After weeks of sheltering in place, many of us will emerge from our homes to be together but at a distance, with some of us being called back to work and to school. After months of “commuting” via video conference, shopping online and even visiting family and friends via the internet, this means we are going to start moving again, and for most Canadians that means we are going to start driving again.
When the pandemic hit, Canadians were spending over 200 hours per year in their cars, driving a total of more than 300 billion kilometres a year – 2,000 times the distance from the earth to the sun. The cost of owning and maintaining private automobiles comprises a larger share of household spending than food, clothing or any other household expense except shelter, even without including the share of taxes that goes to building and maintaining the transportation infrastructure. Yet cars are parked 95% of the time and are increasingly slowed down by traffic congestion during the 5% of the time they are actually being used.
We know that the gasoline-powered mobility system is not sustainable. Transportation accounts for 25% (185 megatonnes of carbon dioxide equivalent) of our total national greenhouse gas emissions, and between 1990 and 2018, GHG emissions from transportation grew by an eye-watering 53%. The trend is sobering and should make us reflect. In cities, our cars, SUVs and pickup trucks as well as the light freight vehicles that deliver our e-commerce purchases account for as much as 50% of the urban carbon footprint, bringing with it the air pollution that shortens the lives of children and adults alike.
Canada’s aspirations to make the transformation to a low carbon economy are not achievable without deep reductions in personal vehicle emissions. Transportation remains a major and growing source of GHGs and air pollution. When we turn our attention to how we will restore our lives and our economy once the pandemic passes, the future of the system of our transportation and mobility services emerges as a key question. The post-COVID recovery presents a historic opportunity to make major improvements in Canada’s transportation system.
What would it take?
The Active and Safe Mobility Fund and Free and Safe Transit Fund
Physical distancing has encouraged new habits that depend on walking and cycling rather than driving and taking public transit. Let’s try to keep some of these new habits.
A number of cities are enabling more people to walk and cycle while maintaining physical distance by converting roads into pedestrian and cycling areas. There are several cities globally that are implementing low-emission zones (LEZ) or zero-emission zones (ZEZ), sometimes called exclusion zones. Currently, there are no such zones in Canada. –Some cities, such as Vancouver, are considering zero-emission zones, but no formal zones have been implemented. Low-emission zones benefit the health of residents thanks to reduced air and noise pollution resulting from a general reduction in vehicles entering the area. They can also be a source of revenue for the city implementing the policy, money that could in turn be redirected toward environmental initiatives and perhaps electric vehicle incentives.
In some cities, the thinking has shifted from giving preferential treatment to zero-emission vehicles to prioritizing pedestrians and cyclists and other active mobility as a way of getting around. For example, Milan has announced that over the summer, 35 kilometres of streets will be expanded for increased cycling and walking space to protect residents as COVID-19 restrictions are lifted. Closer to home, Vancouver banned vehicular traffic in Stanley Park, with the roads remaining open to joggers and cyclists. The change is temporary, but there are voices calling to implement the policy permanently. In general, active mobility corridors have several benefits, including reduced air pollution, greater opportunities for outdoor recreation in cities and incentives to use active mobility modes for transport instead of cars – once again improving the general health of the population. And spaces for active mobility where the air is clean may also play an important role for recreation that is affordable for families living with the economic fallout of COVID-19. That is why our first proposal for creating jobs by building back better mobility is for an Active and Safe Mobility Fund.
This fund would support communities by creating permanent corridors for safe and active mobility for people walking and cycling to work and school, while maintaining physical distancing. The grants would be available for all permanent active mobility corridors that municipalities implement within the next 12 months. This program would put people to work right away by leveraging the pressing need for safe, active mobility.
In addition, we are proposing a Free and Safe Transit Fund. This fund would ensure that people have free access to transit throughout all of Canada’s municipal transit systems for one year. It would require $6 billion in stimulus spending, which would flow directly into the pockets of people, with a strong tilt toward lower-income groups, where the GDP multipliers are highest. This fund will support essential and other workers who rely on public transit at a time when every dollar counts. It will also ensure that students are able to get to school without worrying about the cost of transit fare. The fund will guarantee the revenues that user fees have previously represented. It will also provide the cash needed to enable transit authorities to hire additional staff to clean the surfaces of vehicles and cars.
