Costing Support for EV Battery Manufacturing – Factual information

This note addresses misstatements in the media related to Parliamentary Budget Officer (PBO)’s November 17 report, Costing Support for EV Battery Manufacturing.

• The November report repeatedly highlights the conditional nature of the production subsidies to EV battery manufacturers (see pages 3, 6 and 12). PBO estimates are based on the production schedules provided by Northvolt, Volkswagen and Stellantis-LGES, as are the federal government’s estimates.

• The November report clearly and repeatedly identifies the time period over which the cost estimates apply (see pages 1, 2, 3, 6, 8, 9 and 10).

• Over the past several months, PBO staff have frequently consulted staff in the Automotive and Transportation Directorate at Innovation, Science and Economic Development (ISED) to discuss the agreements with EV battery manufacturers and methodologies to calculate break-even estimates for the EV battery production subsidies.

• In June, PBO staff reached out to Clean Energy Canada and the Trillium Network for Advanced Manufacturing and provided them with detailed technical questions and data requests related to their study (used by both ISED and PBO). Two months later, in August, the Trillium Network informed PBO staff that they were not in a position to answer our questions.[^1]

• In September, the PBO received a request from Unifor (Canada’s largest union in the private sector) to meet and discuss the September report, Break-even Analysis of Production Subsidies for Stellantis-LGES and Volkswagen.[^2] The PBO met with the National President and Director of Research of Unifor and discussed the report’s methodology and assumptions. The PBO also testified at the Standing Committee on Industry and Technology to address the September report.

• Following PBO’s September report, both the federal government[^3] and the Government of Quebec[^4] used PBO’s methodology to estimate the break-even timeline for the production subsidy that will be provided to Northvolt.[^5]

• The break-even methodology PBO used in its November report—unchanged from its September report—included the direct, indirect and induced government revenues generated by the cell manufacturing node of the EV supply chain, upon which the Northvolt production subsidy is based (see pages 13 and 17-18).

• The federal and Quebec governments estimated a 9‑year break-even timeline for the production subsidy that will be provided to Northvolt, slightly shorter than PBO’s estimate of 11 years in the November report.[^6]

• In Canada, to exempt the production subsidies to EV battery manufacturers from taxation at the corporate level, legislative changes will be required.[^7] These legislative changes will result in foregoing some corporate income tax (CIT) revenue. PBO has estimated the tax implications of these changes and reflected them in its cost estimate. Foregone CIT revenue is not a theoretical cost to governments—Finance Canada has estimated the foregone CIT revenue and incorporated this cost into its fiscal framework.[^8]

• The federal government’s 2023 Fall Economic Statement incorporated the incremental spending related to the Stellantis-LGES and Northvolt production subsidies (see page 64).[^9] Further, the government’s own forecast for public debt charges in the 2023 FES reflects, in part, the borrowing that will be required to finance the support provided to EV battery manufacturers. Increased public debt charges are therefore not a theoretical cost to governments.

• PBO did not include the cost related to public debt charges (deficit financing) in its $43.6 billion estimate of the total cost of government support for EV battery manufacturing over 2022-23 to 2032-33.

• The PBO is an independent and non-partisan agent of Parliament that provides independent and non-partisan financial and economic analysis.

• The PBO does not provide policy recommendations or policy advice to parliamentarians. PBO analysis and cost estimation should not be construed as either an endorsement or a rejection of a government’s policy or program.

• The PBO and the staff of the Office of the Parliamentary Budget Officer work for parliamentarians and Canadians.