Business
Canada’s risky and misguided bet on EV battery manufacturing

From the Macdonald Laurier Institute
By Tom McCaffrey and Denaige McDonnell for Inside Policy
By investing $52.5 billion in a handful of foreign-controlled companies, the government has failed to create a sustainable, long-term economic advantage. Instead of fostering innovation and building a robust, homegrown supply chain, Canada has committed itself to an outdated model of industrial policy that relies on foreign entities and low-value manufacturing jobs.
Two years ago, Canada’s minister of natural resources urged Canadians “to fully seize” the economic opportunity presented by the country’s abundant critical minerals.
“We must ensure that value is added to the entire supply chain, including exploration, extraction, intermediate processing, advanced manufacturing, and recycling,” Jonathan Wilkinson stated. “We must create the necessary conditions for Canadian companies to grow, scale-up, and expand globally in markets that depend on critical minerals.”
Two years later, the Canadian government has gone all-in with a $52.5 billion dollar bet on EV battery manufacturing in Ontario and Quebec. The decision goes against the recommendations of industry specialists and the government’s own departments responsible for strategic development who advised officials to go slow, steady, and think full supply chain development when targeting incentives.
Why didn’t the politicians listen?
Ottawa’s risky bet on EV battery manufacturing
By 2033, the Parliamentary Budget Officer (PBO) estimates three recent Canadian Government EV battery manufacturing subsidies will cost the country a total $37.7 billion dollars. The Northvolt, Volkswagen, Stellantis-LGES manufacturing facilities are estimated to take 15 years to pay back Canadian taxpayers.
The repayment estimate is 6 years longer than the government originally estimated because the PBO has now used the manufacturers’ production rate estimations, a more conservative number, than the originally used full production rates. In total, the national investment across the full value chain of EV battery manufacturing equates to $52.5 billion into just 13 companies.
The Canadian government is betting big on EVs, but not by investing in innovation, intellectual property, or Canadian technology. It is betting the farm on foreign entities delivering 8,500 manufacturing jobs. Capital investment for the purpose of growth in labour productivity isn’t a new strategy and it can be effective, but at $4 million per job the likelihood of return on investment is low.
Could the Bet Pay Off?
The global EV battery market is expected to surge over the next 10 years from US$132.6 billion in 2023 to US$508.8 by 2033. So far, growth has been slower than expected, and some major players, like Tesla, will be challenged to meet their sales volumes from last year according to analysts – but basing an opinion on a single year of car sales is not wise.
The truth is car manufacturing in Canada is important to our GDP ($14.6 billion) and to jobs (125,000). It is also true that Canada has lost 50 per cent of its market share in manufacturing of cars ($8 billion in 2000 to $4 billion in 2022), but it has maintained it market share in motor vehicle parts ($9 billion).
Canada appears to be betting that it can maintain it’s position in the car automotive industry rather than cementing its place in the battery metals and manufacturing value chain. But is this wager wise?
Sustainable policy development
Governments can encourage economic and industrial development in several ways. Policy-makers can set efficient regulations and approval mechanisms; create frameworks that build a bridge between government and the private sector; support the development of skilled labour and innovation ecosystems; enable direct collaboration and procurement mechanisms between industry, academia, innovation ecosystems, and government; and share a clear vision and pathway for industrial growth.
Governments can also use subsidies and tax credits to create market share, but there is growing concern that using these methods to create or protect markets will cause more harm than opportunity in developing countries. These kinds of investments risk triggering international protectionism and geopolitical trade-offs as nations turn inward rather than collaborating for development.
What’s needed is a sustainable policy approach – one that influences and benefits the largest subset of market outcomes, including start-up development, foreign direct investment, technology development, technology adoption, investment attraction, the creation of circular economy value chains, and more.
Ottawa’s misguided approach to economic investment
In the EV world, a fully integrated supply chain that includes mining, chemical processing, battery production, and recycling is critical. The battery value chain road map published by Innovation, Science and Economic Development (ISED) Canada, and the Canadian Critical Minerals Strategy published by Natural Resources Canada (NRC) both call for government to develop the full supply chain.
In 2021, a standing committee advised how best to develop the full supply chain. That same year Clean Energy Canada wrote a report on how Canada could build the domestic battery industry across the country, and in 2022 another full suite of associations including the Battery Metals Association, Energy Futures Lab, Transition Accelerator, and Accelerate ZEV developed a roadmap to develop Canada’s battery value chain.