Where greater distances make walking and cycling unfeasible, and where transit is not able to meet mobility needs, we need to take a deeper look.
Electric vehicles are a must-have
The reductions in the cost and improvements in the performance of electric vehicles are reminiscent of an earlier historical period, exactly 100 years ago. In 1920, in the wake of the global influenza pandemic, relatively few Canadian households owned a car. Ten years later, half the households in Canada had a private automobile. Every year throughout the 1920s, the price of owning a car dropped and the comfort and performance of the cars improved. We are at a similar fork in the road with electric vehicles. They are so much more efficient than fuel-powered cars that in spite of the higher cost of electricity, they cost much less to operate than cars that run on fossil fuels (about 80% less) and need less maintenance. The total cost of ownership over the lifetime of an electric car is now lower than for a gas-powered vehicles in most cases, and sticker-price parity with gas-powered cars is expected within the next three or four years.
There is another interesting parallel with the early history of the car in Canada. In the 1920s, the roads infrastructure and fuel distribution systems to support the burgeoning car population lagged behind the growth in car sales, as did consumer credit support for car purchases. Governments scrambled to build and pave the roads, and financing innovations paved the road to affordability for average families. Electric cars now face a similar situation – the cars are ready and Canadians are ready, but the financing and charging infrastructure lags behind.
By switching from gas and diesel to electricity for transportation wherever it’s feasible, it is possible to save money while making our drive to a net-zero emissions economy a reality. The situation is reflected in the federal government’s current goal for zero-emission vehicles (ZEVs), which is to capture 10% of all passenger vehicle sales per year by 2025, 30% by 2030 and 100% by 2040.
However, Canada’s rate of zero-emission car, truck and bus deployment lags far behind that of other cold-climate peers – like Norway, where in 2019 electric vehicles represented 56% of all new cars sold (with the goal of electric vehicles being 100% of all new car sales by 2030). In Canada, electric vehicles, including hybrids, represent only 3.5% of passenger vehicle sales. In 2018, the market share of battery electric vehicles (BEVs) in Norway was 29.5%, while Canada lagged far behind at only 1.2%, in the company of the United States (1.62%) and Germany (1.05%).
If our goal is to reach net-zero GHG emissions by 2050, why is Canada stalled? There are many moving parts to the mobility and transportation market, but there are at least four areas we need to improve:
- providing loan guarantees to buyers where credit markets are still emerging (i.e. leasing and lending structures);
- accelerating investment in public infrastructure on which carbon-free vehicles depend (i.e. EV charging stations);
- broadening eligibility for incentives to make up for the difference in price between new carbon-free vehicles and internal combustion vehicles (i.e. including fleets as eligible for EV incentives); and
- attracting investment to establish competitive supply chains (i.e. to process minerals needed to make batteries, as well as make and assemble components for EVs and charging stations and to assemble electric vehicles).
Canada has programs in place to address some of these elements but needs to do much more. So let’s look at how stimulus programs by the federal government can contribute to creating efficient credit markets; increase EV purchases by individuals, businesses and public institutions; build charging infrastructure; and attract investments to create supply chains for a variety of EVs, including private automobiles, transit and school buses, and light freight trucks.
Establish efficient carbon-free lending for EVs
Let’s start with the consumer who wants to buy an EV. Buying a car became easier over the 20th century, ever since Henry Ford put his mind to making the purchase of a Model T something his employees could manage on the salaries he could afford to pay them while still keeping the price of the Model T down. To make things work, his employees needed to pay for their cars over time. The solution was for the banks to treat the car as an asset that could be used to underwrite the loan needed to buy the car. Doing this was a little tricky because in order to have “security,” the banks needed to know the value of the car from the time it rolled off the production line and was purchased, and each year thereafter for the duration of the loan. With this information, a bank could lend money for a car purchase because if the borrower could not pay back the loan, the bank could take back the car and sell it to repay what was owed. The risk of default was therefore very low, and as a result buying or leasing a car could cost only a little more than the “sticker price.”
