Governments could take four times as long as they say to make profitable the billions in subsidies paid to electric vehicle battery factories in Ontario, estimates the Parliamentary Budget Officer (PBO).
When announcing, in the spring, financial assistance of 13.2 billion granted to Volkswagen for the construction of a battery manufacturing plant for electric vehicles in Ontario, the Trudeau government affirmed that the subsidy would generate new equivalent tax revenues in less than five years.
Ottawa was going to do it again in July by promising, with the Ontario government, up to 15 billion in subsidies for another battery factory project in the province, that of Stellantis-LG Energy Solutions, for total subsidies of 28, 2 billion, including 18.8 billion from Ottawa and 9.4 billion from the Ford government.
Contrary to what was initially suggested, the federal and Ontario governments should not expect to recover their contributions within 5 years, concludes the PBO in Ottawa in an analysis released Tuesday. It will take more like 20, he estimates.
To arrive at this conclusion, the PBO based itself on data used by the federal government which came from projections from two research centers (Trillium Network and Clean Canada Energy).
A ripple effect?
The main reason for the discrepancy between the two assessments is that Ottawa anticipates that the two new battery factories will lead to further investment and increased production at other stages along the production chain. electric vehicles.
However, “given the uncertainty regarding the future geographic location of investments and production linked to other nodes in the electric vehicle supply chain”, the DPB explains that it preferred to stick strictly to the public revenue that should be generated by the battery manufacturing activities that will be subsidized.
The total subsidies of 28.2 billion, which are to extend until 2032, should thus have generated equivalent tax revenues by 2043, estimates the PBO. It could even take a little longer, he continues, because the new factories are likely to divert part of the production capacity of other factories in Ontario and, by the same token, the tax contribution of these last.
The Trudeau government did not let itself be deterred on Tuesday by this more conservative way of estimating the economic and fiscal benefits. “While the Parliamentary Budget Officer’s report does not consider many of the overall economic impacts on the supply chain, it highlights, once again, that these investments will generate far greater economic benefits than our government’s investments “, declared in a press release the Federal Minister of Innovation, Science and Industry, François-Philippe Champagne, who continues to speak of “generational investments [qui] will create thousands of jobs across the entire electric vehicle supply chain.”
From the United States to Quebec
Committed to both an effort to reindustrialize and accelerate its green transition, Washington has recently deployed generous subsidy programs, particularly in the electrification of transport. This is now forcing its trading partners, such as Canada, to in turn develop similar policies, if only to avoid seeing all their companies go the way of the United States.
The phenomenon is also observed in Quebec, where the Legault government notably granted, in May, a forgivable loan of 152 million for a project for a GM battery materials production plant in Bécancour, in the Center-du- Quebec, to which the federal government grants almost the same amount (147 million). The two governments repeated the operation last month by each granting 322 million in financial aid to another battery materials factory project planned in the same region. This time, the factory will be built by a consortium formed by the American Ford and the Koreans EcoProBM and SK On.
The Minister of the Economy, Pierre Fitzgibbon, then suggested that governments would recover their money in various spinoffs in less than 10 years.
“I have no intention of giving gifts to any company,” declared Prime Minister François Legault. It has to be give and take. If I give $1, I have to raise more than $1. »