Canada will freeze fleet-wide greenhouse gas emission standards for passenger cars and light commercial vehicles at 2026 levels through the 2029 model year, giving automakers additional flexibility amid trade pressures and uncertainty across the automotive industry. Annual tightening of the standards is scheduled to resume with the 2030 model year.
The decision forms part of a joint package announced by the Canadian federal government and the province of Ontario on October 21. Under the plan, the fleet-average emissions limit will remain at 172 grams of CO₂ per mile, equivalent to approximately 107 grams per kilometre, during the freeze period.
To support the longer-term objective of electric vehicles accounting for 75% of new vehicle sales by 2035, the fleet-average emissions level would ultimately need to fall to 74 grams per mile, or around 46 grams per kilometre.
Governments Cite Trade Pressures and Industry Flexibility
Canadian Prime Minister Mark Carney and Ontario Premier Doug Ford said the temporary freeze would give manufacturers more time to adapt to changing market conditions while maintaining a pathway toward lower vehicle emissions.
“Maintaining the fleet average performance standard will provide manufacturers with near-term flexibility at a time when the industry is facing trade-related pressures,” the two leaders stated in a joint declaration.
The revised framework also allows manufacturers to accumulate greenhouse gas emissions credits for future use as they gradually improve vehicle efficiency and reduce fleet emissions.
Canada and Ontario Commit CA$2.5 Billion in Automotive Support
The emissions policy changes are accompanied by additional financial support for the automotive sector. The federal government and Ontario plan to provide a further CA$2.5 billion, equivalent to approximately €1.6 billion, over two years for major investment projects.
The federal government will contribute up to CA$1.5 billion, while Ontario will provide up to CA$1 billion. The funding is intended to help companies adjust to changing economic conditions, strengthen industrial competitiveness and protect employment across automotive manufacturing and its supply chain.
The measures come as Canadian automakers and suppliers face higher costs and uncertainty linked to US trade policy. In March 2025, the United States introduced 25% tariffs on imports of cars and automotive parts from Canada, raising concerns about the future of cross-border manufacturing and the possibility of further trade restrictions.
Carney said Canadian vehicle exports to the United States had declined by more than 10% since the tariffs were introduced, while US exports to Canada had fallen by more than 20%. Automotive components can cross the Canada-US border as many as eight times during production, highlighting the industry’s dependence on integrated supply chains.
Referring to the shift in US trade policy, Carney said: “Your course has changed – and ours must too.”
Ontario, Canada’s main automotive manufacturing hub, has repeatedly warned that stricter vehicle regulations could affect industrial competitiveness and employment.
Canada Continues Its Shift in EV Policy
The decision builds on changes to Canada’s automotive strategy announced in February. Carney’s government ended the binding electric and zero-emission vehicle sales quotas introduced under former Prime Minister Justin Trudeau in 2023.
Ottawa instead placed greater emphasis on fleet-wide greenhouse gas standards, purchase incentives and the expansion of charging infrastructure. The objective of electric vehicles representing 75% of new vehicle sales by 2035 remained in place, but as a policy target rather than a binding sales quota.
The latest decision further adjusts the pace of regulatory implementation. By holding emissions limits at 2026 levels for several years, the government is reducing near-term compliance pressure on manufacturers while retaining the longer-term direction toward lower-emission vehicles.
Environmental Groups Question the 2035 Target
The decision has drawn criticism from environmental and clean-energy organisations, which argue that delaying tighter standards could make Canada’s longer-term climate and electrification objectives more difficult to achieve.
Clean Energy Canada warned that the pause could concentrate emissions reductions into the years remaining before the 2035 target. The organisation also raised concerns about potential effects on electric vehicle adoption, charging infrastructure investment and household fuel costs.
The Pembina Institute similarly questioned whether the 75% electric vehicle sales target would remain achievable under the revised regulatory framework.
Automotive manufacturers welcomed the additional flexibility. Brian Kingston, president and CEO of the Canadian Vehicle Manufacturers’ Association, said the measures would create a more predictable and competitive regulatory environment, helping support jobs, production and investment.
Steeper Reductions Expected After 2029
Canada’s revised approach leaves the long-term emissions and electrification objectives in place while postponing the next phase of tightening until the 2030 model year.
The extent to which the country can achieve its 2035 electric vehicle sales target will depend on how standards are tightened after the pause, as well as market demand, vehicle affordability, charging infrastructure and manufacturers’ investment decisions.
For automakers, the policy provides additional time to adjust production and improve fleet efficiency. However, reaching the stated long-term emissions levels will require substantially greater reductions once annual tightening resumes.