A trade war with China over electric vehicles could slow Canada’s transition to a low-carbon economy, groups warn

Environmental groups are calling on the federal government to avoid a trade war with China over electric vehicles.

They say they fear trade sanctions could make electric vehicles more expensive, slowing Canada’s transition to a low-carbon economy.

Less than a week after the federal government announced it was considering imposing trade restrictions on cheaper Chinese electric cars, organizations like Environmental Defense are urging Ottawa to consider the consequences of such a move.

Nate Wallace, Environmental Defense clean transportation program manager, says Ottawa should take a balanced approach when applying tariffs to Chinese-made electric vehicles.

He said this approach should protect jobs in Canada’s auto sector while allowing for competition to drive down the price of electric vehicles.

According to Wallace, North American automakers are determined to make expensive plug-in vehicles that only wealthy households can afford.

“To meet our climate goals, we cannot allow automakers to keep electric cars in a luxury niche market so they can continue to sell gas guzzlers instead,” Wallace said.

‘I think the danger is… that if [tariffs] enable car manufacturers to slow the transition to electric vehicles. Our EV industry is getting weaker, not stronger.”

The Canadian auto industry faces a number of challenges in the coming years. In a decade, many will need to retool their supply chains and operations to sell electric vehicles in line with the federal government’s new 2035 electric vehicle sales mandate.

The sector is competing with China, the world’s largest EV producer. Chinese automakers can build cheaper and more technologically advanced EVs. The cheapest EV from market leader BYD, the compact Seagull, sells for around $13,000.

The 2023 Chevrolet Bolt has a retail price of over $38,000.

In a bid to protect Canada’s rapidly growing EV market, the federal government announced Monday that it will take a step toward making Chinese electric vehicle imports more expensive.

Finance Minister Chrystia Freeland announced a 30-day consultation to investigate Beijing’s trade practices, starting on July 2.

Freeland said Monday that Canada’s EV market is at risk of being flooded with cheaper Chinese plug-ins.

“Canadian auto workers and the auto sector … face unfair competition from China’s deliberate, state-led policies of overcapacity, which undermine the ability of Canada’s EV sector to compete in domestic and global markets,” she said.

The United States is Canada’s largest supplier of electric vehicles, followed by South Korea.

China is in a close third place and its market share is growing. Tesla is making a version of its popular electric vehicle in China for sale in Canada.

If Canada goes ahead with its protectionist measures, it would follow the lead of both the US and the European Union.

Critics of China’s EV industry point to its large carbon footprint and low labor standards.

“[There’s] “There is no justification for trading well-paid, highly skilled jobs for cheap, high-carbon, high-intensity vehicles built in appalling conditions,” said Lana Payne, president of Canada’s largest private union, Unifor.

Chinese electric vehicles are more carbon intensive, but still greener

While environmental groups are concerned about the treatment of workers in China, they say electric cars produced in China still emit less CO2 over their life cycle than internal combustion engine cars.

An analysis by research organization BloombergNEF in March found that electric cars generally have lower life-cycle emissions than cars with a combustion engine.

According to that analysis, even electric vehicles produced and driven in China – with its carbon-intensive electricity grid – have a smaller carbon footprint than internal combustion engines.

However, it turned out that cars produced in the US and with a cleaner electricity grid emit fewer greenhouse gases over their entire lifespan.

For this reason, organizations like Clean Energy Canada, based at Simon Fraser University, said Canada and other countries should not be too quick to target Chinese electric vehicles.

“For those who are concerned about choosing an electric vehicle because it doesn’t have an environmental benefit, it certainly does have an emissions benefit,” said Rachel Doran, vice-president of policy and strategy at Clean Energy Canada.

Clean Electricity Canada said the federal government must look beyond tariffs to ensure the competitiveness of North American automakers.

Canada’s zero-emission vehicle incentives could be adjusted, Doran said, to provide larger rebates for electric vehicles made in low-carbon jurisdictions.

“So a cleaner car, like one made in Canada, would have more benefits than a car made in China because the grid is dirtier and the emissions are higher,” Doran said.

The Green Party of Canada also criticized the push to impose tariffs on Chinese electric vehicles and other clean technology.

“The Biden administration’s recent decision to impose new tariffs on Chinese goods has prompted Canada to consider similar measures,” a statement from the party said.

“However, the Green Party emphasises that climate impacts should drive trade policy decisions.”