The federal government is continuing its efforts to aid and encourage more Canadians to switch over to electric vehicles by topping up, once again, the Incentive for Zero-Emission Vehicles (iZEV) rebate program.
The announcement was made this week as part of the government’s Economic and Fiscal update 2021 report, which reads that $73 million will be added to the program, to “allow Transport Canada to continue offering purchase incentives for zero-emission vehicles until the end of March 2022.”
Originally launched in 2019, the government’s initial investment of $300 million was used up in 20 months. Last year, another $287 million was budgeted into the program, but by the end of October 2021, only around $48 million was left.
The investment of an additional $73 million is now taking the total funding of the iZEV program to almost $660 million since 2019.
Canadian Prime Minister Justin Trudeau said Monday he has proposed harmonizing rebates with the United States for electric vehicles to avoid a trade conflict over Washington’s go-it-alone plan that risks gutting Canada’s auto sector.
His remarks followed threatened retaliatory tariffs on American goods and Ottawa’s suspension of parts of the landmark North American free trade agreement if Washington went ahead with electric vehicle tax credits for EVs made in US union shops.
“Canada and the United States have been making cars together for over 50 years now. Our supply chains are deeply integrated,” Trudeau told a news conference.
“That is why we are working very hard with the United States on getting them to understand that this proposed EV rebate for American-built cars only is not good obviously for Canada, but also not good for the United States,” he said.
Congress is getting an earful these days from America’s trade partners about the tax credits it is proposing on electric vehicles (EVs).
The complaint is that these tax credits, as written, are biased against imports, and run afoul of global trade rules. Canada and Mexico, for example, are talking about challenging the tax credits at the U.S.-Mexico-Canada Agreement (USMCA). Others, including Korea and Japan, say they might file disputes at the World Trade Organization (WTO). Last week, the European Union (EU) wrote to Senate leadership that, unless rewritten, the EV tax credits “will result in unjustified discrimination” against European cars and car parts. This letter is a game-changer, because the EU is credibly poised to retaliate.
First things first. As I’ve recently written, the tax credits come in at $12,500 per vehicle, but with protectionist fine print. The House’s Build Back Better proposes that $4,500 of this be contingent on the car being made by unionized labor, and that another $500 go to EVs with at least 50 percent U.S. content by value and have a U.S. battery. The full $12,500 tax credit would require both by 2027. The Senate’s version ties $2,500 to final assembly being done by unionized labor, and another $2,500 if the manufacturing facility is located in the US. By 2026, however, the full tax credit would require that both boxes be checked.
At issue is a provision in the US Build Back Better Act that offers an additional US$4,500 in tax credits to buyers of electric vehicles made by unionized U.S. workers on top of other incentives.
A bilateral spat over President Joe Biden’s proposed EV tax credit escalated Friday with Canada formally threatening retaliatory tariffs targeting the auto sector “and several other sectors of the U.S. economy” if the controversial provision remains intact.
Deputy Prime Minister Chrystia Freeland and International Trade Minister Mary Ng sent a letter to eight Senate leaders outlining Canada’s concerns. It warns of the actions the government is ready to take if the current “discriminatory” tax credit in the Build Back Better legislation is passed.
“If there is no satisfactory resolution to this matter, Canada will defend its national interests, as we did when we were faced with unjustified tariffs on Canadian steel and aluminum,” read the letter, referencing a 2018 trade dispute that Freeland was on the frontlines of at the time.
“Canada will have no choice but to forcefully respond by launching a dispute settlement process under the USMCA and applying tariffs on American exports in a manner that will impact American workers in the auto sector and several other sectors of the U.S. economy,” the letter read.
Elsewhere » Reuters
Environment Minister Steven Guilbeault says he wants a national mandate that would force auto dealers to sell a certain number of electric vehicles to be in place by the end of next year.
Road transportation accounts for one-fifth of Canada’s total greenhouse-gas emissions. As Canada charts a path to net zero by 2050, eliminating carbon dioxide from passenger cars is a big part of the process.
The federal government wants half of all new passenger cars sold in Canada to be zero-emission vehicles by 2030, and reach 100 per cent by 2035.
Canadians bought more electric vehicles in the last two years than the previous eight combined, but still only three per cent of new cars registered were battery-electric or plug-in hybrids.
In a notice posted on its website, Transport Canada said the popular car ceased to be eligible for the federal $5,000 electric car rebate program for both its 2021 and 2022 models.
Transport Canada said Tesla announced a price increase to its standard range and standard range plus models that took effect Nov. 23, which now exceeds the iZEV program’s eligibility requirements.
“As a result, these vehicle models are no longer eligible for iZEV program incentives,” the department said.
Resources » Transport Canada notice
Congressional Democrats and the Biden White House have pushed that electric vehicle consumers receive a US$12,500 refundable tax credit if they purchase an EV made at a United States factory employing unionized workers. The subsidy declines to US$8000 if the vehicle is made at a non‐union American plant and it drops another US$500 if the car’s battery is not US‐made.
Then starting in 2027, only EVs assembled in the United States would qualify for the base $7,500 credit.
So what are the real objectives of the new US EV tax credits?
The EV tax credit might make for good politics for the union‐friendly Democrats, but the subsidy defies the United States’ international trade agreements, and potentially undermining the very environmental objectives they are intended to achieve.
Both Canada and Mexico have strongly objected, as has the American International Automobile Dealers Association (AIADA) and other groups.