On December 21, 2022, Environment and Climate Change Canada (“ECCC”) announced new proposed regulations in relation to zero-emissions light-duty vehicles (the “ZEV Regulations”). The ZEV Regulations would amend the Passenger Automobile and Light Truck Greenhouse Gas Emission Regulations, which set greenhouse gas emission standards for light-duty vehicles of specified model years.
The proposed amendments relate to light-duty vehicles  either manufactured in Canada or imported into Canada for the purpose of sale to the first retail purchaser.  It is proposed that, beginning in 2026, a company’s “combined fleet”  of such vehicles be subject to a “minimum ZEV requirement,” expressed in percentage terms that increase on an annual basis. A “zero-emission vehicle” or ZEV is defined under the proposed amendments as “an automobile that is an electric vehicle, a plug-in hybrid electric vehicle or a fuel cell vehicle.” According to ECCC’s backgrounder on the ZEV Regulations, these amendments will require companies offering new vehicles for sale to offer a growing percentage of their fleet as ZEVs, starting at 20 percent in 2026 and increasing to 100 percent by 2035. 
The ZEV Regulations further Canada’s commitments under the Canadian Net-Zero Emissions Accountability Act, which targets net-zero emission by 2050. The Government of Canada will launch a formal 75-day consultation period in relation to the ZEV Regulations on December 31, 2022.
The prospect of the ZEV Regulations became clear in June 2021, when it was announced that Canada was setting a mandatory target for all new light-duty cars and passenger trucks sales to be zero-emission by 2035. Subsequently, in March 2022, the Government published Canada’s 2030 Emissions Reduction Plan, which confirmed that the Government would be putting in place a “sales mandate to ensure at least 20 percent of new light-duty vehicle sales will be zero-emission vehicles by 2026, at least 60 percent by 2030 and 100 percent by 2035,” as part of efforts to make it easier for Canadians to switch to electric vehicles.
The ZEV Regulations were announced on December 21, 2022 in unofficial form. Section 30.3 sets out a chart of minimum ZEV requirements corresponding to model year:
|Model Year||Minimum ZEV requirement (%)|
|2035 and subsequent||100|
Under the proposed ZEV Regulations, companies that exceed or miss ZEV sales targets will earn “compliance units” or incur “deficits,” respectively. For example, subsection 30.5(1) of the ZEV Regulations provides that a company will obtain “compliance units if the ZEV value of its combined fleet of a given model year is greater than the minimum ZEV requirement for that model year […],” while subsection 30.5(2) provides that a company will incur a “deficit” if “the ZEV value of its combined fleet of a given model year is less than the minimum ZEV requirement for that model year.”
Further, under the proposed regulatory scheme, a company may bank its compliance units or transfer those units to another company (or some combination of the two). A company that incurs a deficit must use banked compliance units, and may thereafter use units transferred from another company, or units created by contributing to designated ZEV activities to satisfy the deficit.
Fasken’s Automotive Group is pleased to assist in navigating the proposed ZEV Regulations and their impact. According to the Government’s announcement, final regulations are planned to be published in 2023.
 The term “automobile” is defined as “any four-wheeled self-propelled vehicle that is designed for use on highways and that has a GVWR of less than 4 536 kg (10,000 pounds),” with certain exceptions.
 See the ZEV Regulations at subsection 30.1(1) (definition of “combined fleet”).
 Defined in the ZEV Regulations to mean “all automobiles of a specific model year that a company manufactures in Canada or imports into Canada for the purpose of sale of those automobiles to the first retail purchaser.”
 Note that the calculation of ZEV value has differing requirements for electric vehicles and fuel cell vehicles, as opposed to plug-in-hybrid electric vehicles.