Canada freezes passenger-car CO2 rules through 2029

By Daniel Okafor

Canada will hold the passenger-car fleet greenhouse-gas limit at 172 grams per mile—about 107 grams per kilometre—through the 2029 model year, with annual tightening resuming only from 2030, under a joint federal-Ontario decision announced on 21 October.

What changes on 21 October?

The decision keeps the fleet-wide standard at 172 grams per mile for the 2029 model year and allows manufacturers to accumulate greenhouse-gas credits for future years while they gradually improve vehicle emissions and fuel efficiency.

Prime Minister Mark Carney and Ontario Premier Doug Ford said in a joint declaration: “Maintaining the fleet average performance standard will provide manufacturers with near-term flexibility at a time when the industry is facing trade-related pressures.”

The pause gives automakers room to maneuver, but it does not remove the 2035 endpoint.

How much support comes with the pause?

The same package includes a plan to provide a further CA$2.5 billion, approximately €1.6 billion, over two years for major automotive investment projects.

• Federal government: up to CA$1.5 billion
• Ontario government: up to CA$1 billion

The funds are intended to help companies adapt to changing economic conditions, strengthen their competitiveness and secure jobs along the automotive supply chain. The announcement is a public-funding plan, not a completed investment program.

The pause comes with substantial public support, though the two-year rollout remains the next test.

Why did Ottawa and Ontario move now?

The decision follows the 25% US tariffs introduced in March 2025 on imports of Canadian cars and auto parts. The Trump administration may raise those tariffs further.

At the presentation of the measures, Carney reported:

• Canadian car exports to the US had fallen by more than 10% since the tariffs took effect.
• US exports to Canada had declined by more than 20%.

“The border is now part of the operating model,” Carney said in explaining the policy shift. “Your course has changed – and ours must too,” referring to the US government.

The trade shock does not end with finished vehicles. Components of an average car cross the border between the two countries up to eight times.

Canadian automotive production is closely intertwined with US production, and cross-border supply chains have remained under strain. Ontario is the hub of Canada’s automotive industry. Premier Ford had repeatedly warned that stricter regulations could hurt competitiveness and employment.

Ottawa and Ontario are treating vehicle standards as part of their answer to a border trade shock.

Can Canada still reach 75% electric sales by 2035?

The decision continues a policy realignment Carney’s government announced in February. It abolished the binding electric- and zero-emission-vehicle sales quotas introduced under his predecessor, Justin Trudeau, in 2023. Ottawa instead emphasized fleet greenhouse-gas standards, purchase incentives and charging-infrastructure expansion.

The target of 75% electric-vehicle sales in new-car registrations by 2035 remains, but it now serves as a political benchmark rather than a binding sales quota.

Clean Energy Canada warned that the pause would increase pressure on the remaining years and make the long-term target harder to achieve. It also identified possible consequences for electric-vehicle adoption, charging investment and household fuel costs. The Pembina Institute likewise questioned whether the 75% target remains achievable under the revised framework.

The automotive industry welcomed the additional time. Brian Kingston, president and CEO of the Canadian Vehicle Manufacturers’ Association, said the measures create a more predictable and competitive regulatory environment that could help protect jobs, production and investment.

The target survives on paper, with more of the burden pushed into later model years.

What should automakers watch next?

To make the 2035 goal viable, the fleet average must ultimately fall to 74 grams of CO2 per mile, or about 46 grams per kilometre, from today’s 172 grams per mile. Canada has shifted the pressure rather than erased it.

The next checkpoints are the allocation of the two-year investment funding, the use manufacturers make of accumulated emissions credits and the pace of tightening set for the 2030 model year.

Canada has bought a pause. The harder accounting starts in 2030.