Ottawa set to scrap EV mandate, launch $1.5 billion investment fund: sources

Government and industry sources, who were not authorized to publicly discuss details ahead of the announcement, say Ottawa will introduce emission standards on new vehicles similar to what’s in place in Europe.

The European Union sets emissions performance standards for new passenger cars and vans, commonly known as “corporate average fuel efficiency” standards, or CAFE. The system requires that average emissions from all new passenger cars and vans meet specific emissions targets.

The European Commission says the regulations led to a 28 per cent decrease in emissions from all new passenger cars between 2019 and 2024, while emissions from new vans dropped nine per cent.

While it’s not clear what Canada’s standards will be, Europe’s current target is to ensure that all new cars and vans produce no emissions by 2035 — although revised regulations proposed in December would reduce the target to 90 per cent, allowing some flexibility for plug-in hybrids.

One source said Canada’s new emissions regulations would get close to the reduction in emissions set out in the original EV mandate.

The previous Liberal government set a target of having EVs account for at least 20 per cent of sales across Canada this year. The target was to increase to 100 per cent by 2035.

Carney paused the EV mandate in September and launched a 60-day review to offer Canada’s auto sector liquidity in the face of the ongoing trade war with the United States.

Automakers had called on the government to scrap the sales mandate altogether, arguing it was unnecessary since Canada already has other policies to meet its emissions reduction targets.

As first reported by CBC News, the government is also expected to revive the popular incentives program to encourage Canadians to buy new EVs.

The incentive for zero-emission vehicles program — iZEV for short — was paused last year after its funding pool of more than $3 billion ran out.

Sources tell The Canadian Press the government will bring back the rebates at a similar level. Ottawa is expected to offer $5,000 toward the purchase of a new fully electric vehicle and $2,500 for plug-in hybrids.

Previously, fully-electric and longer-range plug-in hybrid electric vehicles received the full $5,000 rebate, while shorter-range ones were eligible for a $2,500 rebate.

Conventional hybrid vehicles will no longer be eligible for rebates, but manufacturers will be able to claim emissions credits for selling them.

Federal ministers promised during and after the spring election campaign to being back the incentives but never set a date. That frustrated car dealers who said EV sales slumped as consumers opted to wait for the rebates to return.

EV sales in Canada started to rise toward the end of 2025. According to the most recent data from Statistics Canada, EVs accounted for 11.3 per cent of all new vehicle sales in November.

Monthly sales peaked in December of 2024 at 18.29 per cent, before the iZEV program was paused.

This report by The Canadian Press was first published Feb. 4, 2026.