By Jack Mintz
With Canadian GDP per capita dropping like a stone, what would you expect our minister of finance, Chrystia Freeland, to say last week at the elite Davos confab? “Come to Canada! We have $135 billion to give you!” is what she did say. Given our poor investment performance, it seems the only way to attract capital is to offer billions of tax dollars to foreign multinationals.
Will these “new economy” subsidies work? Past experience says no.
The extravagant EV battery subsidies for the auto industry are a perfect example of what can go wrong. Fearing EV production would go south, Canada has thrown $35 billion (so far!) at three companies (Volkswagen, Stellantis and Northvolt) to create roughly 8,500 jobs. That works out to over $4 million for each worker. By comparison, Michigan is spending US$1.75 billion on an EV battery plant that will create 2500 jobs costing $US700,000 per worker (C$920,000). Though it’s a bargain compared to Canada’s handouts, the subsidies have generated much criticism as a “massive cost” generating “good paying jobs” that in fact will pay only US$20 per hour.
And who knows whether these companies will even succeed? Tesla has 60 per cent of the U.S. EV market, compared to just six per cent for Volkswagen and zero for Stellantis. Maybe Stellantis and Volkswagen will grab a sizeable market share but with mounting EV financial losses as sales slow, it’s also possible they may end up in financial trouble and require — oops! — another bailout.
To fund this subsidized new economy, the rest of Canada is paying higher personal, excise, payroll, property and corporate taxes to cover new-economy spending. And the command-and-control socialism that is Freeland’s new-economy master plan doesn’t have a good track record, to put things kindly.
There is an alternative. Focus on the private sector’s animal spirits rather than Soviet-style central planning. As I wrote last week, no single silver bullet will solve our growth policy. We need an “open for business” agenda, which means taking the shackles off the private sector, where entrepreneurial talent is most likely to be found.
Instead of throwing around tens of billions of dollars in subsidies, we need policies that make it easier for the private sector to create jobs. Getting rid of regulation that slows down the building infrastructure and housing is a start. Cutting taxes would make life more affordable and improve incentives to work, save and invest. Keeping immigration at levels consistent with growth is critical, too.
Governments should also be looking at their own productivity. The rising furor over inflationary municipal property tax hikes is a case in point. At our home this week, we received a robocall invitation to a phone-in town hall to solve Toronto’s “financial crisis.” It’s Mayor Olivia Chow’s way of selling painful property tax hikes — 10.5 per cent — to voters already pressed by high food, shelter and transportation prices. It seems Toronto can’t find any cost savings. This same story is being repeated in Calgary (where the tax hike is 7.8 per cent), Vancouver (7.5 per cent) and Edmonton (6.6 per cent). Yet, with digitization of processes, artificial intelligence and greater opportunities for contracting-out, cities that wanted to could improve their productivity, lower their costs and not need to raid household piggy banks.
The new economy won’t come as a result of Freeland’s industrial policy. It will come from markets unfettered by political interference.
The future direction of federal energy policy related to the transportation sector is a key question that will be determined in one way or another by the outcome of the presidential election. What remains unclear is the extent of change that a Trump presidency would bring.
Given that Tesla founder and CEO Elon Musk is a major supporter of former President Donald Trump, it seems unlikely a Trump White House would move to try to end the EV subsidies and tax breaks included in the Inflation Reduction Act (IRA). Those provisions, of course, constitute the “carrot” end of the Biden-Harris carrot-and-stick suite of policies designed to promote the expansion of EVs in the U.S. market.
The “stick” side of that approach comes in the form of stricter tailpipe emissions rules and higher fleet auto-mileage requirements imposed on domestic carmakers. While a Harris administration would likely seek to impose even more federal pressure through such command-and-control regulatory measures, a Trump administration would likely be more inclined to ease them.
But doing that is difficult and time-consuming and much would depend on the political will of those Trump appoints to lead the relevant agencies and departments.
Those and other coercive EV-related policies imposed during the Biden-Harris years have been designed to move the U.S. auto industry directionally to meet the administration’s stated goal of having EVs make up a third of the U.S. light duty fleet by 2030. The suite of policies does not constitute a hard mandate per se but is designed to produce a similar pre-conceived outcome.
It is the sort of heavy-handed federal effort to control markets that Trump has spoken out against throughout his first term in office and his pursuit of a second term.
A new report released this week by big energy data and analytics firm Enverus seems likely to influence prospective Trump officials to take a more favorable view of the potential for EVs to grow as a part of the domestic transportation fleet. Perhaps the most surprising bit of news in the study, conducted by Enverus subsidiary Enverus Intelligence Research (EIR), is a projection that EVs are poised to be lower-priced than their equivalent gas-powered models as soon as next year, due to falling battery costs.
“Battery costs have fallen rapidly, with 2024 cell costs dipping below $100/kWh. We predict from [2025] forward EVs will be more affordable than their traditional, internal combustible engine counterparts,” Carson Kearl, analyst at EIR, says in the release. Kearl further says that EIR expects the number of EVs on the road in the US to “exceed 40 million (20%) by 2035 and 80 million (40%) by 2040.”
