From the Fraser Institute

By Kenneth P. Green

Lee Zeldin, administrator of the U.S. Environmental Protection Agency (EPA), recently announced that the EPA will scrap a 2009 Obama-era “Endangerment Finding” that held: “The Administrator finds that the current and projected concentrations of the six key well-mixed greenhouse gases—carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), and sulfur hexafluoride (SF6)—in the atmosphere threaten the public health and welfare of current and future generations.”

After its 2009 enactment and 2016 reaffirmation, according to the U.S. Congressional Research Service, the Endangerment Finding would be the legal rationale to set greenhouse gas (GHG) emission standards for cars and light trucks, power plants, and facilities in the oil and gas sector.

There will no doubt be legal challenges to the Trump administration’s decision to terminate the finding (as there seemingly is for everything Trump), however in the event that it proceeds (and it likely will), one can expect to see the elimination of a fair number of large-scale environmental regulations that could have ripple effects on the Canadian economy.

From a Canadian perspective, the most important aspect of the repeal is that it will likely lead to the complete withdrawal of the U.S. federal government’s support of vehicle electrification. The Trump administration has already killed electric vehicle (EV) mandates and federal subsidies for the purchase of EVs, but remaining production mandates for car companies (under the guise of EPA fleet fuel-economy standards) are also likely to end, and with that, EV manufacturing and sales will likely plummet. This will leave EVs in the niche they’ve held—novelty items for hobbyists or luxury toys for well-heeled eco-virtue signallers. And California can’t bail this one out—its own authority to set more stringent environmental standards for vehicles emissions has also been terminated, along with its ability to drive the EV revolution forward.

So, policymakers in Canada should shelve (or drop into the round file) any expectation of exporting significant EV-related goods into the U.S. market. At the least, governments should suspend or eliminate Canadian EV sales mandates and “investments” based on an expected U.S. market for such goods, unless governments want to give taxpayers a soaking.

The federal government, and some provincial governments, may choose to continue supporting vehicle electrification within Canada and the creation of export capacity for EV parts and components (such as batteries) outside of the U.S. market for any number of reasons. They might justify this support based on concerns over air quality or GHG emissions. However, the logistics of such endeavours, particularly tech sales out of North America, would be daunting. EV components tend to be heavy, require exotic materials and long costly shipping lines to Europe, Asia and points abroad. And planning to sell EV components to Asia is like preparing to sell ice to the Inuit or carrying coal to Newcastle.

Canada’s vehicle electrification fixation has been dubious from the start, much like the U.S. fixation, due to the vast transport distances, rugged topography, inadequate and unaffordable battery tech and charging capacity, and in some precincts, a great deal of cold weather.

But whether one agrees with the death of the Endangerment Finding or not, a pragmatic observer should recognize that, for the next good while at least, the United States is pulling the plug on North America vehicle electrification and subsequently any expectations of profit from the previous EV regulatory milieu. For Canada, I’d argue, that means killing the EV mandate and cancelling/trying to claw back as much of the government’s “investments” in EV and EV battery technology and manufacturing as quickly as possible.

Kenneth P. Green

Senior Fellow, Fraser Institute