You’re paying for Ottawa’s addiction to EV gambling

In my high school yearbook, my mother inscribed: “Good, Better, Best! Never let it rest ‘til you make your good better and your better best!” The Trudeau government seems determined to stand this idea on its head—Bad, Badder, Worst! Never stop at first! Make your bad ideas badder, and your badder worst!

So, despite the fact that it’s theoretically understood and empirically well-documented that governments are abjectly incompetent when they try to “manage” market economies (i.e. promoting what they see as “winning” technologies, activities, sectors, etc.), the Trudeau government seems determined to do little else, particularly with natural resources, energy and greenhouse gas emissions.

Today’s shining example? The Trudeau government’s decision to hand $13 billion to Volkswagen as an “incentive” to build a giant electric vehicle (EV) battery plant in Ontario (rather than the United States, which is handing out subsidies for EVs in wholesale fashion).

It’s rather difficult to spin the Volkswagen “investment” as anything other than “picking winning technology” in multiple domains. It designates as “winners” companies that bet most heavily on specific technologies using specific metals and minerals for specific uses that are chosen expressly for the government’s desired future of transportation, which is a world of battery-powered vehicles.

However, there’s reason to believe that this vision is infeasible in multiple dimensions, from electricity production capacity to mineral and metal productive capacity. In fact, the more people look at the metals and additional electrical power generation needed for EVs, the massive investments in charging capacity, and massive upgrades to power transmission and distribution grids, it becomes less obvious that the future belongs to EVs. It is, self-evidently, a massive government gamble, making decade-long plans, which include the construction of vast battery manufacturing facilities, based on an unproven and untested idea.

All that would be bad enough, but adding insult to injury, the Trudeau government, in its ham-handed way of things, has managed to simultaneously make a dubious bet on Volkswagen while calling into question the viability of a similar bet previously made (though at much smaller scale) with Stellantis, an automaker also banking on an EV future, and which also planned to build a battery manufacturing facility in Ontario.

Now, it’s unclear whether or not Ottawa’s latest gamble (the $13 billion to Volkswagen) will lead to an incremental increase in batteries produced in Canada to support more manufacturing of electric vehicles in Canada (or jobs created thereby), or if there will just be a substitution of planned capacity expansion, as Stellantis has suspended its plan to move forward on its battery plant unless it gets its “fair share” of sweet, sweet government subsidies to match those Volkswagen is getting.

A rational and responsible government, one that bothered to study economic theory or simply look at the records of failure in government efforts to micromanage markets and economies, would not be doing such foolish things, whether in the energy, transportation, technology or mining sectors. These are all massive profit centres for Canada that will henceforth be riding on the EV gamble. Nor is it rational policymaking to create incentives for the private sector to play extortion games like “subsidy, subsidy, who gets the subsidy.”

That our government not only continues to micro-manage the economy, and bet taxpayer dollars heavily on the outcome, implies that we do not have that sort of rationality and responsiveness in Ottawa today.