A recent report from the Parliamentary Budget Officer has unveiled new projections regarding the costs of government support for electric vehicle (EV) battery manufacturing in Canada. According to the report, the provincial and federal support will amount to $5.8 billion more than previously anticipated government projections.
The report focuses on the expenses incurred by the Canadian government through recent deals made with Northvolt, Volkswagen, and Stellantis-LGES to establish EV battery manufacturing facilities within the country. While the governments of Canada, Ontario, and Quebec had initially announced a combined $37.7 billion in production subsidies and construction support for these companies, the report suggests that the total cost of government support between 2022 and 2033 will likely reach approximately $43.6 billion.
This additional $5.8 billion will account for the loss in corporate income tax revenues for Ottawa, Ontario, and Quebec. These costs have arisen due to the Canadian subsidies being designed to align with the U.S. Advanced Manufacturing Tax Credit, a component of the Inflation Reduction Act.
The Parliamentary Budget Officer emphasized the need for transparency and clarity in these support announcements. By providing an estimate of the total cost of government support, including both announced and non-announced expenses, the report aims to enhance transparency.
According to the report, the federal government will bear 62% of the $43.6 billion costs, while the governments of Ontario and Quebec will shoulder the remaining 38%.
Furthermore, the report presents break-even timelines for the government subsidies: 11 years for the Northvolt subsidy, 15 years for the Volkswagen subsidy, and 23 years for the Stellantis subsidy.
The battery plants will be located in St. Thomas, Ontario (in the case of Volkswagen), Windsor, Ontario (for Stellantis-LGES), and approximately 30 km east of Montreal (for Northvolt). This development is expected to boost the EV battery manufacturing industry in Canada and drive the growth of the electric vehicle market.
These findings highlight the significant investment governments are making to promote the production of EV batteries in Canada, with the ultimate goal of advancing the adoption and sustainability of electric vehicles in the country.
1. What is the Parliamentary Budget Officer’s report about?
The report analyzes the costs to governments of recent deals made with battery manufacturers to establish EV battery manufacturing facilities in Canada.
2. How much will the government support for EV battery manufacturing cost?
The report suggests that the total cost of government support between 2022 and 2033 will likely be approximately $43.6 billion.
3. What are the break-even timelines for government subsidies?
The break-even timelines presented in the report are 11 years for Northvolt, 15 years for Volkswagen, and 23 years for Stellantis.
4. Where will the battery manufacturing facilities be located?
The battery plants will be built in St. Thomas, Windsor, and approximately 30 km east of Montreal.
(Sources: The Canadian Press)