TRACKING THE ENERGY TRANSITION 2020 Taking the Wheel How Canada can cut carbon pollution and revitalize its auto sector December 2020 Contents 4 3 Our Car Conundrum 4 Troubling Trends Carbon Pollution is Up The Auto Sector is Down 8 The Electric Opportunity Cutting Carbon The Canadian Advantage 11 A Global Race to Electrify The Shift to EVs World-Leading Policies 14 Canadian Auto: The Next Generation 16 Endnotes 8 Taking the Wheel All rights reserved. Permission is granted to reproduce all or part of this publication for non-commercial purposes, as long as the source is cited How Canada can cut carbon pollution and revitalize its auto sector as “Clean Energy Canada.” Clean Energy Canada is a program at December 2020 | © 2020 Clean Energy Canada the Morris J. Wosk Centre for Dialogue at Simon Fraser University. ISBN: 978-1-989692-02-8 Cover photos: Shutterstock 2 CLEAN ENERGY CANADA Our Car Conundrum anada has a car conundrum. Our transportation delivering them to 4 emissions are up, and our auto manufacturing the Toronto Transit sector is down. And while these two challenges Commission. And might sound only tangentially related, they share a Canada’s auto parts common solution. manufacturers are C But let’s start with the problem. According to leading the charge the International Energy Agency, Canadians drive the most on a zero-emission polluting cars in the world.1 Literally, when it comes to concept car to tailpipe emissions, we take the global top spot. Over showcase what Canada’s supply chain can do.10 the past 20 years, carbon pollution from transportation has The opportunity also extends beyond building vehicles. increased by nearly 30% thanks to a growing appetite for Canada is home to many of the metals and minerals SUVs and trucks.2 needed to make EV batteries.11 What’s more, Canadian Over that same two-decade period, vehicle manufacturing miners can produce them with less pollution thanks to our in Canada fell by 37%, or more than one-million vehicles a nation’s relatively clean power grid, a feature that’s already year.3 Once a global top-five vehicle manufacturer, Canada caught the eye of Tesla.12 Indeed, Canada has been cited as a now doesn’t even crack the top 10.4 potential competitor in the global EV battery industry.13 So, that’s the conundrum: pollution from the vehicles While Canada will ultimately chart its own course— we drive is increasing, while the auto sector has leveraging its unique workforce and geographic strengths— been shifting to other shores. It’s a bad news story for there’s another competitively positioned jurisdiction that both our environment and our economy. But while various might offer some inspiration. California has used regulations causes explain these challenges, a singular solution exists to and rebates to become North America’s EV leader while overcome them both: zero-emission vehicles. simultaneously supporting the development of an EV auto Already, most Canadians lean toward an electric car for sector to meet growing demand. Today, the state is home to their next vehicle purchase, according to a 2019 survey, and a 275,600 EV-related jobs. Electric vehicles are its eighth most majority see EVs becoming mainstream soon.5 The problem? valuable export.14 Most car dealerships in the country don’t have a single EV With a national EV rebate program, a growing network of available to test drive or purchase. A 2020 Transport Canada charging stations, and a couple of promising EV production study found that waitlists of three to six months are typical.6 deals, Canada isn’t starting at zero. But if governments are And if you want to buy electric and Canadian, you’re limited to serious about reducing transportation pollution (responsible a single option: the Chrysler Pacifica plug-in hybrid minivan. for a quarter of our national emissions) and building the But very recently, things have started shifting into gear. An cars of tomorrow, we need an industrial strategy and a agreement between Ford Motor Company and Unifor, package of policies that drive long-term investment in Canada’s largest union, will see nearly $2 billion go and the adoption of zero-emission vehicles. toward the production of five EV models in Oakville, Done right, Canada can overcome its car conundrum Ontario.7 A separate $1.5-billion deal between Unifor while achieving a trifecta of outcomes: cutting transportation and Fiat Chrysler also targets EV production, creating pollution, giving Canadians better access to the cars they want, 2,000 jobs at the latter’s Windsor-based plant.8 and retooling our auto sector to compete in the 21st century. We may want to hold off on the confetti, however, as It’s time to take the wheel. Canada still has a way to catch up. Prior to these fall 2020 funding announcements, an analysis of 29 