Canada will need to match Washington’s EV subsidies to stay in the battery game

This opinion was written by Konrad Yakabuski and was published in the Globe & Mail on January 25, 2023.

The Inflation Reduction Act’s credit could slash the cost of building an EV battery south of the border by as much as one-third, or by more than US$3,500 for a typical 75-kwh battery pack.

U.S. climate envoy John Kerry does not have much sympathy for other countries complaining about the massive subsidies President Joe Biden’s administration is offering to electric-vehicle and batterycomponent makers, as Washington seeks to break China’s dominance of the global EV supply chain.

“The reaction shouldn’t be ‘Oh my God, you shouldn’t be doing that, you’re putting us in an unfair position,’ ” Mr. Kerry said last week at the World Economic Forum in Davos, Switzerland. “Do it! Everybody’s got to do the same thing to accelerate this process even more.”

His comments served as a warning to European and Canadian policy makers scrambling to keep up after Congress’s adoption last year of the Inflation Reduction Act, or IRA, dramatically ratcheted up EV incentives. The U.S.-led subsidy war leaves other countries with the unpalatable choice of either outbidding Washington to lure EV and battery makers, or forgoing billions of dollars in investments and thousands of jobs.

Last week’s decision by electric-battery startup Britishvolt to enter administration (the British equivalent of creditor protection) underscored how U.S. subsidies have disrupted the market in only months. A year ago, Britishvolt was a high-flying unicorn that had just announced it would build a 38-gigawatt-hour (GWh) battery plant in northeastern England. Then-British prime minister Boris Johnson hailed the company’s plans as a testament to the country’s “place at the helm of the global green industrial revolution.”

Britishvolt also hired former Quebec premier Philippe Couillard to head up efforts to win government support for the construction of a battery plant in that province. But the IRA and Britishvolt’s own financial troubles last fall led the company to abandon its Quebec plans. And last week, it pulled the plug on the British plant, too.

The news could not have gone unnoticed in the office of Innovation, Science and Economic Development Minister François-Philippe Champagne, who has been leading Ottawa’s strategy aimed at attracting EV-assembly and battery plants to Canada. Ottawa successfully lobbied to ensure the IRA’s US$7,500 rebate on U.S. EV purchases is extended to vehicles assembled in this country. But few EVs on the market meet the IRA’s North American content requirements. The first Canadianbuilt EVs that could qualify for the credit will not roll off the assembly line until later this decade.

Even more worrisome, the IRA has made Canada a much less attractive place to build electric batteries. The legislation provides a tax credit for U.S. battery-cell production of up to US$35 per kilowatt-hour and a US$10-per-kwh credit on battery modules. The credit could slash the cost of building an EV battery south of the border by as much as onethird, or by more than US$3,500 for a typical 75-kwh battery pack.

Finance Minister Chrystia Freeland is under pressure to match the IRA’s production tax credits in this year’s federal budget. Canada’s only large-scale lithium-ion battery factory on the books – a $5.1-billion joint venture in Windsor, Ont., between automaker Stellantis and South Korea’s LG

Energy Solution slated to begin operating in 2024 – was announced several months before the IRA’s passage. But the price of ensuring Canada’s place in the EV battery pecking order has gone up substantially since then.

While Ontario still remains in the running for a major batteryplant investment by German automaker Volkswagen, hundreds of millions of dollars in federal and provincial subsidies to build the plant may not be enough to seal the deal. Ottawa and Queen’s Park may need to match the IRA’s production subsidies, too.

“The U.S. has turned on a shop vacuum to suck up incentives, and we’re standing here with a dustbuster,” Matt Poirier, senior director of policy and government relations at Canadian Manufacturers and Exporters, told the House of Commons standing committee on international trade in November. “Are we going to try to match it or at least compete with that, or are we going to let all the investment go south?”

According to Benchmark Mineral Intelligence, which tracks global EV supply-chain investments, battery makers announced plans for 12 new gigafactories (or large-scale battery plants) in the United States in 2022, with a total planned capacity of 343 GWh. By comparison, the Stellantis-LG plant in Windsor is expected to have a production capacity of about 45 GWh.

There is no guarantee that all of these plants will be profitable, even with heavy subsidies. Benchmark projects there will be a surplus of batteries on the market by 2026, though growing electric-vehicle sales later in the decade could lead to a battery shortage.

Future demand will hinge on a slew of variables, from oil and electricity prices to sales rebates and whether governments move to enforce the zero-emission-vehicle sales mandates they already set. Ottawa aims to have ZEVs account for all new vehicle sales in this country by 2035, but has provided few details about how it plans to ensure the target is met. All of which makes entering an EV subsidy war even riskier than it sounds.

Author: Ray Nakano

Ray is a retired, third generation Japanese Canadian born and raised in Hamilton, Ontario. He resides in Toronto where he worked for the Ontario Government for 28 years. Ray was ordained by Thich Nhat Hanh in 2011 and practises in the Plum Village tradition, supporting sanghas in their mindfulness practice. Ray is passionate about taking urgent and drastic climate action and very concerned about our climate crisis. He has been actively involved in the ClimateFast group ( for the past 5 years. He works to bring awareness of our climate crisis to others and motivate them to take action. We have to bend the curve on our heat-trapping pollutants in the next few years if we hope to avoid the most serious impacts of human-caused global warming. He has created the website, for tracking climate-related news articles, reports, and organizations. He has created to focus on what you can do to address the climate crisis. He is always looking for opportunities to reach out to communities, politicians, and governments to communicate about our climate crisis and what we need to do to take urgent and drastic action, if we want to have a livable and sustainable future for our children, grandchildren, and all future generations. He is married and has 2 daughters and 2 grandchildren. He says: “Our world is in dire straits. Doing nothing is not an option. We must do everything we can to create a liveable future for our children, our grandchildren, and all future generations.”

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