A trade war with China over EVs could slow Canada's low-carbon transition, groups warn

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

They say they fear trade sanctions could make EVs more expensive, delaying 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-made EVs, groups like Environmental Defence are urging Ottawa to consider the ramifications of such a move.

Nate Wallace, Environmental Defence's clean transportation program manager, said Ottawa should take a balanced approach to applying tariffs to Chinese-made EVs.

He said that approach should protect Canadian auto sector jobs while also allowing for the competition that can drive down the price of electric vehicles.

Wallace said North American automakers are bent on making expensive plug-in vehicles that only wealthy households can afford.

"To meet our climate goals, we can't let automakers keep EVs to a niche luxury market so they can keep selling gas guzzlers instead," Wallace said.

"I think that the danger is ... that if [tariffs] enable automakers to slow down the transition to electric vehicles. Our EV industry becomes weaker, not stronger."

Canada's auto sector 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 accordance with the federal government's new 2035 EV sales mandate.

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

The 2023 Chevrolet Bolt retails for more than $38,000.

To protect Canada's burgeoning EV market, the federal government announced Monday it would take a step toward making Chinese electric vehicle imports more expensive.

Finance Minister Chrystia Freeland announced a 30-day consultation to examine Beijing's trade practices. Consultations begin July 2.

Freeland said Monday that Canada's EV market risks being inundated with cheaper Chinese plug-ins.

"Canadian auto workers and the auto sector … are facing unfair competition from China's intentional, state-directed policy of overcapacity that is undermining Canada's EV sector's ability to compete in domestic and global markets," she said.

The United States is Canada's top supplier of EVs, followed by South Korea.

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

If Canada follows through on protectionist measures, it would be following the lead of both the U.S. and the European Union.

Critics of China's EV industry point to its large environmental footprint and low labour standards.

"[There's] no justification to trade away high-paying, high-skilled jobs for cheap and high intensive carbon vehicles built under deplorable conditions," said Lana Payne, president of Canada's largest private sector union Unifor.

Chinese EVs more carbon-intensive but still greener

While environmental groups acknowledge concerns about China's treatment of workers, they say Chinese-made EVs still emit less carbon over their life cycles than a combustion engine car.

A March analysis by the research organization BloombergNEF found that EVs in general have lower lifecycle emissions than their internal combustion counterparts.

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

It did find cars produced in the U.S. with a cleaner electricity grid produce less greenhouse gas emissions over their lifespans.

For this reason, organizations like the Simon Fraser University-based Clean Energy Canada said Canada and other nations should not be so quick to target Chinese EVs.

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

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

Canada's zero-emission vehicle incentives can be retooled, Doran said, to provide deeper discounts to EVs made in low-carbon jurisdictions.

"So a cleaner produced car, like one produced in Canada, would receive more incentives than a car produced in China, which has a dirtier grid and a higher emissions intensity," Doran said.

The Green Party of Canada also criticized the push to slap tariffs on Chinese EVs and other clean technology.

"The recent decision by the Biden administration to impose new tariffs on Chinese goods has prompted Canada to consider similar measures," a statement from the party read.

"However, the Green Party insists that climate implications must govern trade policy decisions."