2 - Managing the transition to net zero

Learn more about our recommendations for managing the transition to net zero, or click here to download the full report.

2.1 Supporting at-risk firms

The shift to electrification brings major opportunities that Canada can harness but also poses notable risks. Addressing these risks is crucial in order to both sustain and grow the domestic industrial footprint, including among the auto parts supplier base.

It is widely understood that ZEVs, specifically electric vehicles, contain far fewer complex powertrain parts than traditional gas-powered cars. Conversely, EVs contain more electrical and electronic components than gas-powered cars. In a study published through the Future of Canadian Labourforce (FOCAL) initiative, researchers examined 303 component parts connected to gas-powered vehicle engines, drivetrains, exhaust systems, fuel systems, as well as the steering and suspension systems, more than half of them were identified as non-transferrable to BEVs. The FOCAL report also identified roughly 16,000 Canadian auto parts jobs in “high impact” workplaces (i.e. those producing parts not transferrable to EVs) accounting for approximately one-fifth of all parts employment in Canada.

Expanding the footprint of electric vehicle and parts production in Canada is crucial. The greater the scale of new production capacity, the greater the opportunity for workers to continue plying their skills in this growth industry. However, governments cannot ignore the disruptive effects this transition may have on workers. Adequate protections must be in place to help workers adjust to this changing industry, upgrade skills and secure high-quality auto jobs for years to come.

  • The federal government must dedicate resources to undertake a comprehensive risk assessment of Canada’s auto parts industry. This work must be done in partnership with provincial governments and under the oversight of the proposed Ministry of Automotive Supply Chain Development, It is critical for government to understand the country’s supplier vulnerabilities, where these firms are located and develop strategies to support them. Proactively identifying at-risk suppliers and coordinating directly with them around future product plans, advising them of government supports and linking them with new customers as the EV industry grows, will enable governments to manage this transition in a constructive way. By working with unions, governments can also determine the most appropriate training and transitional supports workers need. It is also necessary to make transition supports conditional on firms maintaining both collective bargaining agreements and production in Canada.

2.2 Improving worker adjustment supports

Periods of industrial restructuring without the active participation of unions, through collective bargaining, or government, through social programs, puts workers in a vulnerable position. It is in these periods of transition that deep-seated vulnerabilities of workers surface. Employers will look to wealthy investors, shareholders and governments to raise funds, allowing them to both retool operations and maintain healthy profits. On the other hand, workers rely on their savings, personal networks as well as other supports negotiated by unions and through established government programs. Oftentimes, employers will use these periods of transition to place new demands on workers – in effect, asking workers themselves to pay for this transition through lower wages, lesser benefits and weaker work standards. Without sufficient supports that empower workers, including through income security and skills training measures as well as union protection, these transition periods can severely curtail workers’ rights.

Autoworkers around the world are experiencing this tension. For instance, Tesla is butting heads with German autoworkers union IG Metall by refusing to accept industry standard wages and working conditions at its gigafactory in Berlin. In the United States, the United Auto Workers (UAW) union appeared headed for a collision course with GM following reports that its joint venture battery company, Ultium LLC, will decide workers’ wages, suggesting no role for the union or collective bargaining. GM later walked back those comments and supported the rights of Ultium workers to organize with UAW.

Maximizing the benefit of the EV shift means looking beyond the sustained profit margins of employers. It means developing strategies and financial supports for workers who are most vulnerable to industrial transitions. It also means preserving workers’ fundamental rights to collective bargaining, decent working conditions and fair wages.

  • The federal government must develop and coordinate, along with provinces, the delivery of a constellation of job transition supports for autoworkers affected by job displacement resulting from a shift to ZEV or other significant technological change. These supports would include tailored income maintenance, labour market readiness, skills upgrading, relocation assistance, early retirement bridging, and other supports necessary to successful labour market adjustment. Dedicated federal and provincial funding to create community-based, union-run unemployed worker help centres can support these efforts. These centres would serve as local job-skills transition hubs and recruitment platforms, built on a successful model of peer-to-peer learning and support. Building structural links between this broader adjustment program and the labour market skills assessment coordination is crucial.

2.3 Making electric vehicles more affordable

One of the biggest barriers to EV adoption in Canada is their relatively high purchase price relative to gas-powered cars. In 2021, the average transaction price for a new EV was more than 20 per cent higher than the average car or truck sold in the United States. The high cost and still limited supply of advanced batteries and other component parts can partly explain this price gap. Industry watchers agree that until automakers can build and profit on EVs at a level that is comparable to conventional vehicles, consumer prices will remain above average.

A concept electric vehicle with charging port connected in background with a red vertical chevron and text In 2021, the average price for a new electric vehicle was more than 20% higher than the average car or truck sold in the United States.

Governments eager to ratchet down greenhouse gas (GHG) emissions are seeking ways to encourage faster uptake of EVs. For instance, Canada has set its sights on implementing a national sales mandate requiring ZEVs to account for 20 per cent of all new light duty vehicle sales by 2026, 60 per cent of sales by 2030, reaching 100 per cent by 2035. Other jurisdictions have taken similar measures, such as the United Kingdom, California and China.

