In 2023, Canadian government officials responded to U.S. automakers’ collective opposition to the proposed regulations by introducing a set of so-called compliance flexibilities, which feature a credit mechanism. Under this mechanism, “Companies that perform better than their ZEV targets generate credits which they can bank for up to five model years or trade. Companies that do not meet their targets generate a deficit, which must be discharged within three model years. No accumulated or banked credits can be used to offset a deficit in model year 2035 and beyond.”1 Companies are allowed to generate full credits for those battery electric vehicles that are sold above the designated annual target numbers but only partial credits for certain plug-in hybrid electric vehicles (PHEVs) sold above the targets. They could opt either to bank or trade their credits for up to five model years.2
Moreover, auto manufacturers that act early are eligible to earn more rewards in this credit system, by obtaining early action credits (EACs) for ZEV sales in model years 2024 and 2025. According to the government, “To qualify, a company’s fleet must have had at least eight percent ZEVs in model year 2024 and 13 percent in model year 2025. Qualifying manufacturers can claim EACs between the annual minimum and 20 percent in both model years. EACs may not be traded and cannot be used after model year 2027. These provisions will create incentives for the sale of ZEVs in the short-term. They will also create an additional source of compliance options, which will enhance flexibility and smooth the transition of manufacturers to the new requirements.”3
In addition, automakers can earn credits for investing in fast-charging EV stations, which are in high consumer demand across Canada. Such credits can be traded, but they cannot be used after model year 2030. “Companies may generate one credit for each $20,000 invested in new fast-charging infrastructure projects that meet certain conditions,” which include having new DC fast-charging stations with at least 150 kW of rated power, opening between 1 January 2024 and 31 December 2027 and remaining in operation for at least five years, and being available to any ZEV with a compatible charging port or adapter.4 In an attempt to keep automakers from gaming the system more explicitly, the government stipulated that “the combined value of EACs and compliance units from investments in charging infrastructure [must not] exceed ten percent of a company’s ZEV target in any year.”5
Not surprisingly, though, automakers are now arguing that the credit system designed for their benefit two years ago no longer serves their financial interests. One of their expressed concerns is that, “as the targets become more stringent, there’ll be fewer credits available in the marketplace.”6 This appears to be an attempt to persuade Prime Minister Carney’s government that they are now suffering from an undue burden.
1 Government of Canada, “Canada’s Electric Vehicle Availability Standard (regulated targets for zero-emission vehicles),” 19 December 2023. Retrieved on 21 September 2025 from https://www.canada.ca/en/environment-climate-change/news/2023/12/canadas-electric-vehicle-availability-standard-regulated-targets-for-zero-emission-vehicles.html
2 Arthur Zhang, “Debunking three myths about the ZEV mandate, 440 Megatonnes Project, 22 July 2025. Retrieved on 21 September 2025 from https://climateinstitute.ca/debunking-three-myths-about-the-zev-mandate/
3 Government of Canada, “Canada’s Electric Vehicle Availability Standard (regulated targets for zero-emission vehicles),” 19 December 2023. Retrieved on 21 September 2025 from https://www.canada.ca/en/environment-climate-change/news/2023/12/canadas-electric-vehicle-availability-standard-regulated-targets-for-zero-emission-vehicles.html
4 Ibid.
5 Ibid.
6 Canadian Press, “Automakers could be on the hook for billions under EV mandate if sales don’t ramp up,” CTV News, 19 September 2025. Retrieved on 29 September 2025 from https://www.ctvnews.ca/canada/article/automakers-could-be-on-the-hook-for-billions-under-ev-mandate-if-sales-dont-ramp-up/