Examining the Expenses of Canadian Green Energy Subsidies
The city of Ottawa has approved spending $200 billion dollars to fight against climate change, investing heavily in clean energy initiatives, such as tax credits worth over $60 billion and subsidies for the electric vehicle industry. Environment Minister Steve Guilbeault and the federal government justify these investments; however some economists say that taxpayers may not see a worthwhile return on the investment. Economist Jack Mintz says that the heavy subsidization of the industry is a “risky investment of taxpayer dollars.” Economist Moshe Lander contends that subsidies have to be carefully designed and have the potential to quickly become a regular cost of doing business.
The Fall Economic Statement, released on Nov. 21, details the various clean energy projects supported by the government. The statement shows an average of 4.6 percent of the gross domestic product being used to fund clean energy initiatives since Budget 2021. The projects range from EV incentives and pilot projects to accelerate climate adaptation, to subsidizing eco-friendly vehicle fleets and funding educational campaigns addressing climate change.
The investment tax credits provided by the government, such as the Carbon Capture, Utilization, and Storage investment tax credit, and the Clean Hydrogen investment tax credit, are being used to incentivize companies to upgrade to net-zero operations. The credits are Canada’s answer to large clean energy subsidies in the U.S. and have been implemented to remain competitive in the global market. However, according to some reports, the cost to taxpayers is significant and may hinder private money contributions to these projects.
Other economists argue that Canada could have instead exported raw materials for manufacturing into batteries instead of investing in large subsidies to compete with other countries offering bigger subsidies. Jack Mintz also warns about the danger in selecting specific firms for large subsidies, saying that it can potentially cause a “race to the bottom” and have negative effects on the market.
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