Canada’s Electric Vehicle Sales Goals

A yellow circle graph representing 20% zero emission vehicles in 2026, a blue circle graph representing 60% zero emission vehicles in 2030 and a red circle graph representing 100% zero emission vehicles in 2026.

However, mandates alone will not encourage EV uptake. In a submission to federal consultation on ZEV mandates, Unifor argued for a “holistic” policy approach to spur EV adoption by marrying government sales mandates with major infrastructure upgrades and industrial development efforts. In fact, of all new light-duty vehicle registrations in Canada, less than 4 per cent are EVs. Virtually all are registered in either B.C. or Quebec owing to both provinces’ aggressive consumer purchase incentives.

Making this shift to electrification means addressing the affordability gap, acknowledging the price barriers and introducing meaningful supports to overcome it.

  • Doubling the iZEV rebate program to $10,000 is an immediate step the federal government can take. Provincial governments must also introduce similar and complementary consumer rebates where they are not currently in place. To ensure fair distribution of public funds, governments must also consider setting in place a dynamic income-tested rebate once market penetration for new light duty ZEV purchases crosses the 50 per cent threshold (i.e. eliminating subsidies to individuals with incomes above $200,000 and establishing a sliding scale subsidy for those below that amount).

  • Heavily affected by production downtime and supply-chain disruptions, annual Canadian and U.S. auto industry sales continue to lag pre-pandemic levels by 15 per cent and 12 per cent respectively. Developing vehicle trade-in or “scrappage” programs can simultaneously boost demand for newer, more fuel-efficient vehicles, such as EVs, and reduce overall carbon emissions by pulling higher-polluting older vehicles off the road. Such a program can apply to vehicles aged 12 years or older, the average lifespan of a vehicle, and work in conjunction with dollar-for-dollar matching incentives provided by automakers.

2.4 Expanding electric vehicle charging stations in Canada

Governments in Canada and around the world continue to encourage greater consumer adoption of battery electric cars or those powered by alternative propulsion systems. Apart from consumer price, the biggest barriers to mass adoption of EVs are so-called “range anxiety” concerns – the fear of running out of battery power during a road trip, especially as Canada’s colder climate will deplete batteries faster – and the lack of access to charging infrastructure. To address these barriers, Canada must undertake a major expansion of its electric vehicle-charging network. As of 2021, Canada’s charging network included 15,000 public or semi-private chargers, at approximately 6,500 stations throughout the country.

Analyst reports list Canada among the bottom tier of “EV readiness” due in part to slow moving efforts to expand needed infrastructure, notably chargers.

On the heels of the 2021 federal election, the Liberal government committed an additional $880 million to build 65,000 more chargers by 2026.

This expansion is in addition to other commitments made by automakers, including GM, to develop 40,000 charging stations throughout North America.

As positive as these developments seem, access to charging infrastructure must be exponentially higher if Canada is to succeed in reaching its ZEV targets. For instance, benchmarks set by European Union agencies recommend a ratio of 10 charging stations for every electric vehicle on the road.

A red and blue graph with four charging ports and thirty-nine zero emission vehicles and text four million chargers needed to support 39 million zero emission vehicles on the road.

Canada will have to significantly increase its planned infrastructure investments to meet this ratio. Specifically, the government will need to benchmark 4 million chargers to accommodate an expected on-road fleet of approximately 39 million electric vehicles based on current sales targets for ZEVs.

These concerns with infrastructure raise other considerations too. How EV owners who reside in multi-unit residential buildings or are otherwise without sufficient space to install chargers at home will access infrastructure must be addressed. Access to a variety of charging types, including levels one, two and DC (i.e. fast) charging stations, is also important and must cater to the needs of diverse communities across the country.

Ensuring that sufficient investments and expansions are made for clean, emissions-free energy production added to provincial and territorial baseload capacity are also necessary to avoid the unintended consequence of offsetting more GHG-free vehicles with higher levels of GHG-intensive power generation.

  • Establishing and communicating a national charging benchmark will provide direction for infrastructure planners as well as coordination efforts between various levels of government. A benchmark also sends a signal to prospective EV buyers to ease “range anxiety” expressed as one primary barrier to adoption. Regular monitoring is critical to ensure appropriate resource deployment and access points in various regions of the country, especially in remote communities.

    Meeting this ambitious benchmark will require further investments by all levels of government, partially funded by automakers themselves, in accordance with anticipated uptake in EV ownership. Investments include the retrofitting of public spaces, including libraries and community centres, multi-unit residential dwellings and in conjunction with the existing network of fuel stations in communities and along highway corridors.

    Increased charging capacity must include a mixture of level two and DC fast charging stations.

  • Convene a federal-provincial task force to assess existing capacity issues and opportunities for joint-investments in more GHG-free power generation, emphasizing the production of energy through renewable sources where possible.