Budget Watchdog Demands Finance Update on EV Battery Subsidies

Canada’s budget watchdog has demanded an update from Finance Minister François-Philippe Champagne on the cost of the federal government’s subsidies for electric vehicle battery plants amid a decline in the industry.

The outgoing Parliamentary Budget Officer (PBO) Yves Giroux wrote a letter to the Department of Finance on Aug. 14 to request the department’s updated annual fiscal forecasts of electric vehicle (EV) production subsidies and construction support for Northvolt, Stellantis-LGES, and Volkswagen, as first reported by Blacklock’s Reporter.

Giroux said the PBO’s primary objectives are “to provide timely and effective analysis to the Senate and House of Commons” and to promote “greater budget transparency and accountability.”

“The degree to which this is possible depends, to a large extent, on free and timely access to quality information held by government departments,” he wrote, requesting the updated figures to be sent to his office no later than Aug. 28.

In 2023, the federal government approved nearly $30 billion in subsidies for EV plants in Ontario, including more than $13.2 billion for Volkswagen and $15 billion for Stellantis-LGES.

In his role as industry minister at the time, Champagne said Canada was confident the economic benefits would outweigh the large subsidies for EV plants, adding that Canada was “in the driver seat.”

Then-Prime Minister Justin Trudeau indicated that Ottawa would see a return on its investment in “less than five years.” Champagne echoed that a return on investment in five years was “a pretty good deal” for a plant that he said would operate in Ontario “for 100 years.”

Meanwhile, the PBO said in a 2023 break-even analysis of the subsidies that it would take 20 years to repay the federal subsidies in revenues generated from the Stellantis-LGED and Volkswagen manufacturing plants. Giroux noted this was “significantly longer than the Government’s estimate of a payback within five years.”

In response to the PBO’s break-even analysis, Champagne released a statement calling the subsidies “transformational investments” that would create “thousands of jobs across the entire EV supply chain.” He said the PBO’s report did not capture “many of the broader economic impacts” of the subsidies.

However, Giroux told MPs on the Standing Committee on Industry and Technology in October 2023 that the federal government’s estimate of breaking even in five years was “wildly optimistic” and noted that the timeline could even exceed his office’s estimate of 20 years. He said Ottawa had “significantly” overstated the subsidies’ economic and fiscal impacts.

Meanwhile, Giroux retired from his role as Parliament’s budgetary watchdog on Sept. 2 when his seven-year mandate came to an end. Prime Minister Mark Carney appointed Jason Jacques to a six-month term as the interim PBO, which began on Sept. 3.

Northvolt

Ottawa also approved subsidies for EV plants in Quebec in 2023, including $322 million for a Ford manufacturing plant and $1.34 billion for a Northvolt battery plant.

Quebec’s government announced this week it was ending its funding for the proposed Northvolt EV battery plant. The province’s Economy Minister Christine Fréchette said the decision was made after the company didn’t provide an acceptable plan for the factory, which was set to begin production next year and produce batteries for 1 million EVs each year.

The announcement came after the province lost $270 million that it invested in Northvolt’s parent company that went bankrupt in March, and another $200 million lost by the province’s pension fund manager La Caisse.

Although the province already spent $510 million on the Quebec project before stopping its funding, it’s hoping to get back a $240 million loan it gave to Northvolt to purchase property for the Quebec factory.

Northvolt Batteries North America called Quebec’s decision to stop its funding “regrettable,” noting that it has not gone bankrupt, contrary to its parent company, and that it still has “solid financial resources to relaunch the project.”

While Ottawa had pledged up to $1.34 billion in capital commitment to the proposed Northvolt plant in Quebec, Industry Canada told The Epoch Times in March that “no support in any form has been disbursed to the company by the Government of Canada.” The promised funds were said to be a conditional commitment based on project completion milestones.

While Fréchette said Quebec’s investment in backing the project was “unsuccessful,” she said Quebec’s battery industry still has potential.

Paul Rowan Brian and The Canadian Press contributed to this report.