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Canada is being left behind in the green economy race

Canadian PoliticsEnvironmentEconomic Crisis

Fleet of electric vehicles in Tianjin. China’s EV industry has developed rapidly in recent years, and it currently represents the world’s largest market (1.06 million electric cars sold in 2019). Photo courtesy of Cenitt.

On November 19, the Trudeau government tabled the Canadian Net-Zero Emissions Accountability Act in the House of Commons. It is a plan to set greenhouse gas (GHG) reduction targets to achieve net-zero emissions by 2050. The act calls for a roadmap to meet targets in five-year increments from 2030 to 2050, and will require annual reporting by the minister of finance.

Unfortunately, however, the act imposes no immediate requirements for industry, and is insufficient to jump-start a transformative climate agenda. We have seen this movie before.

In the five years the Liberals have been in power, they have adopted the Harper administration target to reduce GHGs by 30 percent below 2005 levels by 2030, and are on a trajectory to fall well below that target by 15-20 percent. Canada has never met any of its previous GHG targets.

Yet, during the Trudeau government’s mandate, in October 2019, the prime minister re-affirmed his commitment to construct (and nationalize) the twinning of the Trans Mountain pipeline, a white elephant which will cost the public purse between $13 and $20 billion, depending on who’s counting.

Keystone XL was also on Trudeau’s short-list for his first telephone conversation with US President-elect Joe Biden. Biden has already said he’d cancel the permit if elected president.

What’s more, the federal government has failed to make progress on its commitment to end fossil fuel subsidies. In the first quarter of 2020, Energy Policy Tracker estimated subsidies for the oil and gas sector amounted to $16 billion.

As a consequence of maintaining these enormous handouts to prop up floundering extractive industries, the government has failed to allocate sufficient funds for emerging renewable energy technologies—particularly electric vehicles (EVs). This paints a disheartening portrait of what happens when public financing for Canadian clean technology, manufacturing, and innovation comes nowhere near that of other wealthy, developed nations.

For Canadian federal and provincial governments, this is not necessarily a question of a need for new money, but rather a re-alignment of financial and legislative priorities away from the extractive economy towards an industrial strategy centred on clean growth.

Québec, the only province in Canada with an electric vehicle ecosystem

The transportation sector is responsible for 23 percent of Canada’s GHGs, and electrifying trucks and buses, as well as private vehicles, is essential in any serious climate strategy. Québec stands out as the sole Canadian jurisdiction with a complete electric vehicle ecosystem (complimented by abundant hydroelectric resources).

This ecosystem includes various firms including:

  • Lion Electric, a Saint-Jérôme-based all-electric truck and school bus manufacturer.
  • Nova Bus, an electric bus builder (owned by Volvo) headquartered in Saint-Eustache.
  • Dana TM4, a producer of electric motors and drivetrains based in Boucherville.
  • Blue Solutions, a Boucherville-based maker of batteries and electrical storage solutions.
  • AddÉnergie, Flo and Elmec, leaders in the manufacture of electric vehicle charging stations.

Aside from these companies, Québec is also home to two raw material suppliers and a number of research institutions including the Innovative Vehicle Institute (Institut du véhicule innovant) and Hydro-Québec’s Center of Excellence in Transportation Electrification and Energy Storage, a world-class innovation hub in the field of battery materials manufacturing.

Lion is a success story, and it has succeeded without the deep pockets of the large vehicle manufacturers. Back in 2016, Lion pioneered the creation of North America’s first electric school bus, designed from the bottom up as proprietary technology. It has since sold 300 buses and moved on to develop a wide range of Class 5 to 8 electric specialty trucks in collaboration with multiple partners.

Just this year, Lion sold $15 million worth of Lion8 trucks to Canadian National Railway, had an order for 10 Lion6 trucks to Amazon, and sent the first two Lion8 garbage collection trucks to Waste Connections as part a pilot project. The company has the capacity to manufacture 2,500 electric vehicles per year at its St-Jérôme headquarters.

On November 16, the Coalition avenir Québec (CAQ) revealed its five-year, $6.7 billion Plan for a Green Economy (Plan pour une économie verte, or PEV). While the PEV represents a step in the right direction—it includes a ban on the sale of new gas-powered vehicles starting in 2035—it only aims to reduce emissions by 12.4 megatonnes, not the 29 megatonnes needed to achieve its GHG reduction objectives by 2030. This target will be difficult to achieve, not least because the PEV is structured around market-based incentives to steer behaviour.

The PEV will feature subsidies for electric trucks, school buses and electric urban buses, and the installation of an additional 2,500 fast charging units. However, the plan only provides $30 million for innovative products in electric transport and $20 million for battery recycling. This is woefully insufficient to compete effectively outside Québec.

While Premier Legault stated he would welcome federal support for the PEV, Québec’s plan reflects the “growing national imbalance” on climate action, a disunity that won’t be remedied without better national coordination and robust forms of intervention from Ottawa.

Photo by Ivan Radic/Flickr

Federal-provincial improvisation in Ontario

Meanwhile in Ontario, the federal government’s participation in financing electric vehicle technology, manufacturing, and innovation has been spotty and unfocused.

Much to the credit of a negotiated agreement between Unifor and Ford Motor Company, the provincial and federal governments will each contribute $300 million for Ford to convert its Oakville assembly plant to produce electric vehicles. This is money dedicated to helping a US-owned company catch up with global automakers complying with vehicle legislation in the European Union and China.

Unifor has been negotiating a similar agreement for the Fiat Chrysler Windsor plant and comparable federal and provincial funding is anticipated.

