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Jerome Gessaroli: The government’s zero-emission vehicles mandate is an arrogant, unnecessary gamble

Commentary

In December 2023, Steven Guilbeault, the federal minister of environment and climate change, announced that all new auto sales in Canada must be zero-emission vehicles by 2035. The Liberal government’s mandate to restructure the auto sector is industrial policy on a massive scale. Whether one agrees or disagrees with the mandate, there is general consensus on the substantial nature of this government intervention.

Many people write about whether wholesale government mandates will benefit or harm Canadians. Pundits of all stripes invoke their favoured political and economic ideologies (whether it is capitalism, command socialism, dirigisme, or economic nationalism) when discussing the government’s actions. When evaluating the efficacy of these government mandates, I will refrain from using polarizing labels and instead apply a first principles approach to assess how successful products, markets and entire industries are created.

To illustrate this approach, I reference a classic essay written in 1958 by Leonard E. Read, “I, Pencil.” In this essay, Read questions whether anyone truly knows how to produce a pencil from scratch, a simple commodity that has been mass-produced for over 300 years.

Read describes a pencil’s components, including wood, lacquer, graphite, a bit of metal, an eraser, and labelling. He delves into the intricacies of each element needed for pencil production. For instance, harvesting wood involves using saws, trucks, railcars, radios, and other equipment. The extensive skills, knowledge, and capital needed to design and manufacture this equipment are immense. Motors, railcars, trucks, and radios all require mining and refining ores, engineering design, manufacturing, distribution, and deployment, just so loggers can do their job.

After the wood arrives at the sawmill, it is cut, machined, and dried. The equipment and expertise needed for this second step are too long to list. Power for the mill and kiln, generated by a hydroelectric dam and transmitted through power lines, requires its own design, construction, and operation—a testament to human ingenuity.

The pencil’s graphite must be mined and imported. Transforming raw graphite into the final pencil material involves mixing it with various compounds at the mine site, moulding, cutting, multiple drying rounds, and quality checks. The graphite then travels to the pencil plant, where it undergoes further mixing, moulding, and cutting and is then placed inside the pencil. Chemists, manufacturing engineers, production workers, millwrights, and truck drivers, not to mention the specialized equipment for graphite manufacturing, all play crucial roles in this intricate process.

The pencil lacquer, made up of various compounds, is applied to the wood, and then the pencil runs through a specialized machine multiple times to get the desired finish. Inputs, including the chemical process, labour, and co-ordination for this procedure are too lengthy to detail. The aluminium band around the pencil serves to secure the eraser.

The eraser must be abrasive enough to remove the graphite from the paper without damaging the paper itself. Over time, chemists have changed the eraser’s composition, using their knowledge of polymers and other chemicals. The intricate production of a simple pencil requires diverse material inputs from various sectors and production processes, all of which must be cost-efficient to keep the pencil’s cost very low.

The collective knowledge, capital, and materials needed to produce a pencil are dispersed among millions of individuals and companies throughout society. No single person, even the CEO of a pencil company, possesses anything but a tiny fraction of the knowledge needed to make a pencil.

Despite this diffusion, spontaneous order emerges, driven by individuals pursuing their own interests, needs, and wants. As Read argues, those involved in the pencil’s production from miners, loggers, and engineers to CEOs, perform their tasks not because they desire a pencil but for other motivations. Instead, each participant exchanges their specific ability for the goods and services they need, with the pencil potentially being one of many items in this exchange.

Creating a zero-emission vehicle sector is vastly more complicated than a pencil. Given this complexity, the feasibility of any single entity, including the government, to successfully direct an auto sector restructuring is doubtful. Sustainably producing zero-emission vehicles instead will require decisions, capital, and resources dispersed throughout society that spontaneously arrange themselves in a manner that responds to the demand for such vehicles.

The federal government has assured Canadians that they will help with this transition, primarily through government subsidies to consumers and businesses. Money is given to subsidize zero-emission vehicle purchases to make them a bit less costly.

A total of $43 billion will be provided by the federal, Ontario and Quebec governments in subsidies for three battery plants, enabling the companies to manufacture batteries profitability. As well, funding is provided for 42,000 electric chargers, which are in addition to the 40 percent of existing chargers that the government has already subsidized to help keep drivers’ vehicles on the road.

The federal government cannot be certain its decisions are correct. It might be better to not subsidize battery plants and instead relax restrictions on supply chain development. This would involve ensuring the supply of critical minerals, chemicals, electrode production, transportation services, testing equipment, recycling, and more.

Unsold 2024 Mustang Mach-E electric vehicles sit at a Ford dealership Sunday, Jan. 21, 2024, in Broomfield, Colo. David Zalubowski/AP Photo.

The government’s approach bypasses the price system and diverts money from its best use. The subsidies are artificial. While companies may initially react to these subsidies, their response is contingent upon the government’s continued support.

Without the millions of people making individual decisions that are spontaneously organized through the price system to create a sustainable zero-emission car market, the federal government’s mandate will likely fail.

It is the height of hubris to assume that the government can restructure the auto industry in such a fundamental way. More likely, the massive subsidies will financially burden Canadians for many years, leading to a disarray of misallocated resources that will take years to correct. Indeed, the Parliamentary Budget Office estimates that the debt charges for the federal and participating provincial governments subsidizing battery manufacturing will increase the total cost by $6.6 billion over 10 years.

This poor policy will disproportionately hurt middle- and working-class Canadians, through lower employment and higher taxes that would otherwise be unnecessary.

Howard Anglin: What’s in and what’s out in 2024

Commentary

Do you want to know what to expect in 2024? Look somewhere else. This is a half-serious, half-facetious list (and I don’t even know which is which) drawing on observations and conversations on both sides of the Atlantic. It is a list for people who have ever wondered “What is the next turmeric?” Or thought, “I’ve heard good things about the skiing in Amirsoy, but will anyone I know be there?” It is my list, and even I wouldn’t trust it. 

