A new report from the Parliamentary Budget Officer (PBO) says that the subsidies provided by federal and provincial governments to attract electric vehicle (EV) battery manufacturing to Canada will cost $5.8 billion more than forecast.
The report analyzes the costs of recent deals struck with Northvolt, Volkswagen (VLKAF) and Stellantis (STLA) to locate EV battery plants across the country.
So far, the federal government in Ottawa and provinces of Ontario and Quebec have announced a combined $37.7 billion in subsidies to support the EV battery facilities.
However, the PBO, which oversees federal spending, says that the total cost of government support between 2022 and 2033 is more likely be $43.6 billion.
The Canadian subsidies have been designed to match the U.S. Advanced Manufacturing Tax Credit, which is part of America’s sweeping Inflation Reduction Act.
Of the total $43.6 billion in costs, 62% will be borne by the federal government and 38% will be covered by the Ontario and Quebec governments, says the report.
The report also estimates that it will take 11 years for the governments to break even on the Northvolt battery plant, 15 years for the Volkswagen facility, and 23 years for the Stellantis subsidy to be recovered.
Volkswagen's battery plant is being built in St Thomas, Ontario, and the Stellantis plant is being constructed in Windsor, Ontario. The Northvolt facility is being erected outside of Montreal.