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 Instead of fostering innovation and building a robust, homegrown supply chain, Canada has committed itself to an outdated model of industrial policy that relies on foreign entities and low-value manufacturing jobs.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.
Carbon Tax
The book the carbon taxers don’t want you to read

By Franco Terrazzano
Prime Minister Mark Carney wrote a 500-page book praising carbon taxes.
Well, I just wrote a book smashing through the government’s carbon tax propaganda.
It tells the inside story of the fight against the carbon tax. And it’s THE book the carbon taxers don’t want you to read.
My book is called Axing the Tax: The Rise and Fall of Canada’s Carbon Tax.
Axing the Tax: The Rise and Fall of Canada’s Carbon Tax
Every now and then, the underdog wins one.
And it looks like that’s happening in the fight against the carbon tax.
It’s not over yet, but support for the carbon tax is crumbling. Some politicians vow to scrap it. Others hide behind vague plans to repackage it. But virtually everyone recognizes support for the current carbon tax has collapsed.
It wasn’t always this way.
For about a decade now, powerful politicians, government bureaucrats, academics, media elites and even big business have been pushing carbon taxes on the people.
But most of the time, politicians never asked the people if they supported carbon taxes. In other words, carbon taxes, and the resulting higher gas prices and heating bills, were forced on us.
We were told it was good for us. We were told carbon taxes were inevitable. We were told politicians couldn’t win elections without carbon taxes, even though the politicians that imposed them didn’t openly run on them. We were told that we needed to pay carbon taxes if we wanted to leave a healthy environment for our kids and grandkids. We were told we needed to pay carbon taxes if we wanted to be respected in the international community.
In this decade-long fight, it would have been understandable if the people had given up and given in to these claims. It would have been easier to accept what the elites wanted and just pay the damn bill. But against all odds, ordinary Canadians didn’t give up.
Canadians knew you could care about the environment and oppose carbon taxes. Canadians saw what they were paying at the gas station and on their heating bills, and they knew they were worse off, regardless of how many politicians, bureaucrats, journalists and academics tried to convince them otherwise. Canadians didn’t need advanced degrees in economics, climate science or politics to understand they were being sold a false bill of goods.
Making it more expensive for a mom in Port Hope to get to work, or grandparents in Toronto to pay their heating bill, or a student in Coquitlam to afford food won’t reduce emissions in China, Russia, India or the United States. It just leaves these Canadians, and many like them, with less money to afford everything else.
Ordinary Canadians understood carbon taxes amount to little more than a way for governments to take more money from us and dictate how we should live our lives. Ordinary Canadians also saw through the unfairness of the carbon tax.
Many of the elites pushing the carbon tax—the media, politicians, taxpayer-funded professors, laptop activists and corporate lobbyists—were well off and wouldn’t feel the brunt of carbon taxes. After all, living in a downtown condo and clamouring for higher carbon taxes doesn’t require much gas, diesel or propane.
But running a business, working in a shop, getting kids to soccer and growing food on the farm does. These are the Canadians the political class forgot about when pushing carbon taxes. These are the Canadians who never gave up. These are the Canadians who took time out of their busy lives to sign petitions, organize and attend rallies, share posts on social media, email politicians and hand out bumper stickers.
Because of these Canadians, the carbon tax could soon be swept onto the ash heap of history. I wrote this book for two reasons.
The first is because these ordinary Canadians deserve it. They worked really hard for a really long time against the odds. When all the power brokers in government told them, “Do what we say—or pay,” they didn’t give up. They deserve to know the time and effort they spent fighting the carbon tax mattered. They deserve all the credit.
Thank you for everything you did.
The second reason I wrote this book is so people know the real story of the carbon tax. The carbon tax was bad from the start and we fought it from the start. By reading this book, you will get the real story about the carbon tax, a story you won’t find anywhere else.