Fast forward to today.
Anyone who has tried to lease an EV in Canada has experienced sticker shock. And the shock is not from the price difference between the EV version of a car model and the ICE edition. The incentives mentioned above address most of that gap. The shock is from the cost of financing the vehicle: banks currently have little historical data on what the value of an EV will be at the end of the lease period, so the monthly lease payments for an EV are much higher, because of unrealistic worst-case actuarial assumptions that the EV will experience maximum depreciation over the course of the lease. That means monthly payments for an EV lease are often twice those of its ICE equivalent. Just like when Henry Ford started selling Model Ts, banks don’t yet have sufficient information on the value of an EV in each year of life after purchase, to the end of its useful life. Similar to our deep-retrofit finance proposal, we propose a federal guarantee of EV automotive loans over a period of three years to enable banks to collect data on the real residual value of EVs so that they can be financed in the same way as ICE vehicles are today.
Incentives for carbon-free ride sharing
Electric vehicles are starting to make their way into the Canadian market, but, as stated, we have not been quick off the mark. In 2018, only 1.2% of new motor vehicles registered in Canada ran completely on batteries, with no reliance on an internal combustion engine. That was a near doubling of sales from 2017, but we are a long way from the market share penetration of battery electric vehicles (BEVs) in another cold, sparsely populated, oil-producing economy: the market penetration of BEVs in Norway was 25 times higher than ours in 2018, at 29.5% of all registered cars. And in Canada, the up-take is much higher in some provinces than others, with 97% of EVs registered in 2018 in three provinces: Quebec, Ontario and British Columbia.
One way to make progress fast is through car-sharing services such as EVO and Communauto, which have grown in popularity. These services enable us to access a fleet of shared cars when we need it. They are hugely popular in cities like Paris, where many people have forgone the financial burden of owning, maintaining and insuring a car and the hassle of finding and paying for parking. Instead people are opting to use the EV fleet operated on behalf of the city of Paris. These EVs are parked next to charging stations in hundreds of prime locations designated by the city.
Ride-hailing services such as Uber and Lyft have also grown quickly. Like car-sharing services, these are part of the growing category referred to as “mobility as a service” (MaaS). They have proven to be popular, but today, more than 50% of vehicle kilometres travelled (VKTs for short) are with no passengers in the vehicle. This has led researchers to conclude that ride-hailing services produce 69% more emissions than the trips they displace. That’s a steep price to pay for the convenience of instant mobility when the cars that provide that service are powered by ICEs. So to make ride hailing more economical for drivers and lighten these services’ environmental and health impacts, converting these cars to electric vehicles is a priority. For this reason, we propose that the existing federal zero-emissions vehicles program be extended to include ride-sharing and ride-hailing fleets (and that these incentives be available upfront rather than after purchase). Because BEVs cost less to operate than ICE vehicles, this program puts money in the pockets of drivers within one year.
On your marks, get ready, install more EV charging stations
Charging stations, either at home or on the way to and from our destinations, need to be available for us to be able to use our EVs – just as is the case with ICE cars and gas stations. In light of the slow growth in EV use in Canada, it’s not surprising that Canada’s position on EV charging stations also needs a big boost.
With 5,004 charging stations, Canada’s ratio of charging stations to 100,000 inhabitants is 13.4, which is 35% that of France, 41% that of Germany, 47% that of the UK and only 7% of that of Norway (which has 186 charging stations per 100,000 inhabitants!). The current focus of the federal Zero Emission Vehicle Infrastructure Program (ZEVIP)*, targeted at owners and occupants of multi-unit residential buildings (MURBs), is primed and ready to support the installation of charging stations within the year. But more could be done to speed up the deployment of charging stations where people live and work.
