Canadian Legislative Issues

With environmental regulation and legislation increasingly targeting specific sectors and industries, the transport sector risks a regulatory environment that will be difficult to comply with in the years to come. While a nationwide carbon price floor – announced earlier this fall by Prime Minister Justin Trudeau – will have an impact on many prices in the economy, it does represent a policy that many had anticipated and much of Canada already lives under at the provincial level.

Higher risks to the sector come from other regulatory moves aimed at reducing our footprint, policies that are usually much higher cost and less effective than pure carbon pricing mechanisms. Chief among these policies is Quebec’s zero emission vehicle (ZEV) mandate, a requirement for manufacturers and dealers to sell a much larger share of electric vehicles (EVs) than are currently demanded in the province.

Policies such as these that swim against the stream of consumer demand have a harder time gaining popularity.  Governments are better off enacting policies that enable the development of EV and other alternative energy sources, and on investing in the charging infrastructure required for EVs (which we currently lack). Quebec and other provinces to their credit are also making these investments. However, mandating an artificially high level of EV demand years before the market is ready for it is a high-risk policy direction for the province of Quebec. Other jurisdictions should take notice and tailor policies accordingly.

The automotive industry is among the largest investors of green technology in the world. Fleet gets more efficient and less polluting every year due to technological advancements, consumer demand, and government regulation. But not all government rules are created equally: those that assume consumer behavior and choice can be counteracted by legislation which attempts to reverse popular opinion. Even in Quebec, where EVs are more popular than in most other places, the vehicle type still represents an insignificant share of overall sales in the province, barely more than zero. No law has the power to create consumer demand that does not presently exist. The disruption to the industry and to the consumer could be large.