Canada’s EV Battery Plant Deals to Cost $5.8 Billion More Than Projected: PBO Report

A new report from the Parliamentary Budget Office (PBO) reveals that provincial and federal support for electric vehicle (EV) battery manufacturing in Canada will surpass initial government projections by $5.8 billion. The report, released on Friday, analyzed the financial commitments made in deals with Northvolt, Volkswagen, and Stellantis-LG Energy Solutions.

The PBO analysis revealed a misalignment in tax treatment between the Canadian and U.S. approaches to subsidizing EV battery production. In the U.S., manufacturers benefit from a tax credit based on kilowatt-hour energy calculations. In Canada, however, financial support per kilowatt-hour is provided as a taxable subsidy, resulting in a $5.8 billion shortfall over ten years due to lost corporate income.

The total cost of government support, estimated to be around $43.6 billion between 2022 and 2033, surpasses the originally announced figure of $37.7 billion. Production subsidies for the three manufacturers amount to $32.8 billion, with an additional $4.9 billion allocated for facility construction.

The PBO report also assesses the break-even timelines for government investments, revealing that the Northvolt deal will take 11 years, two more than initially estimated. Volkswagen’s break-even point is set at 15 years, while Stellantis-LGES faces a 23-year horizon.

Federal Industry Minister Francois-Philippe Champagne defends the EV battery investments, highlighting their positive impact on job creation across the entire supply chain. Champagne underscores that the PBO report doesn’t account for the conditional nature of two-thirds of the government support, spread over a decade. (via CBC)

You can read the full PBO report below.

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