global automakers had identified US$300 billion flowing into EV development with not a single dollar destined for Canada.9 But building cars isn’t the whole automotive story. Quebec’s Lion Electric Company has been selling electric trucks to CN Rail and Amazon and is North America’s largest producer of electric school buses. Warren-Buffett- Merran Smith, Executive Director, backed BYD is manufacturing electric buses in Ontario and Clean Energy Canada TAKING THE WHEEL 3 150K NEW VEHICLE SALES IN CANADA TRUCKS, 100K VANS & SUVS CARS 50K 2000 2010 2020 Fitted line through monthly (seasonally unadjusted) data. Source: Statscan NDM Table 20-10-0001 Troubling Trends #1 CARBON POLLUTION IS UP TOO MANY SUVS by the booming SUV market. Canada’s carbon pollution When it comes to the vehicles we drive, Canadian from transportation has increased nearly 30% over consumer habits have changed over the past decade. New the past 20 years. Pickup trucks, vans, and SUVs were registrations of trucks, vans, and SUVs rose 2% in 2019, responsible for over half of those additional emissions.19 while passenger cars declined 17%.15 This shift toward Conversely, carbon pollution from sedans fell by 15% bigger vehicles is concerning for our climate, as large over that same period, largely due to rules requiring that SUVs produce about a quarter more carbon pollution than automakers improve the fuel efficiency of the cars they sell.20 smaller cars.16 Unfortunately, those same policies face an uncertain In 2019, the International Energy Agency found future. The Trump administration’s recent rollback of that SUVs were the second-largest source of new global regulations requiring new vehicles to get cleaner and emissions over the past decade.17 To put that in perspective, more efficient every year are automatically applied in if all SUV drivers formed their own country, it would be the Canada.21 Unless Canada breaks from the Trump-era rules seventh-largest emitter in the world.18 or President-elect Joe Biden adopts his own approach Even as automakers produce more efficient cars, (perhaps in consultation with Canada), our vehicles will including EVs, emissions reductions are being cancelled out become less fuel-efficient and more polluting. 4 CLEAN ENERGY CANADA TRANSPORTATION SECTOR EMISSIONS IN CANADA 200 Trucks, vans Cars Other* 180 and SUVs 160 140 120 100 80 60 40 20 Megatonnes of carbon dioxide equivalent 0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 *Includes freight (rail, domestic aviation, maritime, heavy-duty trucks) and other passenger transport (motorcycles, bus, rail, and domestic aviation). Source: Government of Canada, 2020 TOO FEW EVS To make Already, most Canadians are eyeing an electric car for matters worse, their next vehicle purchase, according to a 2019 survey the picture is from Abacus Data and Clean Energy Canada. In fact, starkly different 64% say they would like to see EVs become the majority depending on of vehicles sold, while even more say it’s bound to happen where you live, at some point.22 as EV supply The reason why there aren’t more electric cars on the is unevenly road isn’t that Canadians don’t want them. It’s that many distributed Canadians can’t find an EV to test drive, buy, and take across the home. A study conducted for Transport Canada country. Potential found that nearly 70% of over 1,000 Canadian buyers in B.C. dealerships didn’t have a single EV available and Quebec have for purchase in February of 2020. Only one in 10 access to more electric dealerships had four or more on their lots, while waitlists cars and a greater range of three to six months were the norm.23 of models. The two provinces Canadians also have fewer makes and models to choose are home to 76% of Canada’s new EV from. While 49 and 45 EV models were available in the inventory, meaning the rest of Canada is left to fight over U.S. and the EU in 2019,24 only about 40 can be bought the remaining quarter. As of February, there were 23 in Canada.25 Meanwhile, there were over 250 gas models EVs available for sale for every 100,000 Quebec available in Canada last year.26 With plenty of new EV residents compared to just four for every 100,000 makes and models coming to market in the next few years, Albertans and Ontarians.27 we should ensure they’ll be made available for Canadians In other words, Canadians want to go electric, but supply as well. isn’t keeping up with demand. TAKING THE WHEEL 5 CANADIAN MOTOR VEHICLE PRODUCTION CANADIAN MOTOR VEHICLE PRODUCTION 3M 2M 1M Vehicle production (millions of units) production Vehicle 0M 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 Source: Trillium Network, 2020 / Automotive News, various years #2 THE AUTO SECTOR IS DOWN The Canadian auto sector has played a significant role in producing EVs in Canada.