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On Wednesday, Environment and Climate Change Canada announced forthcoming regulations aimed at incentivizing low-emission passenger vehicle adoption in Canada. 

The regulations will amend the Passenger Automobile and Light Truck Greenhouse Gas Emission Regulations issued pursuant to the Canadian Environmental Protection Act, 1999, and create a program of credits and deficits to reward car manufacturers and importers for meeting “zero emission vehicle” (ZEV) sales quotas.

Starting in 2026, car companies’ annual “fleet” sales must consist of 20% ZEVs, with this target increasing to 60% by 2030 and 100% by 2035. ZEVs are primarily expected to be electric and hydrogen-powered vehicles, but hybrid vehicle sales will be eligible for partial credit as well under the program.

Companies that fail to hit ZEV sales targets must compensate for the shortfall by purchasing “compliance units”. These can be purchased from companies that exceed their ZEV sales targets and have a surplus of credits to sell. Companies can also earn compliance units by performing an “eligible ZEV activity”, defined as “any activity that contributes to the growth of ZEV infrastructure in Canada, including charging stations, hydrogen refueling stations and electricity distribution infrastructure that supports charging stations.” 

Several provinces and US states have already adopted similar ZEV regulations, including Quebec, British Columbia, California, and New York. Numerous other US states, including Colorado, Minnesota, Virginia, and Washington, plan to adopt such regulations by 2026. 

The official proposed regulations will be published in the Canada Gazette on December 31st, at which time the government will begin a 75-day public consultation period regarding its planned program rules.

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