The Parliamentary Budget Officer (PBO) today released his analysis of the Government of Canada’s electric vehicle battery manufacturing facility agreement with Volkswagen.
The PBO’s latest report provides an estimate of total cost of the funding support to Volkswagen, which was recently announced by the government.
“Based on our analysis, the federal government’s financial commitment to Volkswagen will total around $16.3 billion over the period of the agreement,” says PBO Yves Giroux.
The PBO’s total cost estimate includes $12.8 billion in production support, a $0.7 billion contribution through the Strategic Innovation Fund (SIF) for the construction of the plant, and an estimated $2.8 billion in tax adjustments, that are needed to achieve an after-tax equivalency to support offered under the U.S. Inflation Reduction Act (IRA), as per the Government’s stated intention.
The additional $0.5 billion in direct support to Volkswagen announced by the Government of Ontario will be funded by the province and is not included in the PBO’s federal cost estimate.
The PBO’s report also examines the economic and budgetary impacts of the Volkswagen plant’s construction.
“The economic benefits of building the new facility are marginal,” adds Mr. Giroux. “We estimate the plant will increase real GDP in Canada by 0.01 per cent above its baseline projection by 2027 and will add around 1,400 jobs by the same time.”