The Canadian industrial policies being used to create the EV supply chain are a mix of production subsidies, investment tax credits, foregone corporate income tax revenue, construction capital expenses, and other monetary supports. Though large, the $52.5 billion investment ignores key aspects of the upstream supply chain (mining, refining, etc.) that would allow us to reap full value from EV battery production. Worse, it comes at a time when automakers are pulling back from EV investments due to lower than expected demands, making the investment increasingly risky given changing market conditions.
By flying in the face of the very industries it supports and specialists it employs, it raises the question: why is Canadian government failing to follow its own strategy? Why choose to support an undeveloped strategy that banks on foreign investment and manufacturing jobs when experts across Canada’s supply chain, and two government departments, had a fulsome and balanced approach to supply chain development? Why shun a balanced approach to government investment focused on building out the entire supply chain?
Where Canada continues to go astray
Canada’s investment strategies have long been plagued by short-term thinking, favouring politically motivated quick wins over sustainable, long-term value creation. The government’s $52.5 billion bet on EV battery manufacturing is a prime example—subsidizing foreign companies while neglecting the development of critical upstream supply chains and domestic innovation. This approach leaves Canada reliant on international markets for critical materials, with little to show in terms of intellectual property or R&D growth.
By ignoring expert advice and focusing on politically strategic regions, Canada misses opportunities to build fully integrated industries across the country, ultimately failing to support homegrown solutions that could foster long-term economic resilience. Instead, Canada continues to prioritize high-risk, low-return investments, with little consideration for the foundational elements needed for a competitive, innovative economy.
Research on industrial policy shows countries are better served when governments focus on delivering well-designed policies aimed at improving general business environments than attempting to artificially create new markets. This is why industrial policies went out of vogue more than two decades ago.
It raises the question – are there examples of successful government interventions that seeded new sectors?
How the Asia-Pacific region cornered the semiconductor market
In the 1980s both the South Korea and Taiwanese governments made strategic early investments in companies that were well positioned to accelerate growth of the semiconductor sector. Today, the Asia-Pacific region is dominating the global market share of what has become a US$620 billion industry. Both South Korea and Taiwan were investing in the semiconductor industry in the 1960s. From a policy perspective, the two countries took similar approaches and focused their state-directed capital allocations to companies like Samsung LG and the Taiwan Semiconductor Manufacturing Company (TSMC). Through strong government support, both countries created technology institutes, centres for research and development, infrastructure and tax incentives, tax holidays, and interest-free loans.
Those investments helped to seed highly successful sectors in each country. Both countries continue to invest tax dollars back into the sector to help maintain the competitive advantages they helped to foster. South Korea’s semiconductor industry received a $US19 billion show of support from its government earlier this year to create a comprehensive support program spanning financial, research and development, and infrastructure support. The investment is part of a decades long commitment to the semiconductor industry which now accounts for nearly 20 per cent of total exports and plays a leading role in the South Korean economy. In Taiwan, the semiconductor sector is a powerhouse that accounts for 15 per cent of the national GDP and ranks number one globally for wafer foundry and packaging and testing, and number two for integrated circuit (IC) design.
These successes were largely enabled by government-controlled economies and early, and ongoing support to industry. This support did not waiver for decades. It is unlikely that Canada will be able to maintain this level of stability and government focus.
Other factors like access to cheap labour, willingness to specialize, commitment to product quality, and streamlined manufacturing played an important role.
Policy Challenges: Economic and Political Complexities
The challenge of creating successful industrial policy is that it is complex, long-term, has uncertain benefits, and requires government departments to have deep industry expertise. Experts worry that the current federal government simply isn’t up to the task.
In 2023, more than 2,500 new industrial policies were introduced globally, and more than 70 per cent were subsidies, tariffs, or import/export restrictions. These policies create trade distortion more often than they lead to market creation. Trade distortion can unfairly tilt the playing field in favour of domestic industries, often at the expense of foreign competitors.
With Canada’s recent industrial policy on EV battery manufacturing, we are choosing to distort our own economy.
Industrial policies strain global trade and economic relations. Such policies can have wide-ranging effects on both the implementing country and the global economy. They also appear protectionist even to allied nations.
How can Canada get it right?
Many of Canada’s mature sectors have enjoyed government support or protection at some point in our nation’s history. Past Canadian governments have protected the industries of their time, be it agriculture, steel manufacturing, pulp and paper, aerospace, and even defence.
There are recent examples of small sums of government dollars creating big wins for Canada’s homegrown innovation and sustainability economy.
At the provincial level, one organization that stands out is Emissions Reduction Alberta (ERA), an arms-length provincial organization that has weather several changes in government in its 15 years. ERA uses Technology Innovation and Emissions Reduction dollars to invest in late-stage sustainable technology. To date, the organization has invested almost $1 billion dollars into 277 technologies at a ratio of 8 industry dollars to 1 ERA dollar.
