Introduction

On February 5, 2025, the Canadian government announced a major revision to its electric vehicle policy. The government decided to scrap its national EV sales mandate and replace it with a policy mix that combines stricter vehicle emissions standards, expanded purchase incentives for electric vehicles, and increased investment in charging infrastructure. Prime Minister Mark Carney explained that the policy shift was intended to focus on emissions outcomes while avoiding undue burdens on the domestic auto industry.

The announcement came shortly after the European Commission moved to soften regulations that would have effectively phased out the sale of gasoline and diesel vehicles. While the Canadian government did not cite low EV adoption rates as a direct reason for its policy change, a common thread across regions is that governments are adjusting their approaches amid a global context in which EV adoption has progressed more slowly than originally anticipated. This article examines how the US, the EU, and Canada are responding in different ways to the shared challenge of slower EV adoption.

Why EV Adoption Is Lagging Behind Expectations

The reassessment of EV policies across major economies reflects a growing recognition that the pace of EV adoption has fallen short of initial policy assumptions. In Europe, the European Commission has pointed to persistently weak consumer uptake of electric vehicles as one of the factors behind its decision to soften plans related to the phaseout of internal combustion engine vehicles.

This concern has been articulated most clearly by the European Automobile Manufacturers’ Association. In calling for greater regulatory flexibility, ACEA Director General Sigrid de Vries stated:

“2030 is around the corner, and market demand is too low to avoid the risk of multi-billion-euro penalties for manufacturers.” She also said, “It will take time to build the charging points and introduce fiscal and purchase incentives to get the market on track. Policy makers must provide breathing space to manufacturers to sustain jobs, innovation and investments.”

Her remarks underscore that slower EV adoption is not simply a matter of consumer preference. Rather, it reflects structural challenges, including insufficient charging infrastructure, the timing of fiscal support, and the scale of investment required from manufacturers. When regulatory requirements advance faster than market readiness, policy risks can spill over into industrial competitiveness, employment, and long-term investment.

Canada: From Sales Mandates to Emissions Outcomes

Canada’s policy reset should be understood within this broader international context. While scrapping the EV sales mandate, the government has indicated that it will introduce more stringent vehicle emissions standards for model years from 2027 to 2032.

At the same time, Canada has rolled out a substantial package of financial incentives to support both EV adoption and the automotive industry’s transition. According to Prime Minister Carney, the government will provide C$2.3 billion to fund incentives of up to C$5,000 per vehicle for EV purchases or leases by individuals and businesses. In addition, C$1.5 billion has been earmarked for the expansion of EV charging infrastructure, and up to C$3.1 billion will be allocated to support Canada’s auto manufacturing sector as it manages the costs associated with electrification.

The Canadian government has emphasized that this policy shift is not driven by EV adoption rates alone, but by a desire to prioritize emissions reductions while avoiding excessive compliance burdens on manufacturers. By combining emissions standards, purchase incentives, and industrial support, Canada is aiming to pursue a more flexible and market-aligned transition pathway.

The European Commission: Maintaining Long-Term Targets While Adding Flexibility

Through initiatives such as the European Green Deal, the EU has long positioned itself as a leader in EV policy. However, at the end of last year, the European Commission announced plans to ease its proposal to end sales of new gasoline and diesel vehicles by 2035. Under the revised approach, zero-emission vehicles would account for 90 percent of new car sales, rather than 100 percent, with the remaining share allowing hybrids and vehicles with internal combustion engines.

The EU is also seeking to reduce emissions across the full vehicle lifecycle by requiring the use of low-carbon steel and encouraging greater reliance on biofuels and so-called e-fuels. While these measures reflect an attempt to align climate goals with industrial realities, critics argue that increased flexibility could slow the momentum of the EV transition and weaken Europe’s competitive position against foreign manufacturers.

What This Means for Companies

Taken together, developments in the EU, and Canada illustrate that the transition to electric vehicles is unlikely to follow a single, linear path. Differences in policy tools, timelines, and market conditions mean that companies operating across regions must plan for multiple regulatory scenarios.

This is particularly relevant for the management of transport-related Scope 3 emissions. Rather than relying on a single EV-centric assumption, companies increasingly need flexible decarbonization strategies that account for policy volatility and uneven market readiness. Continuous access to reliable emissions data and the ability to adjust strategies in response to changing conditions are becoming critical capabilities.

Conclusion

Canada, the EU are all grappling with the same underlying challenge: EV adoption is advancing more slowly than policymakers once expected. Their responses differ, but these policy adjustments should be seen less as a retreat from climate ambition than as an effort to reconcile long-term decarbonization goals with economic and industrial realities.

As the overall direction toward vehicle electrification remains intact, companies cannot base their strategies on policy certainty alone. In an environment of shifting regulations and market conditions, resilience, flexibility, and data-driven decision-making will play an increasingly central role in sustaining competitiveness.

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