS provided clear signals about vehicle availability timelines, which allowed infrastructure investors and utilities to plan accordingly. The challenge now is ensuring outcome-based emission standards provide similar certainty for charging networks and electricity grid upgrades.
The critical issue is managing the near-term transition while maintaining long-term certainty. If your goal is to reduce 90% of fleet emissions, it’s clear that EVs are the path forward. But if your goal is 30% reduction in the near term, you can get there with regular hybrids.
The challenge is designing the parameters to ensure the emission standards actually drive the transition to EVs rather than allowing manufacturers to meet interim targets with hybrid technologies that don’t require the same infrastructure investments. The government will need to be careful. Too much flexibility and manufacturers optimize for near-term compliance with hybrids. Too little flexibility and you recreate the political problems that killed the EVAS.
The stringency curves, credit systems, and compliance pathways all matter. Getting these details right determines whether the standards actually drive the transition to EVs or simply create a more flexible compliance framework without changing investment behavior. There’s a real risk of designing a system that looks good on paper but doesn’t deliver the infrastructure investment signals or vehicle availability the policy claims to provide.
Incentives and Infrastructure Matter More Right Now
At this stage of market adoption, incentives and infrastructure matter more than regulations for driving consumer adoption. The reinstated rebates—$5,000 for battery electric vehicles and $2,500 for plug-in hybrids in 2026—address affordability barriers directly. The $1.5 billion for charging infrastructure removes range anxiety and supports the grid investments necessary for electrification.
These are the near-term drivers. Emission standards provide long-term certainty for manufacturers. But consumers make purchase decisions based on upfront cost and charging convenience. Getting the incentive and infrastructure deployment right matters more in this moment to drive adoption.
Within an industrial policy framework, the return of consumer credits provides much needed demand support for the Canadian industry. Aligning supply and demand supports is critical, and the rebalancing signalled here could form the basis of a successful policy mix.
Industrial Policy in Action
The new auto strategy attempts to connect emission reduction goals to industrial capacity development. Several elements demonstrate this approach:
- $3 billion from the Strategic Response Fund plus up to $100 million from regional initiatives to help the auto industry adapt, grow, and diversify to new markets.
- No price cap on Canadian-made vehicles for consumer incentives. While the rebates apply to vehicles with a final transaction value up to $50,000 for imports from countries with free trade agreements, Canadian-made EVs face no cap.
- Strengthening Canada’s automotive remission framework to reward companies that produce and INVEST in Canada. The idea being proposed is simple: companies that invest in Canada generate credits that allow them to import vehicles tariff-free into the Canadian market. Investment in Canada equals preferential market access. This is industrial policy in action. The government’s commitment to reward companies that “invest” in Canada mirrors the logic of our proposal to use supply chain investment credits within the EVAS framework. For this to work as industrial policy, “investment” needs to include the battery supply chain beyond just vehicle assembly.
- Workforce support. Work-sharing grants to prevent layoffs, employment assistance and reskilling for up to 66,000 workers, and a new workforce alliance of industry, labor, and training partners.
What We Need to Get Right
The auto strategy doesn’t exist in isolation. It needs to integrate with the Critical Minerals Strategy, the National Electricity Strategy, defence industrial strategy, and existing investment tax credits. The challenge is ensuring these strategies actually talk to each other rather than operating in parallel.
In terms of the success of this auto strategy, three implementation challenges will determine success or failure:
- GHG standards design: Parameters that actually drive EV adoption rather than allowing near-term compliance through regular hybrids, while maintaining the infrastructure investment signals that EVAS provided.
- Remissions framework design: Comprehensive definition of “investment” that includes the whole battery supply chain—extraction, processing, components, cells, R&D—not just final assembly.
- Cross-strategy integration: Deep coordination between auto strategy, critical minerals, electricity planning, defence industrial strategy, and investment tax credits will enable Canada to build at speed.
- Advanced manufacturing and productivity: The $3bn in SRF funds need to be deployed in a way that connects Canadian automaking to a broader movement toward advanced, automated manufacturing. To maintain competitiveness and drive productivity, Canadian manufacturing must evolve rapidly.
The government has set the right direction. The work ahead is translating policy framework into regulatory detail, and ensuring that implementation delivers the industrial capacity development the strategy promises. The next six to twelve months of regulatory design will be critical.