Federally, Prairies Economic Development Canada (PrairiesCan) is an example of a highly innovative approach to economic development. It has invested millions of dollars in repayable interest-free loans and regional innovation ecosystem supports. Ecosystem supports include accelerators and incubators that have exponentially increased the success of start ups and mature firms alike.
PrairiesCan and ERA operate on annual budgets of $300 million and $50–200 million, respectively. These dollars employ various types of expertise and invest across large swaths of the mature and new economy. They look across hundreds of organizations, understand the regional context, varying business dynamics and make strategic investments.
If government persists in committing tax dollars to the growth of the economy, then it should draw inspiration from these kinds of organizations.
Do Governments Make Effective Market Makers?
Canadians are rightly skeptical about Ottawa’s $52.5 billion bet on EV battery manufacturing.
Ottawa is rolling the dice that it will make Canada a leader in battery supply chains. It’s one of the largest industrial policy bets we have seen in our lifetimes. However, industrial policy analysts are warning about the risk of misallocation of funds.
Expert critics say Canada’s economy is too reliant on government-driven innovation policies. These researchers believe that competition creates markets, and that the government should commit to focusing on reducing policy and regulatory barriers. Many still believe in the capitalist ethos – that fostering a cultural and economic environment that naturally supports risk-taking and competition is the best route to success. The same people would note that the natural process of business turnover is essential for innovation and growth.
Conclusion
Canada’s current strategy of picking winners through massive, targeted subsidies is not just risky – it’s short-sighted. By investing $52.5 billion in a handful of foreign-controlled companies, the government has failed to create a sustainable, long-term economic advantage. Instead of fostering innovation and building a robust, homegrown supply chain, Canada has committed itself to an outdated model of industrial policy that relies on foreign entities and low-value manufacturing jobs. This approach ignores the foundational elements that drive true competitiveness – innovation, R&D, and full value chain development.
What Canada needs is a fundamental shift in its investment strategy. Instead of betting the farm on politically motivated, high-risk subsidies, the government should focus on strengthening ecosystems that support innovation, entrepreneurship, and domestic industry. Investments should be directed at building a fully integrated supply chain that includes mining, refining, and manufacturing, while supporting Canadian companies that will keep intellectual property and jobs at home.
If Canada continues down the current path, it risks becoming a player in someone else’s game, perpetually reliant on foreign companies and global markets. The country should seize this moment to redefine its complete industrial strategy, making bold investments in innovation and infrastructure that can secure economic resilience for generations to come. Without this shift, Canada’s $52.5 billion bet may very well be remembered as one of the biggest missed opportunities in modern economic history.
Tom McCaffery, M.B.A., is the CEO and managing director of Two River Advisory and former executive director of policy and engagement for Emissions Reduction Alberta.
Denaige McDonnell, Ph.D., is an accomplished business management strategist and CEO of People Risk Management, specializing in organizational systems, culture, and psychological safety.
Business
Saskatchewan becomes first Canadian province to fully eliminate carbon tax

From LifeSiteNews
Saskatchewan has become the first Canadian province to free itself entirely of the carbon tax.
On March 27, Saskatchewan Premier Scott Moe announced the removal of the provincial industrial carbon tax beginning April 1, boosting the province’s industry and making Saskatchewan the first carbon tax free province.
Under Moe’s direction, Saskatchewan has dropped the industrial carbon tax which he says will allow Saskatchewan to thrive under a “tariff environment.”
“I would hope that all of the parties running in the federal election would agree with those objectives and allow the provinces to regulate in this area without imposing the federal backstop,” he continued.
The removal of the tax is estimated to save Saskatchewan residents up to 18 cents a liter in gas prices.
The removal of the tax will take place on April 1, the same day the consumer carbon tax will reduce to 0 percent under Prime Minister Mark Carney’s direction. Notably, Carney did not scrap the carbon tax legislation: he just reduced its current rate to zero. This means it could come back at any time.
Furthermore, while Carney has dropped the consumer carbon tax, he has previously revealed that he wishes to implement a corporation carbon tax, the effects of which many argued would trickle down to all Canadians.
The Saskatchewan Association of Rural Municipalities (SARM) celebrated Moe’s move, noting that the carbon tax was especially difficult on farmers.
“I think the carbon tax has been in place for approximately six years now coming up in April and the cost keeps going up every year,” SARM president Bill Huber said.
“It puts our farming community and our business people in rural municipalities at a competitive disadvantage, having to pay this and compete on the world stage,” he continued.
“We’ve got a carbon tax on power — and that’s going to be gone now — and propane and natural gas and we use them more and more every year, with grain drying and different things in our farming operations,” he explained.