This book is important because if the federal Liberals’ carbon tax is killed, the carbon taxers will try to lay blame for their defeat on Prime Minister Justin Trudeau. They will try to say that carbon taxes are a good idea, but Trudeau bungled the policy or wasn’t a good enough salesman. They will try to revive the carbon tax and once again make you pay more for gas, groceries, and home heating.
Just like with any failed five-year plan, there is a lingering whiff among the laptop class and the taxpayer-funded desk rulers that this was all a communication problem, that the ideal carbon tax hasn’t been tried yet. I can smell it outside my office building in Ottawa, where I write these words. We can’t let those embers smoulder and start a fire again.
This book shows why the carbon tax is and always will be bad policy for ordinary Canadians.
Franco’s note: You can pre-order a copy of my new book, Axing the Tax: The Rise and Fall of Canada’s Carbon Tax, here: https://www.amazon.ca/Axing-
2025 Federal Election
Poilievre To Create ‘Canada First’ National Energy Corridor

From Conservative Party Communications
Poilievre will create the ‘Canada First’ National Energy Corridor to rapidly approve & build the infrastructure we need to end our energy dependence on America so we can stand up to Trump from a position of strength.
Conservative Leader Pierre Poilievre announced today he will create a ‘Canada First’ National Energy Corridor to fast-track approvals for transmission lines, railways, pipelines, and other critical infrastructure across Canada in a pre-approved transport corridor entirely within Canada, transporting our resources within Canada and to the world while bypassing the United States. It will bring billions of dollars of new investment into Canada’s economy, create powerful paycheques for Canadian workers, and restore our economic independence.
“After the Lost Liberal decade, Canada is poorer, weaker, and more dependent on the United States than ever before,” said Poilievre. “My ‘Canada First National Energy Corridor’ will enable us to quickly build the infrastructure we need to strengthen our country so we can stand on our own two feet and stand up to the Americans.”
In the corridor, all levels of government will provide legally binding commitments to approve projects. This means investors will no longer face the endless regulatory limbo that has made Canadians poorer. First Nations will be involved from the outset, ensuring that economic benefits flow directly to them and that their approval is secured before any money is spent.
Between 2015 and 2020, Canada cancelled 16 major energy projects, resulting in a $176 billion hit to our economy. The Liberals killed the Energy East pipeline and passed Bill C-69, the “No-New-Pipelines” law, which makes it all but impossible to build the pipelines and energy infrastructure we need to strengthen the Canadian economy. And now, the PBO projects that the ‘Carney cap’ on Canadian energy will reduce oil and gas production by nearly 5%, slash GDP by $20.5 billion annually, and eliminate 54,400 full-time jobs by 2032. An average mine opening lead time is now nearly 18 years—23% longer than Australia and 38% longer than the US. As a result of the Lost Liberal Decade, Canada now ranks 23rd in the World Bank’s Ease of Doing Business Index for 2024, a seven-place drop since 2015.
“In 2024, Canada exported 98% of its crude oil to the United States. This leaves us too dependent on the Americans,” said Poilievre. “Our Canada First National Energy Corridor will get us out from under America’s thumb and enable us to build the infrastructure we need to sell our natural resources to new markets, bring home jobs and dollars, and make us sovereign and self-reliant to stand up to Trump from a position of strength.”
Mark Carney’s economic advice to Justin Trudeau made Canada weaker while he and his rich friends made out like bandits. While he advised Trudeau to cancel Canadian energy projects, his own company spent billions on pipelines in South America and the Middle East. And unlike our competitors Australia and America, which work with builders to get projects approved, Mark Carney and Steven Guilbeault’s radical “keep-it-in-the-ground” ideology has blocked development, killed jobs, and left Canada dependent on foreign imports.
“The choice is clear: a fourth Liberal term that will keep our resources in the ground and keep us weak and vulnerable to Trump’s threats, or a strong new Conservative government that will approve projects, build an economic fortress, bring jobs and dollars home, and put Canada First—For a Change.”
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