If we want to reduce emissions, are ZEV mandates really the best way?

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For years now, it’s been the same routine. Automotive journalists like me drive a new car, tell you about it and then, if you decide you’re interested in that vehicle, you go take a look at a dealership. But what’s the point if you can’t actually buy it?

The new Toyota Prius Prime is just such a vehicle. It’s a nice car, looks sharp and drives well. More important, it uses little gas and, because of its larger plug-in hybrid battery, it may never use any gas until it’s time to burn off last year’s stale fill-up. It’s affordable too, compared to full battery electric vehicles (BEVs). The base model starts at $37,990, and again, because of that bigger battery, it now qualifies for the full $5,000 federal rebate. The current model only qualifies for half that.

Sleek Toyota Prius Prime adds power, but good luck finding one

Good luck buying one, though, unless you live in Quebec or British Columbia. Those two provinces penalize automakers that don’t sell a large-enough proportion of their total fleets as electric or electrified vehicles, and the requirement is getting more stringent every year.

It’s a complicated system of credits earned for selling electrified vehicles, with different amounts of credits for different abilities of vehicles: BEVs earn full credits, while plug-in hybrid electric vehicles (PHEVs) and others earn fractions of credits, depending on their electric range.

Both provinces have stepped up their targets, however, as electric vehicles have grown in popularity – and to stay in sync with regulations in California and some other American states. In simple terms, by 2025, Quebec and B.C. want 22 per cent of all vehicles that any manufacturer sells in their province to be the equivalent of full electric and that proportion will continue to rise steeply until 2035, when 100 per cent of new car sales must be zero-emission vehicles, or ZEVs.

(ZEVs include hydrogen-powered vehicles that use a fuel-cell instead of a battery to power the electric motor. Like BEVs, they also produce no emissions while driving, hence the government terminology. Conventional hybrids – which combine a gas engine with an electric motor and do not need to be plugged in – are not considered ZEVs and do not qualify for any credits.)

Here’s the kicker that’s killing EV sales in the rest of the country. If an automaker fails to meet the annual target, the current fine in Quebec and B.C. is the equivalent of $5,000 for every credit sold beneath the target, but that’s soon rising to $20,000 per vehicle. For example, if an automaker sells 10,000 vehicles in Quebec for the 2025 model year, then enough of them must be electrified to be the equivalent of 2,200 full-electric vehicles. If the automaker has fallen short, selling the equivalent of 2,000 full-electric vehicles, it must pay a fine of $20,000 for each of the 200 vehicles beneath the target, or $4-million.

That means Quebec and B.C. dealerships will get priority for electric vehicles says Toyota Canada vice-president Stephen Beatty. “If you look at the upcoming changes to the Quebec rules, for example, where selling one too few ZEVs amounts to a $20,000-a-vehicle credit deficit, that’s really difficult to overcome.

“We know that Toronto, for example, is a significant market for electrified vehicles, and we’re doing everything we can to get product into the marketplace, but we have to meet those requirements first before we can meet the needs of other markets.”

In other words, if you want to buy a Prius Prime PHEV in Toronto – or Calgary or Halifax or anywhere outside of Quebec and British Columbia – then you have to wait until Toyota sells enough vehicles in those two provinces with ZEV mandates to not get penalized with a hefty fine. It’s unfair, but given the state of disparate provincial regulations, it’s just responsible business for the automaker.

Toyota thinks it has a better idea, though, which it’s been advocating for several years with little political success: Don’t penalize automakers for not selling enough electric cars, but penalize them for not reducing their overall greenhouse gas emissions.

Currently, the federal government wants 60 per cent of all vehicles sold in 2030 to be ZEVs, in order to clean up our air and slow climate change; Toyota would change that to mandate a 60-per-cent reduction in greenhouse gas emissions. It says it can do this by selling many more comparatively inexpensive and relatively clean conventional hybrids, which don’t need to be plugged in and recover energy from braking. Though nowhere near as efficient as BEVs, far more people could afford to drive regular hybrids, reducing emissions over all. They would also not have to leap the barrier of range anxiety.

The added advantage of changing the policy is that hybrids require fewer raw materials, such as lithium, graphite and even tin. For the amount of lithium needed to build a BEV, for example, Toyota can build six plug-in hybrids, or 90 conventional hybrids.

“How we use those scarce resources is important, and using them exclusively for BEVs may not deliver the emissions reductions the planet needs,” Beatty says.

“Don’t get me wrong – we think 60 per cent is an excellent number, but instead of focusing on technology, it needs to be applied to outcomes. That’s why Toyota has agreed to commit to a 60-per-cent reduction in greenhouse gas emissions by 2030.”

Others disagree that this is the best solution.

“I think they’ve done a business model which has been very successful, based on hybrids, and they want to sustain that mandate,” says Jose Munoz, the chief executive officer of Hyundai Motor North America.

“Without a doubt, you clean the air more with an EV than with a hybrid. Without a doubt – the numbers are very clear. But if I didn’t have the right technology, I would say the same [thing as Toyota]. I think they’ve missed the point big time. If you remember, they were one of the shareholders of Tesla and they abandoned it, thinking this is not a good technology. I think they completely missed the point.”

Toyota only began selling its first BEV in North America this year, the bZ4X crossover. Hyundai has been selling its Ioniq 5 and Kona BEVs for the last two years. Both companies also sell hybrids, PHEVs and hydrogen-fuelled cars.

“The [EV] technology is better if you get the battery, and if you get the right cost,” says Munoz. “Some companies are struggling very badly on the cost side – I think we’re not an exception, but we are not selling EVs at a loss.”

Ford announced in March that it expects to lose US$3-billion this year by selling electric vehicles. Toyota’s Beatty says he’s concerned about the high cost of EVs to drivers, because it means they will keep their older cars for longer as they avoid or delay paying the higher prices. Those are the vehicles that spew the dirtiest emissions. If we really want to clean up our air, he says, then compared to a 10-year-old Corolla, a simple hybrid seems a simple solution.