From mandate to market: Canada’s proposed shift on zero-emission vehicle regulations From mandate to market: Canada’s proposed shift on zero-emission vehicle regulations

On August 15, 2026, the Government of Canada published proposed amendments to the Passenger Automobile and Light Truck Greenhouse Gas Emission Regulations [PDF] that would repeal the Electric Vehicle Availability Standard (EVAS), the federal ZEV sales mandate. The proposal would eliminate the ZEV sales requirements introduced in 2023, as well as the associated compliance, reporting and credit-trading regime applicable to manufacturers and importers.

Background: a changing North American automotive landscape

The proposal is a key element of Canada’s automotive industry strategy announced on February 5, 2026, which is more fully described in our February 2026 Update: “Canada shifts gears: what the 2026 auto strategy means for manufacturers, EVs and trade”. It is intended to address significant changes in market conditions since the ZEV mandate was introduced in 2023. The Regulatory Impact Analysis Statement (RIAS) identifies several factors motivating the repeal

• declining ZEV sales in Canada, which fell from approximately 14% of new vehicle sales in 2024 to approximately 9% in 2025
• the end of previous federal ZEV purchase incentive programs
• changes in U.S. electric vehicle policy and the repeal of U.S. vehicle greenhouse gas (GHG) emissions standards
• ongoing trade disruptions and tariff pressures affecting the integrated North American automotive market

The government’s stated rationale is that the current mandate places significant financial and operational pressure on manufacturers and importers at a time of economic uncertainty, potentially affecting vehicle supply, investment decisions and employment in Canada’s automotive sector.

In light of these pressures, the proposed amendments would fundamentally restructure the federal regulatory approach to electric vehicle adoption.

Key elements of the proposed amendments

Repeal of ZEV requirements

The proposed amendments would eliminate the federal EVAS and all associated compliance requirements introduced in 2023. Once in force, manufacturers and importers would no longer be required to meet annual ZEV sales targets or demonstrate compliance with those targets. The proposal would also eliminate related reporting obligations and the compliance unit system, including the creation, banking, trading and management of ZEV credits and deficits.

GHG emission standards and compliance obligations remain in force

While the ZEV mandate would be eliminated, the broader greenhouse gas emissions regulatory framework for light-duty vehicles would remain in force. Manufacturers and importers would remain subject to existing fleet-average CO₂ emission standards, testing requirements, and compliance obligations under the Passenger Automobile and Light Truck Greenhouse Gas Emission Regulations [PDF]. The amendments would also preserve the existing emissions-testing and calculation framework (under which ZEVs and hybrid EVs do create compliance credits that are purchased for material value by existing manufacturers and importers) through updated references to U.S. vehicle emissions standards.

Future regulatory direction

While the government proposes to eliminate the ZEV sales mandate, it has reaffirmed its long-term commitment to transportation electrification and emissions reductions. Specifically, the government has signaled its intent to

• introduce stronger, technology-neutral, Canada-specific GHG emission standards through a future regulatory amendment, targeting 75% EV sales by 2035 and 90% by 2040
• reintroduce EV purchase incentives
• develop a national charging infrastructure strategy
• support domestic automotive manufacturing and investments in clean technologies

The government has also indicated that it may reduce tariffs on a limited number of lower-cost Chinese EVs, currently subject to a 100% surtax imposed in 2024, as part of its broader affordability strategy, though the scope and timing of any such reduction remain uncertain.

The coexistence of technology-neutral framing with specific EV penetration targets suggests the forthcoming standards will be calibrated to drive electrification outcomes while affording manufacturers greater flexibility in how those outcomes are achieved.

Practical implications for manufacturers and importers

For manufacturers and importers, the proposal provides immediate regulatory relief by eliminating compliance obligations associated with the federal ZEV sales mandate.

However, the proposal does not represent deregulation. The government has clearly signalled its intention to replace the EVAS with stringent Canada-specific, technology-neutral GHG standards. Manufacturers and importers should therefore consider participating in the consultation process and begin assessing how future emissions-based requirements could affect their fleets, compliance strategies and long-term investment decisions.

In addition, manufacturers and importers holding banked ZEV compliance credits should assess the impact of the repeal on the value and utility of those credits. Fleet operators and investors in the EV supply chain should also monitor the forthcoming consultation on Canada-specific GHG standards, which will define the next phase of federal emissions regulation and may require significant adjustments to product planning and capital allocation strategies.

Similar policy changes in other jurisdictions

The proposed amendments are broadly consistent with actions in other jurisdictions. In April 2026, British Columbia announced its intention to revise its 2035 ZEV goal from 100% to 75% to align with the new federal target.^[1] In June 2026, Québec proposed to lower its 2035 ZEV requirement from 100% to 80%.^[2] The European Union also published a proposal in December 2025 to ease interim ZEV requirements and expand compliance flexibilities for manufacturers.^[3]

This convergence across jurisdictions suggests a broader recalibration of ZEV policy in response to market realities and may provide manufacturers operating across multiple markets with greater regulatory predictability in the near term.

Stakeholders have 75 days to comment

The proposed amendments are now open for public consultation through the Canada Gazette website. Interested stakeholders have 75 days from publication, until October 29, 2026, to submit comments. The government has indicated that a separate consultation process will be launched to support the development of future Canada-specific GHG emissions standards for light-duty vehicles.

Our Automotive and Regulatory teams are available to assist stakeholders in navigating the proposed amendments, preparing consultation submissions, and assessing the implications of Canada’s evolving emissions regulatory framework.

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[1] Updating zero-emission vehicle targets, expanding charging network.

[2] Regulation to amend the Regulation respecting the application of the Act to increase the number of zero-emission motor vehicles in Québec in order to reduce greenhouse gas and other pollutant emissions (proposed June 2026).

[3] Automotive package – Mobility and Transport – European Union.