Canada’s EV mandate is complete madness.
Canada’s EV mandate is complete madness.
I n Canada, despite massive government subsidies of new electric vehicle purchases and EV battery plants, as well as considerable government spending on EV infrastructure, the EV market still makes up only 13.3 percent of new vehicle registrations. I write “only” 13.3 percent, but the federal government somehow managed to interpret from this statistic that in double-quick time, 100 percent of Canadians will want to drive nothing but EVs. It cited the statistic as part of its newly announced mandate that by 2035, 100 percent of new vehicle sales must be electric or plug-in hybrid. The government also announced interim targets: From 13.3 percent last quarter, EVs must account for 20 percent of the market by 2026, and at least 60 percent by 2030. Dealers who fall short of these quotas face heavy financial penalties: They must either buy EV “credits” from other automakers or pay for public EV charging stations.
This is madness. Even with government subsidies of up to C$12,000 per vehicle, on average, EVs in Canada today are C$14,000 more expensive to the consumer than gasoline-powered vehicles. Not to worry, the federal government says in announcing its mandate. “According to experts,” the government claims, “when purchase incentives from the federal government (up to C$5,000) and provincial and territorial governments (up to C$7,000 in Quebec, for example) are combined with the reduced costs of battery charging and maintenance, many models hit a cost parity with gas vehicles within four years, and some in under a year.”
Which experts made this claim , the government did not say. How many models are expected to hit cost parity within four years, it did not say either. I am reminded of an exchange from an episode from the eleventh season of the Simpsons:
Newspaper Tour Guide: And each paper contains a certain percentage of recycled paper.
Lisa: What percentage is that?
Newspaper Tour Guide: Zero. Zero is a percent, isn’t it?
That “many” models may hit cost parity within four years is a worthless claim without saying how many, or what proportion, “many” is. The worthlessness of the claim is enforced by the federal government’s horrendous record of inaccuracy in these sorts of estimates. When the federal and Ontario governments promised a combined C$28.2 billion in subsidies to Stellantis-LGES and Volkswagen for EV battery plants, the federal government estimated the economic activity the subsidies produce would allow it to recoup the subsidies through tax revenues in 3.3 years. A report from the Parliamentary Budget Officer estimated the break-even period to be 20 years instead.
There is then the definition of “cost parity.” Even if we accept the government claim citing unnamed “experts” according to whom “many” models will hit cost-parity with gas-powered vehicles within four years, this is not real cost-parity, but only cost-parity to the individual purchaser. It excludes the cost to taxpayers of subsidies that go as high as C$12,000 per vehicle.
There are yet more problems with the government’s math: It defines as “savings” to the consumer the money it does not allow the consumer to spend on vehicles the consumer wants. By this logic, the government could also solve the country’s housing-affordability crisis by mandating everybody to be homeless. Everybody would save money on rent and mortgage payments; thus, the affordability crisis is solved. But of course, stopping people from spending money on homes they want to live in are not savings to homeowners or renters any more than stopping people from spending money on the cars they want to drive are savings to drivers.
The hopes, too, of rapidly improving economics of EVs such that everybody will want to drive them in 2035, are nonsense. If the economic viability and quality of EVs are so quickly ascending that by 2035 everybody does want to drive these vehicles, there would be no need for a mandate. In fact, as Mark P. Mills detailed in a study for the Manhattan Institute earlier this year, hopes for EVs’ financial parity with gas-powered vehicles, as well as their environmental benefits, are dubious. To achieve the mandates of the sort proposed by numerous states and now Canada, “Consumers will need to adopt EVs at a scale and velocity 10 times greater and faster than the introduction of any new model of car in history,” Mills observes. “Bans on conventionally powered vehicles,” he concludes, “will lead to draconian impediments to affordable and convenient driving and a massive misallocation of capital in the world’s $4 trillion automotive industry.”
The point on “convenient driving” is especially pertinent to Canada. A great deal of the population lives in rural and remote areas. The federal government says it “has heard the concerns from some Canadians living in rural and northern communities that may currently have less access to public charging infrastructure, as well as concerns expressed regarding the performance of batteries in cold weather.” It proceeds to dismiss these concerns by assuming technology, and therefore cold-weather performance, will improve. It might — but it may well not.
The EV mandate is complete madness, but there is one reason for some optimism. Heather Exner-Pirot of the Ottawa-based Macdonald Laurier Institute explains: “Consumers are voters. And command economies don’t work well in democracies.” The EV mandate is coming from a Liberal government that may not win re-election, in which case the policy may turn out to be “a foolish but benign distraction.” That is a bit too optimistic — even if later canceled, by causing market uncertainty and misallocation of capital in the interim, the announcement of the mandate is far from benign. It is, however, of course incredibly foolish.