ZEV mandate: the Mechanics

A lengther description: 

If the Canadian ZEV mandate is structured like the California one, the program will assign ZEV credits to each automaker equivalent to a percentage of it’s new vehicle sales. In California, it is equivalent to 4.5% of all new vehicle sales in 2018, and increasing to 22% in 2025. In Quebec, it will be 3.4% in 2018 and 15.5% in 2025. Automakers will be required to hold credits at the mandated levels by achieving sales targets or buying credits from other automakers. Battery electric vehicles and hydrogen fuel cell vehicles earn more credit per vehicle than plug-in hybrid electric vehicles. For example, an automaker selling 100,000 new cars in 2018 in Quebec would need to maintain 3,400 ZEV credits. But, this doesn't mean the automaker has to sell 3400 zero-emission vehicles because the number of credits a vehicle is assigned depends on its range, the number of miles the vehicle can travel per charge in the case of electric vehicles. Battery electric and fuel cell vehicles receive 1 to 4 credits. The Tesla Model S with a range of over 322 km per charge gets 3.3 credits while the Nissan Leaf with a 176 km range per charge gets 1.8 credits per car sold.

In Quebec, where the ZEV mandate will be imposed on 2018 models, large automakers (those that sell or lease 4500 or more new vehicles a year, on average) are required to meet a ZEV sales target that is set by the government based on the percentage of light vehicles the automaker sells in the province. The sales target is converted into credits for the automaker. Smaller automakers that are not subject to the mandate will be able to benefit financially from selling their excess credits to automakers that are mandated to sell ZEVs. Automakers can also hold onto credits for future use (banking of credits). While the mandate will apply to 2018 models, automakers can accumulate credits for 2014 to 2017 models that can used to comply with the mandate in subsequent years. However, the government may limit the number of referred credits automakers can use to meet requirements. Automakers covered under the mandate who cannot achieve the sales target must buy credits from other companies or pay fines. Innovative companies that can achieve or exceed targets are rewarded with the revenue from these credits. For example, in California, Tesla Motors earned $140 million in revenue from ZEV mandate credit sales in the third quarter of 2016 alone.