Still Unrealistic: Canada’s Electric Vehicle Targets Beyond 2026

November 18, 2025 – The federal government is expected to unveil proposed changes to its electric vehicle sales mandate this winter. The upcoming announcement comes as Canada’s 2026 Zero Emissions Vehicle (ZEV) mandate – requiring 20 percent of new light-vehicle sales to be electric – faces mounting evidence it was unlikely ever to be met, according to a new report by the C.D. Howe Institute.

In “Mandating the Impossible? Assessing Canada’s Electric Vehicle Mandate for 2026 and Beyond,” Brian Livingston finds that the policy’s trajectory remains unrealistic beyond 2026. “Even if incentives return, the targets far exceed what consumers are willing or able to buy,” says Livingston. “Mandates alone won’t generate the demand or the vehicles needed to meet these goals.”

The analysis shows that under the 2026 requirement, automakers collectively would have had to spend hundreds of millions of dollars to comply. Companies falling short of their targets could face over $200 million in penalties to generate “Charging Fund Credits,” along with unknown additional costs to purchase “Excess Credits” from firms such as Tesla and Hyundai. To meet compliance thresholds, manufacturers might have been forced to restrict non-ZEV sales, reducing total vehicle supply by more than 400,000 units – leaving significant consumer demand unmet.

Meanwhile, companies exceeding the 20 percent target – primarily foreign-based automakers – would benefit from windfall revenues by selling excess credits. Canadian-based producers such as GM, Ford, Toyota, Stellantis, and Honda, which manufacture domestically, would bear higher costs and face reduced competitiveness.

Federal officials recently noted that the government’s highly anticipated review of the ZEV mandate – launched after Prime Minister Mark Carney paused the 2026 target in September – will report back this winter and unveil proposed changes to targets and credit rules.

Livingston recommends that Ottawa either abandon or substantially revise the ZEV mandate. Options include revising percentage targets to align with market realities, counting increasingly popular hybrid vehicles toward compliance, redirecting credit proceeds to the federal government, or suspending the mandate until trade negotiations with the United States and China clarify the future of Canada’s auto sector.

“The waiver of the 2026 target is only a first step,” Livingston cautions. “Unless the policy is recalibrated to reflect consumer demand and production capacity, Canada’s ZEV mandate risks driving up costs, shrinking supply, and undermining competitiveness – without delivering meaningful emissions reductions.”

Read the Full Report

For more information, contact: Brian Livingston, Senior Fellow, C.D. Howe Institute; Percy Sherwood, Associate Editor and Communications Officer, C.D. Howe Institute, 416-407-4798, psherwood@cdhowe.org.

The C.D. Howe Institute is an independent not-for-profit research institute whose mission is to raise living standards by fostering economically sound public policies. Widely considered to be Canada’s most influential think tank, the Institute is a trusted source of essential policy intelligence, distinguished by research that is nonpartisan, evidence-based and subject to definitive expert review.

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