Canada Announces Return of ZEV Incentives of $5,000 on Any Canadian-Made EV
Prime Minister Mark Carney announced today that federal incentives for zero-emission vehicles (ZEV) are returning. As before, the new five-year EV Affordability Program promises tax breaks of up to $5,000 for fully electric vehicles (EVs) and hydrogen fuel cell electric vehicles (FCEVs), as well as $2,500 for plug-in hybrid vehicles (PHEVs), but there some twists.
The first change is that those incentives will only be available on vehicles with a final transactional value of $50,000 if they’re imported from a country with which Canada has a free trade agreement. If the ZEV is assembled in Canada, though, the incentive is available no matter how much the vehicle costs.
In addition, Buyers will only be able to get the full $5,000 incentive in 2026, though. Buyers will be eligible for less and less until 2030, when EVs and FCEVs are eligible for just $2,000 in incentives, and PHEVs are eligible for just $1,000.
Buyers can start applying for federal ZEV incentives as of February 16, 2026.
| Vehicle type | 2026 | 2027 | 2028 | 2029 | 2030 |
| EV or FCEV | $5,000 | $4,000 | $3,000 | $3,000 | $2,000 |
| PHEV | $2,500 | $2,000 | $1,500 | $1,500 | $1,000 |
Canada Invests in EV Charging and Production
Meanwhile, Ottawa has also promised to invest $1.5 billion from the Canada Infrastructure Bank into the nation’s charging network and hydrogen refueling stations. A Productivity Super-Deduction will also allow auto manufacturers to write off more of their investments in Canadian manufacturing.
These measures are intended to encourage the adoption of ZEVs and to incentivize auto production in Canada. Carney hopes that a recent memorandum of understanding with South Korea, as well as a newly implemented strategic partnership with China will help “diversify trade and catalyse new investment in the automotive sector.”
“Canada’s new government is fundamentally transforming our economy,” said Carney. “From one reliant on a single trade partner, to one that is stronger, more independent, and more resilient to global shocks.”
Indeed, the government said that it would maintain counter tariffs against auto imports from the U.S. It added that it will support workers through a Work-Sharing grant that it hopes will prevent layoffs and support retention. Ottawa is also investing $570 million to provide assistance and reskilling for up to 66,000 workers across Canada, including auto workers.
Canada Eases Emissions Standards
The government also took the controversial decision to pull back on greenhouse gas emission standards. Ottawa now aims to make 75 per cent of all new vehicles sold in Canada electric by 2035, and for 90 per cent of new vehicles sales to be electric by 2040.
That marks a significant step back from the emissions goals of the Liberal government under Justin Trudeau, when Canada aimed to make 100 per cent of new vehicle sales electric by 2035.
The easing of emissions standards has been celebrated by the Canadian Automobile Dealers Association, whose CEO Tim Reuss called today’s announcement “a strong commitment by the government to the automotive industry” that “demonstrates their ability and willingness to respond to market realities and consumer demand.”
However, Équiterre, an environmental action organization, called the government’s easing of emissions standards the start of a regressive cycle that stands out in a world that is increasingly moving towards electric mobility.
“After having invested billions of taxpayer dollars to support the auto industry, the government is now abandoning its efforts to demand results from manufacturer and hold them accountable,” wrote Blandine Sebileau, a sustainable mobility analyst for Équiterre. “Bringing back incentives is continuing to offer carrots to an industry with no stick to fear.”
