Real cost of EV battery plant subsidies $5 billion higher than government estimates: PBO
November 28th 2023
The government’s electric vehicle battery plant projects will likely cost a lot more than expected, the parliamentary budget officer said in a report released Nov. 17.
The government recently announced $37.7 billion in funding toward the plants, with $13.2 billion going toward Volkswagen AG, $15 billion toward Stellantis NV-LG Energy Solution, and $4.6 billion for Northvolt AB. But parliamentary budget officer Yves Giroux said the numbers were announced in “isolation” and that the true cost had not been released to the public.
“We estimate the total cost of government support for EV battery manufacturing by Northvolt, Volkswagen and Stellantis-LGES to be $43.6 billion over 2022-23 to 2032-33, which is $5.8 billion higher than the $37.7 billion in announced costs,” Giroux noted in a press release.
The report comes as the fight for turf in the emerging EV industry heats up, led by aggressive U.S. subsidies.
The introduction of the U.S. Inflation Reduction Act in August 2022, which featured hundreds of billions of dollars of new spending and tax breaks to encourage clean energy industries in the U.S., has “vastly accelerated the clean energy arms race,” said Michael Bernstein, executive director of Clean Prosperity, a Toronto-based think tank that researches Canadian climate policy.
Countries around the world, including Canada, are vying for a piece of the green energy supply chain, with EV battery manufacturing being one of the most heavily contested.
Canada’s funding has drawn criticism from industry-watchers. Greig Mordue, a professor of engineering at McMaster University in Hamilton, Ont., and former general manager of Toyota Motor Manufacturing Canada, said in August that he thinks the subsidies are “over-the-top.”
The PBO, who provides economic and financial analyses to parliament, released the report to “increase transparency” around the EV battery plant announcements.
The PBO estimated that more than half of the costs will be borne by the federal government, while the rest will fall to the provincial governments of Ontario and Quebec.
The government expected to make its money back on the Northvolt plant in nine years, but Giroux said the number is closer to 11.
In June, Finance Minister Chrystia Freeland said the PBO’s estimates on the Volkswagen plant were inaccurate. The PBO had said that the Volkswagen subsidy would be around $2.8 billion more than the government expected, due to the tax implications of the deal.
Credits to Financial Post, Marisa Coulton
financialpost.com
The government recently announced $37.7 billion in funding toward the plants, with $13.2 billion going toward Volkswagen AG, $15 billion toward Stellantis NV-LG Energy Solution, and $4.6 billion for Northvolt AB. But parliamentary budget officer Yves Giroux said the numbers were announced in “isolation” and that the true cost had not been released to the public.
“We estimate the total cost of government support for EV battery manufacturing by Northvolt, Volkswagen and Stellantis-LGES to be $43.6 billion over 2022-23 to 2032-33, which is $5.8 billion higher than the $37.7 billion in announced costs,” Giroux noted in a press release.
The report comes as the fight for turf in the emerging EV industry heats up, led by aggressive U.S. subsidies.
The introduction of the U.S. Inflation Reduction Act in August 2022, which featured hundreds of billions of dollars of new spending and tax breaks to encourage clean energy industries in the U.S., has “vastly accelerated the clean energy arms race,” said Michael Bernstein, executive director of Clean Prosperity, a Toronto-based think tank that researches Canadian climate policy.
Countries around the world, including Canada, are vying for a piece of the green energy supply chain, with EV battery manufacturing being one of the most heavily contested.
Canada’s funding has drawn criticism from industry-watchers. Greig Mordue, a professor of engineering at McMaster University in Hamilton, Ont., and former general manager of Toyota Motor Manufacturing Canada, said in August that he thinks the subsidies are “over-the-top.”
The PBO, who provides economic and financial analyses to parliament, released the report to “increase transparency” around the EV battery plant announcements.
The PBO estimated that more than half of the costs will be borne by the federal government, while the rest will fall to the provincial governments of Ontario and Quebec.
The government expected to make its money back on the Northvolt plant in nine years, but Giroux said the number is closer to 11.
In June, Finance Minister Chrystia Freeland said the PBO’s estimates on the Volkswagen plant were inaccurate. The PBO had said that the Volkswagen subsidy would be around $2.8 billion more than the government expected, due to the tax implications of the deal.
Credits to Financial Post, Marisa Coulton
financialpost.com
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