GM workers use human-assisted automation to weld vehicle doors at a General Motors assembly plant during the COVID-19 pandemic in Oshawa, Ontario, on March 19, 2021. Nathan Denette/The Canadian Press
Washington has given Canada’s electric vehicle and clean-tech industry a big gift in the form of a historic climate bill that creates new incentives for American consumers to buy battery-powered cars. Now it’s just a matter of not wasting it.
This weekend, the US Senate voted in favor of The Inflation Reduction Act $369 billion in climate and energy spending, which supporters have billed as Washington’s largest initiative to combat climate change. Bonus: despite previous White House plans to exclude foreign-made cars from the bill’s tax credit for electric vehicle buyers, the final legislation doesn’t leave out major trading partners like Canada.
The bill’s success in the Senate is a major victory for President Joe Biden after months of doing so his green agenda appears to be overshadowed by fears of soaring consumer prices and a looming recession. The legislation now goes to the House of Representatives for approval before Mr Biden signs it into law.
To date, America’s inability to muster support to do what is needed to reduce emissions in its economy, the world’s largest, has hindered global progress—and the job has only gotten harder.
For Canada, a huge opportunity lies in legal incentives for electric vehicles, specifically the tax credit, which amounts to $7,500 for each new car.
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Although Mr. Biden initially appeared to take a US position on eligibility, the new bill specifically extends incentives to electric vehicles made across North America, following strong lobbying by Canadian federal and provincial governments and industry representatives who highlighted , that four-fifths of the approximately two million cars and trucks produced in Canada each year are exported to the US
The auto industry has been critical of the incentives, saying they won’t apply to enough vehicles on the market today because of the number of auto components that come from other countries, especially China. But manufacturers could solve this problem—by sourcing parts from North America, for example.
The proposals in the legislation also require critical minerals used to build electric vehicle batteries to be produced or processed in countries with which the U.S. has free trade agreements. Canadian mining companies are already looking to increase domestic supplies of these minerals.
But Canada is still missing a solid game plan to build all the elements of its electric vehicle industry. Such a strategy should include the local and foreign owners of assembly lines, as well as the suppliers of the parts that are bolted there.
According to Matthew Fortier, CEO of Accelerate, an alliance formed to blueprint Canada’s zero-emissions vehicle supply chain, Canada’s plan must also cover battery manufacturers, battery recyclers, miners and companies that develop technologies that go into electrifying Transport Canada.
The strategy should include input from industry and government, he said, as well as other segments of society across the country that have an interest in making the industry a success. “For Canada, the focus must be on defining our position in the North American and global EV industry,” added Mr. Fortier.
“We have a once-in-a-generation opportunity here. We have the critical minerals the world needs, we have a mature and integrated automotive sector and we have governments that believe this is important.”
Accelerate includes officials from manufacturing, mining, environmental groups, academia and organized labor. It was created last year in response to concerns that Canada is lagging behind Europe and other regions when it comes to developing the infrastructure needed to support an integrated electric vehicle industry, although Ottawa has been moving forward with plans to mandate 100 percent of new vehicles sold here by 2035 will be of the zero-emission variety.
To date, federal and provincial governments, particularly Ontario and Quebec, have focused on attracting investment in vehicle and battery manufacturing outside of Canada’s borders. Now, Mr. Fortier said, the trick will be to use those investments as hubs for all the other parts of the economy that feed into electric vehicle production, including areas like software development and artificial intelligence.
“The way we’re going to really catch on and actually lead the pack is to recognize that our opportunity is bigger than just assembly, bigger than auto parts, bigger than batteries,” he said.
“This will require deliberate planning.”
Geoffrey Jones writes about sustainable finance and the ESG sector for The Globe and Mail. Email him at jeffjones@globeandmail.com.
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