Canada proposes rebates for electric cars, voluntary sales mandate

The Trudeau government is proposing to help subsidize the cost of buying an electric car by up to $5,000, but has declined to establish a more stringent sales mandate, opting instead for voluntary targets.

Finance Minister Bill Morneau's 2019 budget, delivered March 19, proposes to spend $300 million over three years to introduce a nationwide "federal purchase incentive" of "up to $5,000" for electric vehicles or hydrogen fuel cell vehicles that sell for less than $45,000.

It also proposes providing $5 million over five years for Transport Canada to "work with auto manufacturers to secure voluntary zero-emission vehicle sales targets" to make sure that supply meets demand.

The government wants to encourage more Canadians to drive zero-emission vehicles, to help improve local air quality, cut carbon pollution that contributes to climate change and reduce transportation costs for families, according to the budget tabled by Morneau, who is known to drive his own electric car.

The amount of electricity required to power an electric vehicle costs far less than the amount of gasoline required to travel the same distance. Gasoline engines, which burn a mixture of air and fuel, are also less efficient than electric motors at converting potential energy into powering the wheels.

Burning gasoline, a fossil fuel, creates carbon pollution that leads to climate change. Older gas vehicles also produce noxious or toxic substances that affect air quality. Transportation is responsible for a quarter of all of Canada’s carbon pollution.

A $5,000 purchase subsidy was a direct recommendation from the government's Advisory Council on Climate Action, which released its interim report this month. Incentives have also been suggested by environmental groups as a way to shift more of the car-driving population to electrics.

This type of incentive, already in place in British Columbia and Quebec, and formerly in place in Ontario until the Ford government eliminated it, is also popular, with a recent poll demonstrating a large majority of Canadians in favour.

But environmental and social groups have said the only true way for Canada to achieve its target of selling 10 per cent of zero-emission vehicles by 2025 and 100 per cent by 2040 is to create a requirement forcing automakers to sell a certain percentage of their vehicles as electrics.

That's because, no matter how much money governments offer to subsidize purchases, potential buyers often run into problems with auto manufacturers like long wait times, low inventories, low knowledge at dealerships or a lack of vehicles on lots available for test drives.

A sales mandate, in force in Quebec, California and other U.S. states, and under development in B.C., may eventually be necessary nationwide, the advisory council said.

While it could initially offer voluntary targets, "the federal government should, however, be prepared to implement mandatory sales targets if voluntary measures do not sufficiently address supply issues," it stated.

The retail price cut-off of $45,000 is likely to ensure such a program applies more broadly to middle-class Canadians. The previous Ontario government, for example, was criticized for allowing its incentive program to be used by wealthy electric-car buyers who helped finance luxury vehicles, mainly early-model Teslas.

The budget document also says it wants to encourage "investment in Canada's domestic auto industry so that it can become a global leader in zero-emission transportation manufacturing."

It suggested auto manufacturers and parts suppliers could access funding through the government's general Strategic Innovation Fund for this purpose, for example if it wanted to invest in a new battery factory.

The council said electric cars could represent major economic opportunities along the supply chain, but there was a long way to go. Currently only one major electric vehicle is manufactured in Canada, the Chrysler Pacifica plug-in hybrid, it said.

Finally, the government is expanding a program to create a nationwide network of electric vehicle chargers, that has attracted controversy for also funding natural gas refueling stations that don't require renewable gas.

The government committed in its 2016 and 2017 budgets to roll out $182 million over six years to establish hundreds of these chargers.

In Tuesday's budget, it puts more money into the effort — $130 million over five years — as well as expands the program to include recharging and refueling stations "in workplaces, public parking spots, commercial and multi-unit residential buildings and remote locations."

The budget also includes a series of incentives to help reduce utility bills, including support for home energy retrofits.