What started off as an interesting regulation with lots of potential is now turning into something very different than originally intended.
It was a long time coming: British Columbia’s Zero Emission Vehicles Act passed Third Reading and received Royal Assent on May 30, 2019, but the regulation to operationalize the legislation was not released until July 30 this year.
Some of you might be asking, what’s the big deal?
For the legal and compliance types, you might be wondering why the industry is upset about legislation that took more than a year to come into effect from the time it was passed? After all, it is generally assumed that business prefers not to be overly regulated, so the delay in the implementation of the legislation should be a good thing, right?
The delay in issuing the regulation, along with the substantive changes from the draft regulation are not good things for the automotive industry. And unless this regulation is tweaked by the B.C. government, it will have the exact opposite result of the government’s stated rationale for implementing the legislation in the first place — which was to ensure there are more zero emission vehicles (ZEVs).
This is not just the perspective of a lobbyist on the wrong end of a regulatory transaction, but rather the objective assessment of someone who has reviewed the regulation in some detail.
Officials, after indicating that the province would try to harmonize where possible with other jurisdictions, have created a final regulation that is not only unique in North America but also the most stringent ZEV mandate in North America. While this may appease the environmental community, it creates a unique and totally unanticipated compliance burden for industry.
The net effect of this change also favours vehicles with larger batteries over those with smaller batteries. Some readers might be saying “so what?” — but one thing most of us know about ZEVs is that the battery generally makes up a significant portion of the cost of the vehicle. This change runs counter to the province’s desire to get more ZEVs — and specifically more affordable ZEVs — on B.C. roads.
If we consider that the overriding rationale provided by the government for proceeding with a ZEV mandate in the first place was to get more affordable ZEVs on B.C. roads, then this regulation will actually have the opposite result —not only for the reasons noted above, but also because the regulation, as currently structured, also encourages manufacturers to place vehicles in Quebec and California instead of B.C.
Moreover, increasing the stringency of the regulation beyond anything contemplated in the broad consultation undertaken by the government last fall only means that many manufacturers will be forced into the position of either paying non-compliance penalties, or purchasing credits from other manufacturers (such as Tesla). Financial penalties and credit purchases do not equate to ZEVs on the road.
The automotive industry has always tried to work collaboratively and constructively with the Government of British Columbia on the goals of the Zero Emission Vehicles Act. While we may not agree on the need for the Act or with the focus on one technological solution to reduce greenhouse gas (GHG) emissions from light-duty vehicle transportation, we respect the government’s prerogative to introduce whatever legislation and regulations it deems appropriate.
The industry’s goal in its discussions with the government has been to try and determine ways in which the industry and government can work towards achieving the government’s goals, without decimating the automotive industry in the process. We thought that we were making reasonable progress towards this goal in the discussion with the government, pre-COVID-19. However, the pandemic brought with it only silence from the government regarding the timeline for the regulation.The ongoing delay with the publication of the regulation only served to further exacerbate one of the industry’s most problematic concerns with the legislation and regulation that was issued last month, which was the retroactive application of the regulation.
The legislation indicates that vehicles of the 2020 model year would be regulated under the legislation. For those that are not aware, a future model year can be sold on January 2nd of the current calendar year. For instance, 2020 model year vehicles could have been sold as early as January 2, 2019.
Given the long lead and production times associated with the automotive industry, even if we had the regulation last summer or last fall, it would have been exceedingly difficult for manufacturers to make any changes to their production and allocation of ZEVs at that point in time.
Given that we are now eight months into calendar year 2020, there is no possibility for manufacturers to alter their production or allocation of ZEVs, given that the 2020 model year production is all but “built-out” as manufacturers are now well into the production of 2021 model year vehicles.
While legislators are within their right to regulate however they wish, regulation in a way that is inherently retroactive in its application is both unfair and unjust —especially given the fact that the government was adversely impacted by COVID in its ability to finalize the regulation earlier than July.
We will see what happens as the industry continues to dialogue with British Columbia on this regulation. But rather than the Zero Emission Vehicles Act putting more and more affordable ZEVs on B.C.’s roads, we may well end up in a situation where manufacturers are simply paying non-compliance penalties or buying credits from other OEMs.
