The Quebec government takes steps to promote zero-emission motor vehicles

Global Publication August 2016

The auto industry has been preparing for this moment for some time; the Quebec government has finally decided to use legislative means to further promote growth in the number of electric cars in Quebec.

The Minister of Sustainable Development, the Environment and the Fight Against Climate Change, David Heurtel, tabled Bill 104, An Act to increase the number of zero-emission motor vehicles in Québec in order to reduce greenhouse gas and other pollutant emissions, in the Quebec National Assembly on June 2, 2016. The bill’s purpose is to increase the number of zero-emission motor vehicles and make them more accessible. To this end, the bill proposes various measures to induce motor vehicle manufacturers to offer a wider range of electric vehicles on the Quebec market. These measures, which form part of the Quebec government’s Transportation Electrification Action Plan 2015-2020 (TEAP), include a system of credits and charges that will apply to the sale or leasing of new vehicles. Manufacturers will be able to accumulate credits for the sale or lease of new vehicles that meet the following three criteria (which the government may supplement by way of regulation):

1. vehicles completely or partially propelled by electric power;

2. the battery or cell that powers the electric motor used to propel the vehicle must be rechargeable from a source not on board the vehicle;

3. vehicles must appear in the list published annually by the Minister in the Gazette officielle du Québec.

The target to be met by each manufacturer in order to earn such cumulative credits will be calculated by applying a percentage, determined by government regulation, to the total number of light vehicles sold or leased by the manufacturer. The government may also, by regulation, classify auto manufacturers by category. Thus, manufacturers will have to accumulate credits by selling and leasing new zero-emission vehicles and report annually to the government. If they have not accumulated the required credits, they will have to pay a charge as explained below. Note that dealerships are not covered by this bill.

The credits accumulated by a manufacturer may be sold or transferred (in consideration for payment or free of charge) to another manufacturer that is subject to the Act and each party to the contract will be required to report the transaction to the Minister. Although Bill 104 applies to automobile manufacturers that sell or lease over 4,500 new vehicles on average for three consecutive model years, other manufacturers (that sell or lease fewer than 4,500 new vehicles annually) may still accumulate credits that they can subsequently sell.

In addition to granting the Minister various powers, the current version of Bill 104 provides for manufacturers to pay charges (whose parameters, calculation method and conditions will be determined by regulation) if they do not accumulate a sufficient number of credits. Furthermore, the bill introduces a scheme of administrative fines, similar to those applicable under the Environment Quality Act. For example, a fine of $1,000 per day may be imposed on a manufacturer that fails to provide required information or documents. Other administrative offences subject to fines may be determined by regulation. The bill also includes penal provisions (fines of up to $600,000 for failure to provide information and $1,500,000 for hindering an official, misleading an official by concealing information or making a false declaration, with fines being doubled or tripled for repeat offences). More importantly, Bill 104 provides that where a manufacturer or its agent, mandatary or employee commits an offence under the Act or the regulations, the director or officer of the manufacturer will also be presumed to have committed the offence unless the director or officer can prove due diligence.

Bill 104 also creates a register in which the Minister will record various information required by regulation that manufacturers will have to report, as well as the number of credits allocated to the manufacturer, based on the information it has reported. The government may determine by regulation what information in the register is public. The bill also creates a register of information about administrative fines and a register of information about offences for which a manufacturer has been found guilty, both these registers will be public.

The 2018 model year will be the first year for which credits will have to be accumulated by manufacturers and for which charges may be imposed. On June 1, 2019, the Minister will determine for the first time how many credits a manufacturer has accumulated, including for sales and leases of new vehicles for the 2016 and 2017 model years.

Any sums paid under this Act or any of its regulations will be credited to the Green Fund in accordance with s 15.4 of the Act respecting the ministère du Développement durable, de l’Environnement et des Parcs.

In closing, we recall that, as part of the Transportation Electrification Action Plan 2015-2020 (TEAP), which includes various other incentives, Quebec has set a target of 100,000 registered plug-in vehicles by 2020, as the Minister observed in the news release announcing the tabling of Bill 104.

By comparison, the Ontario government has elected to simply use financial incentives to promote sale and access to battery electric vehicles and plug-in hybrid electric vehicles. The Ontario government issued a new version of its Electric Vehicles Incentive Program (EVIP) on February 10, 2016 that provides various subsidies to facilitate the purchase or lease of eligible new vehicles. In addition, a number of states in the US, including California, have adopted various standards and measures relating to zero-emission vehicles.

We will be closely monitoring the progress of Bill 104 and the special consultations that started on August 16, 2016, especially to see how the Quebec government will apply the provisions, considering that the powers granted to the Minister are particularly broad and permissive and a number of questions remain unanswered (What will the targets be? How much will the charges be? How will fines be applied?). It will also be interesting to see if the targets set will allow certain manufacturers to sell their accumulated credits to others, a system which is not unlike the carbon market also established by the Quebec government to fight against climate change.

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