In contrast, the Trudeau government has dragged its heels on the implementation of national zero-emissions vehicle (ZEV) mandate, binding legislation that would require EVs to comprise a larger share of automakers’ passenger-vehicle sales.

Set against the above patterns, China’s BYD Company—a manufacturer of automobiles, battery-powered bicycles, buses, forklifts, solar panels, and rechargeable batteries—started production at its new electric bus plant in Newmarket in 2019. The plant will focus on assembling buses for the Canadian and US market.

Likewise, Ontario-based Magna International is involved in a joint venture to build electric vehicles in China and has an agreement with Magna Steyr to produce EVs in Austria.

Also in Ontario, MacLean Engineering, MEDATech Engineering Services, Kovatera and FVT Technologies are manufacturing electric mining vehicles. But Canadian federal incentives are modest. According to Robert Rennie, President of MDEATech, “The government needs to step in… The Europeans are taking it way more seriously than North Americans are.”

It is clear that sporadic government responses are not the way to go and federal-provincial collaboration is critical.

As for the government’s support for Ford and possibly Fiat Chrysler, these moves are nothing new—they are in keeping with a tradition of support for the Ontario auto industry.

So far, both the federal and provincial governments have failed to inject life into Canada’s emerging clean technology economy. Worse, federal legislative initiatives to facilitate its expansion pale in comparison to other jurisdictions around the world.

Take Swedish battery manufacturer Northvolt, for example. The company recently raised at least $3 billion to construct Europe’s largest battery manufacturing plant, Northvolt Ett, in Sweden. This will be built alongside the world’s largest battery recycling plant. To support strategic cooperation with central European automakers Volkswagen and BMW, Germany’s Federal Ministry of Economics has pledged $525 million to support the construction of a second factory, Northvolt Zwei, in Germany. This move has helped to further integrate European delivery and supply chains.

Volkswagen paid upwards of €450 million to secure a 50 percent stake in Northvolt Zwei. The German automaker is expected to be the world’s largest EV producer by 2030.

Elsewhere, Total, France’s oil giant, Groupe PSA (Citroën, Peugeot, Opel) and the governments of France and Germany—in addition to the European Cluster Collaboration Platform—have raised $6 billion to create the Automotive Cells Company, comprising two battery production facilities, one in France, the other in Germany, and two research and development sites in France.

These initiatives are complimented by the European Commission’s contribution of $3.5 billion to a pan-European battery system, announced in December 2019. This represents a major push to “turn the continent into a global hub for green battery making.”

In China, all battery powered vehicle manufacturers must be responsible for battery recycling. China is also experimenting with a battery recycling framework, and one of the country’s largest electric vehicle manufacturers, NIO, which introduced its first EV in 2018, is now registered on the stock market. By July 2020 the firm had produced its 50,000th vehicle.

Xpeng, another EV manufacturer from China, is well financed with the backing of Xiaomi, Alibaba, and Foxconn. In August 2020, Xpeng filed for an initial public offering (IPO) on the New York Stock Exchange. The company hopes to raise more than $1 billion with the IPO.

Overall, China is leading the world in low-carbon technology development and innovation through state-led industrial policies such as Made in China 2025. The country also holds 29 percent of the global total of renewable energy patents, and has invested more in renewable energy than the US and EU combined.

Regrettably, neither the Québec or Ontario governments, nor the Trudeau administration, have introduced any legislative requirements to assure a market for recycled batteries.

Rendering of Northvolt Ett, a future battery production facility in northern Sweden. Image courtesy of Northvolt.

Billons are elsewhere

Despite four years of Donald Trump, access to clean technology financing in the United States has been relatively stable over the course of his administration, complementing support from progressive states. Canada has a dramatically weaker record. The 2017 Budget committed only $2.3 billion to support “clean technology research, development, demonstration and adoption, as well as scaling-up clean technology businesses.”

With Joe Biden about to take charge, many are predicting historic supports for American-made electric vehicle manufacturers, among many other measures.

In California, a state with a population similar to that of Canada, the Advanced Clean Truck Regulation already require that half of heavy-duty trucks sold be ZEVs by 2035, and the other half by 2045.

Compare this with Winnipeg-based New Flyer, a manufacturer of urban transit buses. A New Flyer spokesperson made it clear that, with Biden’s proposed “Buy American” requirements, incentives will be weaker for manufacturing electric buses in Canada. Accordingly, New Flyer’s Xcelsior electric buses are manufactured in Anniston, Alabama, alongside its Vehicle Innovation Center.

In Canada, the lack of a coherent national green economy strategy and insufficient federal-provincial collaboration explains why we are rapidly falling behind other industrialized nations.

Compared to the European Union and China, jurisdictions which have rapidly pivoted to become clean-tech powerhouses, Canada is simply lagging behind. In fact, Canada’s share of the global clean technology market fell from two to 1.3 percent since 2005. That marks a 41 percent decline.

Adding to the pressure, the incoming Biden administration has promised a $2.2 trillion climate plan that will likely see an explosion in subsidies for clean technology firms, including the creation of ARPA-C, a federal agency focused on climate that will “target affordable, game-changing technologies.”

With the backdrop of an underdeveloped clean technology sector, and the impending climate emergency, the stakes could not be higher. Canada desperately needs stimulus measures to reduce our GHG emissions, support low-carbon technologies, and secure a just transition to avoid the worst impacts of the climate crisis.

Will Dubitsky formerly worked on environmental policy, legislation, programs and projects with the Government of Canada. Since retiring in 2012, he has been researching and writing on the transition to a clean economy.

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