The ZEVIP program has $130 million in funding over five years and covers 50% of the cost of charging installation for eligible transit, workplace, fleet, on-street and multi-unit residential projects. To accelerate the stimulus impact of installation jobs over the next 12 months, this program could be expanded to cover 100% of the expense of installing charging infrastructure (80% grant, 20% loan guarantee), with a focus on fleets and professional drivers to help reduce business costs during the economic downturn. The program could also be expanded to enable transit operators to prepare to operate electric buses and for the next 12 months – as we have recommended for EV purchase incentive– should be based on delivering funding in advance of the EV installation project, rather than after project completion.
To grow Canada’s EV charging infrastructure to levels approaching those of other advanced economies, this program could include hard targets of 1,500 public fast-charging stations; 10,000 stations for cars, SUVs and pickup trucks; 1,000 for fleet use, including local delivery vehicles; and 1,000 for transit to support bus electrification over the next 12 months.
On your marks, get set, electrify the Trans-Canada Highway
Public charging stations are a key piece of the puzzle to ensure we get the electric vehicle growth we need. Connecting us from West to East and acting as the backbone for many roads “inland” is the Trans-Canada Highway. But efforts to electrify the Trans-Canada have not been realized, and there are interoperability issues with current charging stations. In some cases, matters are complicated by contractual arrangements for highway rest stops that are physically on Crown land but are governed by long-term leases held by companies that sell gasoline and diesel as well as provide food and services to travellers. With COVID-19, traffic to these rest stops is, and is likely to remain, depressed.
For this reason, we have proposed the Electrify the Trans-Canada Highway program, which would leverage existing programs to deliver a public alternative in the form of 500 ultrafast charging stations, each containing 10 slots to charge passenger vehicles in five minutes and two slots for heavy freight haulers ultrafast charging. This would do for electrified transportation what the National Dream did for rail.
Leveraging Canada’s EV supply chain to create an EV manufacturing hub
Our last proposal is to be ready to seize the opportunity to attract investment to establish a competitive Canadian supply chain for electric vehicles. Canada has a number of companies today that are making and assembling parts for electric buses and light freight trucks. It also has tier-one automotive manufacturers, as well as world-class nickel resources, which are key minerals for electric batteries.
As part of a low-carbon recovery, Canada can build on this advantage to establish an EV manufacturing hub to harness the economic benefits of the growing global market for ZEVs. Creating an EV manufacturing hub could be accomplished with a dedicated industrial development strategy to identify potential clusters of expertise for expansion. Stimulus could play a part in this through a federal incentive of 50% for the cost of new facilities that create jobs (half grant, half loan guarantee). Ensuring that Canadians have the benefits of our move to zero-carbon transportation requires us to be competitive and ready to attract the industrial infrastructure for carbon-free vehicles and trucks.
Building Back Better Transportation
Tens of thousands of jobs could be created over the next 12 months with programs to support the electrification of transportation and construction of new cycling infrastructure. Many of the investments, such as those in charging infrastructure, facilitate and leverage much larger investments in the electrification of the transportation sector. Incentives for companies that are manufacturing EV components can help put Canada on a low-carbon recovery pathway and create good jobs. Transportation currently accounts for 25% of Canada’s emissions. These investments could reduce GHGs by at least 12 Mt CO2e per year by 2030, improve air quality, save drivers money and benefit people’s health by making active and public transportation more accessible.
Stimulus investments to create jobs
The Government of Canada has made commendable progress over the last five years in the establishment of programs to increase the number of zero-emission vehicles (ZEVs) on Canada’s roads. To stimulate jobs over the next 12 months, these programs need to be turbocharged in a time-limited way, including:
- Active and Safe Mobility Fund: Cycling and other modes of active transportation are important for reducing congestion and GHG emissions in cities, and can provide economic opportunities for tourism in smaller communities. Many municipalities have a roster of cycling infrastructure projects awaiting funding. Federal funding for projects that can begin construction in the next 12 months could create construction jobs, enhance cycling infrastructure and improve the health and safety of residents.Cost: $2 billion
- Free and Safe Transit Fund: This proposal would ensure that people have free access to transit throughout all of Canada’s municipal transit systems for one year. Funds would flow through existing programs It will also provide the cash needed to enable transit authorities to hire additional staff to clean the surfaces of vehicles and cars.