The falling battery costs have been driven by a collapse in lithium prices. Somewhat ironically, that price collapse has in turn been driven by the failure of EV expansion to meet the unrealistic goal-setting mainly by western governments, including the United States. Those same cause-and-effect dynamics would most likely mean that prices for lithium, batteries and EVs would rise again if the rapid market penetration projected by EIR were to come to fruition.
In the U.S. market, the one and only certainty of all of this is that something is going to have to change, and soon. On Monday, Ford Motor Company reported it lost another $1.2 billion in its Ford Model e EV division in the 3rd quarter, bringing its accumulated loss for the first 9 months of 2024 to $3.7 billion.
Energy analyst and writer Robert Bryce points out in his Substack newsletter that that Model e loss is equivalent to the $3.7 billion profit Ford has reported this year in its Ford Blue division, which makes the company’s light duty internal combustion cars and trucks.
While Tesla is doing fine, with recovering profits and a rising stock price amid the successful launch of its CyberTruck and other new products, other pure-play EV makers in the United States are struggling to survive. Ford’s integrated peers GM and Stellantis have also struggled with the transition to more EV model-heavy fleets.
None of this is sustainable, and a recalibration of policy is in order. Next Tuesday’s election will determine which path the redirection of policy takes.
David Blackmon is an energy writer and consultant based in Texas. He spent 40 years in the oil and gas business, where he specialized in public policy and communications.
Author: Kris Sims
The Trudeau government’s ban on new gas and diesel vehicles is a nonstarter for three powerful reasons.
First, Canadians want to drive gas-powered minivans and diesel pickups.
Second, Canada does not have the electrical power to fuel these battery-powered cars.
Third, Canadians do not have the money to build the power-generating stations that would be needed to power these government-mandated vehicles.
Let’s start on the showroom floor.
The Trudeau government is banning the sale of new gasoline and diesel-powered vehicles by 2035.
In about 10 years’ time, Canadians will not be allowed to buy a new vehicle powered by an internal combustion engine because the government will forbid it.
Canadians disagree with this.
The Canadian Taxpayers Federation released Leger polling showing 59 per cent of Canadians oppose the federal government’s ban on new gas and diesel vehicles.
Among those who are decided on the issue, 67 per cent of Canadians, and majorities in every demographic, oppose the Trudeau government’s ban.
Now let’s look under the hood.
Canada does not have the electricity to charge these battery-powered cars. The government hasn’t presented any plan to pay for the power plants, transmission lines and charging stations for these government-mandated vehicles.
That leaves a big question: How much will this cost taxpayers?
Canada’s vehicle transition could cost up to $300 billion by 2040 to expand the electrical grid, according to a report for Natural Resources Canada.
Let’s look at why this will cost so much.
The average Canadian household uses about 10,861 kWh in electricity per year. The average electric car uses about 4,500 kWh of energy per year.
The average household’s electricity use would jump by about 40 per cent if they bought one EV and charged it at home.
Canada is home to 24 million cars and light trucks that run on gasoline and diesel, according to Statistics Canada.
If all those vehicles were powered by electricity and batteries, that fleet would use about 108 million mWh of power every year.
For context, one large CANDU nuclear reactor at the Darlington nuclear plant in Ontario generates about 7,750,000 mWh of power per year.
Canada would require about 14 of these reactors to power all of those electric cars.
Building a large nuclear reactor costs about $12.5 billion.
That’s a price tag of about $175 billion just for all the power plants. The Natural Resources report estimates the transition to electric vehicles could cost up to $300 billion in total, when new charging stations and power lines are included.
Who would be paying that tab? Normal Canadians through higher taxes and power bills.
Canadians cannot afford the cost of these mandatory electric vehicles because they’re broke.
Canadians are broke largely because of high taxes and high inflation, both driven by the Trudeau government’s wasteful spending.
About half of Canadians say they are within $200 of not being able to make the minimum payments on their bills each month. That’s also known as barely scraping by.
Food banks are facing record demand, with a sharp increase in working families needing help. That means parents who are holding down jobs are still depending on donated jars of peanut butter to feed their kids.
Rubbing salt into the wound, the federal government also put taxpayers on the hook for about $30 billion to multinational corporations like Honda, Volkswagen, Stellantis and Northvolt to build EV battery factories.
The roadside sobriety test is complete, and the Trudeau government is blowing a fail on this policy.
Canadians are opposed to the Trudeau government banning the sale of new gasoline and diesel-powered vehicles.
Canada does not have the electricity to charge these battery-powered cars.
Canadians don’t have the money to build the new power plants, transmission lines and charging stations these vehicles would demand.
It’s time to tow this ban on new gas and diesel vehicles to the scrapyard.
Franco Terrazzano is the Federal Director and Kris Sims is the Alberta Director of the Canadian Taxpayers Federation
The Destructive Legacy of Gender Theory’s Popular Pioneer
Biden-Harris Admin’s EV Coercion Campaign Hasn’t Really Gone All That Well
Preparation, swift response define wildfire season
Alberta Bill of Rights Amendment, Bill 24 – Stronger protections for personal rights
Premiers fight to lower gas taxes as Trudeau hikes pump costs
One Solution to Canada’s Housing Crisis: Move. Toronto loses nearly half million people to more affordable locations
Heavy-duty truckers welcome new ‘natural gas highway’ in Alberta
Gas prices plummet in BC thanks to TMX pipeline expansion