“I know most producers that have grain drying systems have three-phase power. If they haven’t got natural gas, they have propane to fire those dryers. And that cost goes on and on at a high level, and it’s made us more noncompetitive on a world stage,” Huber decalred.
The carbon tax is wildly unpopular and blamed for the rising cost of living throughout Canada. Currently, Canadians living in provinces under the federal carbon pricing scheme pay $80 per tonne.
Automotive
Electric cars just another poor climate policy

From the Fraser Institute
The electric car is widely seen as a symbol of a simple, clean solution to climate change. In reality, it’s inefficient, reliant on massive subsidies, and leaves behind a trail of pollution and death that is seldom acknowledged.
We are constantly reminded by climate activists and politicians that electric cars are cleaner, cheaper, and better. Canada and many other countries have promised to prohibit the sale of new gas and diesel cars within a decade. But if electric cars are really so good, why would we need to ban the alternatives?
And why has Canada needed to subsidize each electric car with a minimum $5,000 from the federal government and more from provincial governments to get them bought? Many people are not sold on the idea of an electric car because they worry about having to plan out where and when to recharge. They don’t want to wait for an uncomfortable amount of time while recharging; they don’t want to pay significantly more for the electric car and then see its used-car value decline much faster. For people not privileged to own their own house, recharging is a real challenge. Surveys show that only 15 per cent of Canadians and 11 per cent of Americans want to buy an electric car.
The main environmental selling point of an electric car is that it doesn’t pollute. It is true that its engine doesn’t produce any CO₂ while driving, but it still emits carbon in other ways. Manufacturing the car generates emissions—especially producing the battery which requires a large amount of energy, mostly achieved with coal in China. So even when an electric car is being recharged with clean power in BC, over its lifetime it will emit about one-third of an equivalent gasoline car. When recharged in Alberta, it will emit almost three-quarters.
In some parts of the world, like India, so much of the power comes from coal that electric cars end up emitting more CO₂ than gasoline cars. Across the world, on average, the International Energy Agency estimates that an electric car using the global average mix of power sources over its lifetime will emit nearly half as much CO₂ as a gasoline-driven car, saving about 22 tonnes of CO₂.
But using an electric car to cut emissions is incredibly ineffective. On America’s longest-established carbon trading system, you could buy 22 tonnes of carbon emission cuts for about $660 (US$460). Yet, Ottawa is subsidizing every electric car to the tune of $5,000 or nearly ten times as much, which increases even more if provincial subsidies are included. And since about half of those electrical vehicles would have been bought anyway, it is likely that Canada has spent nearly twenty-times too much cutting CO₂ with electric cars than it could have. To put it differently, Canada could have cut twenty-times more CO₂ for the same amount of money.
Moreover, all these estimates assume that electric cars are driven as far as gasoline cars. They are not. In the US, nine-in-ten households with an electric car actually have one, two or more non-electric cars, with most including an SUV, truck or minivan. Moreover, the electric car is usually driven less than half as much as the other vehicles, which means the CO₂ emission reduction is much smaller. Subsidized electric cars are typically a ‘second’ car for rich people to show off their environmental credentials.
Electric cars are also 320–440 kilograms heavier than equivalent gasoline cars because of their enormous batteries. This means they will wear down roads faster, and cost societies more. They will also cause more air pollution by shredding more particulates from tire and road wear along with their brakes. Now, gasoline cars also pollute through combustion, but electric cars in total pollute more, both from tire and road wear and from forcing more power stations online, often the most polluting ones. The latest meta-study shows that overall electric cars are worse on particulate air pollution. Another study found that in two-thirds of US states, electric cars cause more of the most dangerous particulate air pollution than gasoline-powered cars.
These heavy electric cars are also more dangerous when involved in accidents, because heavy cars more often kill the other party. A study in Nature shows that in total, heavier electric cars will cause so many more deaths that the toll could outweigh the total climate benefits from reduced CO₂ emissions.
Many pundits suggest electric car sales will dominate gasoline cars within a few decades, but the reality is starkly different. A 2023-estimate from the Biden Administration shows that even in 2050, more than two-thirds of all cars globally will still be powered by gas or diesel.
Source: US Energy Information Administration, reference scenario, October 2023
Fossil fuel cars, vast majority is gasoline, also some diesel, all light duty vehicles, the remaining % is mostly LPG.
Electric vehicles will only take over when innovation has made them better and cheaper for real. For now, electric cars run not mostly on electricity but on bad policy and subsidies, costing hundreds of billions of dollars, blocking consumers from choosing the cars they want, and achieving virtually nothing for climate change.
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