Cost: $6 billion
3. Installation of charging infrastructure (national): The current Zero Emission Vehicle Infrastructure Program (ZEVIP) and Electric Vehicle and Alternative Fuel Infrastructure Deployment Initiative (EVAFIDI) cover 50% of the cost of charging installation. To kickstart installation jobs in the near-term, the government could launch new fast-track requests for proposals (RFPs) and would provide the financing in advance for any proponents able to complete projects over the next 12 months and ensure the program is sufficiently funded to support eligible projects. A loan guarantee should be provided for the additional cost for proponents that need it.
To have the desired job-creation impact in the near-term, the delivery of the program funding will need to be streamlined and efficient, using financial institutions to speed delivery if needed. The priority should be placed on projects that help fill gaps in the current Trans-Canada network and improve interoperability.
4.Installation of charging infrastructure (local): To kickstart installation jobs in urban areas, federal support for the cost of installation and electricity upgrades could be provided to building owners, homeowners, municipalities, utilities and other businesses. This should include DC and Level 2 chargers and be in the form of 50% grant and 50% loan guarantee for projects that can be completed over the next 12 months. Electric vehicles can also provide distributed storage and peak management services to the new electricity system that is emerging, but only if the charging infrastructure is “vehicle-to-grid” ready.
5.Incentives for ZEV fleet purchase: The current iZEV program provides a point-of-sale rebate for the purchase of a ZEV up to $5,000 per vehicle. Over the next 12 months, passenger fleets could be further incentivized to purchase ZEVs by: doubling the incentives from $5,000 to $10,000 for fleet vehicles
- doubling the incentives from $5,000 to $10,000 for fleet vehicles (for 12 months)
- providing a loan guarantee for the remainder of the vehicle cost, secured by the government;
- simplifying the process for consumers with a one-window approach for the loan and rebate at the time of purchase; and
- removing the cap on the number of vehicles per business for “mobility as a service” companies such as car sharing, taxi companies and ride hailing to support uptake among those for whom the current tax incentive does not apply.
This could help these businesses and drivers save an estimated $6,000 to 8,000 per year per vehicle on operating costs and support businesses that manufacture ZEV components. In addition, a new rebate should be available for heavy duty vehicles to support the conversion of delivery truck fleets. This rebate should significantly help close the gap between the cost of purchasing fossil fuel vehicles compared to ZEVs.
Recovering with zero-carbon transportation jobs
6. Creating an EV manufacturing hub: Canada already has businesses with expertise in batteries, auto-parts manufacturing, assembly, autonomous vehicle technology and materials. As part of a low-carbon recovery, Canada can build on this advantage to establish an EV manufacturing hub to harness the economic benefits of the growing global market for ZEVs. This could be accomplished with a dedicated industrial development strategy to identify potential clusters of expertise for expansion and a federal incentive of 50% for the cost of new facilities that create jobs (half grant, half loan guarantee).
7. ZEV Mandate: Canada can send a strong signal to ZEV suppliers by adopting a federal ZEV mandate that ensures Canada meets its targets for zero emissions light duty vehicles of 10% by 2025, 30% by 2030 and 100% by 2040. A mandate for manufacturers would ensure that Canadians have access to ZEVs and create additional incentive for the establishment of an EV manufacturing hub.
As was the case with our proposals for green buildings and green power, the same kinds of “new normal” innovations have been making their way into the mobility sector for some time – changing how we access transportation services. These big changes are coming to the array of ways we rely on to access our workplaces, to see friends and family, for freight delivery to bring the food we eat to nearby stores, to deliver parcels and all of the millions of moving parts in the transportation system that keeps the economy going.
*Program name corrected.
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Ralph Torrie is senior associate with Sustainability Solutions Group and partner at Torrie Smith Associates.
Céline Bak is the founder and president of Analytica Advisors.
With files from Gilliean McEachern, Toby Heaps, Aleena Naseem and Laura Väyrynen
Notice to reader: Please be aware some of the figures and other details in this white paper have been updated in the Final Report to reflect feedback.