GM workers use human-assisted automation to weld vehicle doors at the 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 cleantech industries a big gift in the form of a landmark 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 the Inflation Reduction Act $369 billion in climate and energy spending, which supporters billed as Washington’s largest climate change initiative. 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 trying to do so it appeared that his green agenda was being overshadowed by fears about out-of-control consumer prices and an impending recession. The legislation now goes to the House of Representatives for approval before Biden signs it into law.
So far, America’s inability to rally support to do what is needed to reduce emissions in its economy, the world’s largest, has held back global progress, and the job has only gotten harder.
For Canada, a massive opportunity lies in the legislation’s electric vehicle incentives, particularly the tax credit, which amounts to US$7,500 for each new car.
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While Mr. Biden initially appeared to take a buy-American stance on eligibility, the new bill specifically extends incentives to electric vehicles built across North America, following persuasive lobbying by Canadian federal and provincial governments and from industry officials, who stressed that four-fifths of the roughly two million cars and trucks built in Canada each year are exported to the U.S.
The auto industry has been critical of the incentives, saying they would not apply to enough vehicles on the market today because of the number of auto components that come from other countries, particularly China. But manufacturers could solve this problem by sourcing American parts, for example.
The proposed legislation also requires that critical minerals used to build batteries for electric vehicles be produced or processed in countries with which the US has free trade agreements. Canadian mining companies are already looking to bolster domestic supplies of these minerals.
But Canada is still lacking a solid game plan for building all the elements of your electric vehicle industry. This strategy should involve the national and foreign owners of the assembly lines, as well as the suppliers of the parts that are screwed into them.
According to Matthew Fortier, CEO of Accelerate, an alliance formed to develop Canada’s zero-emission vehicle supply chain blueprints, Canada’s plan must also include battery manufacturers, battery recyclers, miners and companies that develop technology for electrification. Canadian Transport.
The strategy must 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. “Canada needs to focus on defining our position in the US and global electric vehicle industry,” added 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 formed last year in response to concerns that Canada was lagging behind Europe and other regions in developing the infrastructure needed to support an integrated electric vehicle industry, even as Ottawa was making progress with the plans to mandate that 100% of new vehicles sold here by 2035 be of the zero-emissions variety.
To date, the federal and provincial governments, particularly Ontario and Quebec, have focused on attracting investment in vehicle and battery manufacturing from outside Canada’s borders. Now, said Mr. Fortier, the trick will be to use these investments as hubs for all the other parts of the economy that feed into EV manufacturing, including areas like software development and artificial intelligence.
“The way we’re really going to get stuck in and lead the pack is to recognize that our opportunity is bigger than assembly, bigger than auto parts, bigger than batteries,” he said.
“This will take some determined planning.”
Jeffrey Jones writes about sustainable finance and the ESG sector for The Globe and Mail. Email him at jeffjones@globeandmail.com.