Canada should monitor American electric vehicle investments, but no specifics on how feds will counter U.S. subsidies

Canada’s ambassador to the United States says the federal government should be watching American investments in electric vehicle manufacturing, but wouldn’t give specifics on how it plans to compete with the subsidies offered in the Inflation Reduction Act enacted south of the border.

Kirsten Hillman told CTV’s Question Period host Vassy Kapelos, in an interview airing Sunday, it’s important Canada remain competitive in the electric vehicle market, an arena in which it already has several advantages, including the workforce, expertise, and critical minerals resources. She said experts are working to ensure Canada is ahead of the curve and encouraging investment in the electric vehicles sector, but she didn’t specify how.

“I think we have to be aware of what’s happening down here,” Hillman said in the interview from Washington, D.C. “And we have to understand its implications for the Canadian economy.”

“Of course responsible policymaking is making sure that we understand what the environment is for Canadians and Canadian investments, and maximizing benefits for us,” Hillman said.

But when pressed, the ambassador didn’t give specifics on how Canada would counter the United States’ Inflation Reduction Act — passed in August 2022 and aimed at quashing inflation, reducing the deficit, and investing nearly US$400 billion in clean energy — which offers significant subsidies to electric vehicle battery manufacturers.

“The Inflation Reduction Act and the investments that it’s making in green technology are important, and they are similar to investments that we’ve been making, issues we’ve been focusing on, in Canada for a number of years now,” Hillman said.

“The government has committed to remaining competitive,” she also said, adding Canada saw significant investment specifically in the area of battery technology last year. “So we are doing very well in that space, but we can never be complacent.”

The ambassador is set to travel to Mexico City this week to attend the North American Leaders’ Summit — the 10th iteration of the trilateral gathering — despite violence in Mexico following the arrest of one of notorious jailed drug kingpin Joaquin “El Chapo” Guzman’s sons.

Officials from Canada, the United States, and Mexico are expected to discuss, among other topics, climate change and the environment. Electric vehicles are sure to be a talking point.

Before the United States Congress enacted the Inflation Reduction Act in its current form last August, an earlier version targeted the massive subsidies to only American-made electric vehicles and their parts, which worried Canadian manufacturers and could have devastated the Canadian auto industry.

But the legislation was expanded to include vehicles built in Canada and Mexico, not just the U.S., after nearly a year of lobbying by Ottawa and industry.

“It’s important, with our American friends, that we continue to emphasize that we both do better when we’re committed to each other’s success,” Hillman said, adding of the Inflation Reduction Act: “We succeeded in that respect, by getting Canada carved in to the electric vehicle tax subsidy and the electric vehicle battery subsidy.”

Meanwhile Deputy Prime Minister and Finance Minister Chrystia Freeland — who also plans to attend the Mexico City meetings — told The Canadian Press in November 2022 that two new federal tax credits for clean technology included in the government’s fall economic statement are just the “down payment on the work that lies ahead to respond to the Inflation Reduction Act.”

Any more significant response or countering of the American legislation will have to wait until this spring, when Freeland is set to table the next federal budget.

“I think what’s important is not necessarily doing exactly what the Americans do, they have their own domestic environment, and they have their own ways in which they are attracting investment, their own value proposition and we have ours,” Hillman said. “We have been investing in this space for a long time and we have an ecosystem that is already healthy in this space, the U.S. less so.”

She added the Canadian market will benefit from American growth in the electric vehicle market because of the nature of the trade relationship between the two countries.

“So yes, [the U.S.] is a big country with a lot of money to invest and they are doing that,” she said. “That’s a good thing for the environment.”

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