OUTIN
minimalismclutter
OntarioQuébec
ennuimalaise
George BrownD’Arcy McGee
cigarspipes
vapescigarettes
Justin TrudeauSophie Grégoire Trudeau
frustrationanger
BudapestBucharest
Che Guevara t-shirtsMoshe Dayan t-shirts
coffee breakslunch breaks
FloridaMaine
occupationgunboat diplomacy
Scotland’s lochsScotland’s beaches
Jacqueline Kennedy Onassis style iconCarolyne Bessette-Kennedy style icon
Pre-Raphaelite BrotherhoodWhistler—Sargent bromance
beardssideburns
GrotiusSuárez
Scottish ginSpanish gin
historical-pastoral tragical-historical
anti-woke Rightanti-woke Left
dry whitesoff-dry whites
Al WaxmanBruno Gerussi
EVshybrids
IslayCampbelltown
NCAA basketballEuroleague
Western Roman EmpireEastern Roman Empire
Charlotte BrontëEmily Brontë
Spanish FalangismLebanese Phalangism
Sense and Sensibilia Names and Necessity
veteransrookies
dessertsdigestifs
the bully pulpitendynamistic power
human dignityrights for robots
opaquesheer
memoirsbiographies
Alexander WaughAuberon Waugh
Pineau des CharentesCarcavelos 
Christopher HitchensPeter Hitchens
via positivavia negativa
blockingignoring
smoothiessoups
Bertie WoosterRupert Psmith
handbagsfashion totes
declinefall
John HumphreyCharles de Koninck
Georgian townhousesEdwardian flats
quiet quittingwork to rule
Roald Dahl’s children’s storiesRoald Dahl’s adult stories
DMsvoice notes
parkspiazzas
girl mathbro science
bowdlerisationexpurgation
the mediathe silent majority
thinking about the Roman Empirethinking about the Holy Roman Empire
Anthony TrollopeAnthony Powell
ApuliaLiguria
Fidel CastroSimón Bolívar
Impressionist cityscapesRomantic landscapes
mackerelbranzino
GentileschiBronzino
Tonka beantamarind
Bernese Mountain DogsNewfoundlanders
Beverley McLachlin’s airport fictionRobert Borden’s translations of Goethe
Slovenian beachesAlbanian beaches
illiberal democratic backslidingliberal democratic backsliding
CNNCSPAN
bridgesferries
weekend golfweekday golf
illegal border-crossingvisa overstays
car audio systemscar video systems
book clubschoirs
Netflix and chilldinner and a movie
Jimmy Carter Gerald Ford
lacrosserugby
bike laneswalking paths
“pursuing our own good in our own way”“a manly, moral, regulated liberty”
mindfulnessprimal screams
ModiglianiBrancusi
George OrwellCyril Connolly
business cardscalling cards
contraceptionpregnancy
smoked cocktailsfood-infused cocktailsBut I’m still not ordering either.
Michael Ondaatje’s fictionMichael Ondaatje’s poetry
matchaprobably something even worse
civilisationits discontents
legislative powerexecutive power
fenceshedges
The Greek islandsThe Greek mainland
citrusfloral
PRC election interferencePRC cultural disruption
incomeinheritance
lake housesriver houses
houndstoothtartan
Georgian orange wineBulgarian pét-nat
mushroom drinksmushroom everything
genocide“genocide”
loft conversionsbarn conversions
clean linestassels and fringes
food deliveryfrozen meals
The BalkansThe Baltics
Old FashionedSazerac
hotelsstaying with friends
sobrietycelibacy
flower gardenskitchen gardens
ColombiaPeru
ginger groupsAdullamite factions
FlorenceRavenna
kalecabbage
cottagescabins
superstitionwitchcraft
knitting thatching 
Nutellapistachio cream
flavoured honey flavoured mustard
Scottish foldsBritish shorthairs
Marina AbramovicYoko Ono
grassdirt
exhibitionspermanent collections
hoodiesovershirts
New York steakhousesParis steakhouses
proseccochampagne
tweedcorduroy
Reagan DemocratsAttlee Conservatives
cacio e pepela gricia 
fusionregional
going for it on fourth downfake punts
organic farmingregenerative farming
Millennial imposter syndromeGen Alpha brash ignorance
Eastern Canadian winesWestern Canadian wines
West Coast American winesEast Coast American wines
ironyhypersentimentalism
impeachment25th Amendment
short storiesmultivolume novels
urban bee hivesurban pollinator gardens
black trufflewhite truffle
ZermattCervinia
fleeceshearling
soccerrugby
minimum wageautomation
literary fictionliterary non-fiction
plasticglass
hopsmalts
political platformspolitical principles
Taylor SwiftAmy Winehouse
latteshot chocolate
Scandinavian modernCalifornia modern
amarovermouth
Hart TrophyTed Lindsay Award
cutting post-secondary fundingcutting post-secondary enrolment
Left bankRight bank
proper Canadian spellingwrong American spelling
blaming Boomersresenting Gen-X
punctuationdashes
Formula 1bullfighting
‘80s nostalgia‘90s nostalgia
backyard chickensbackyard ducks
celebratory champagneeveryday champagne
moneytime
Jordan PetersonGeorge Grant
heritage tomatoesheritage apples
rentinglodging
tillingmulching
“defund the police”phthano-paranomic power
Cartesian scientismViconian humanism
single source chocolatesingle source honey
NBA basketballOlympic basketball
faux furreal fur
AthensJerusalem
Perry MasonSam Spade
coordinatedmismatched
prophetsmystics
weaknessstrength
buttonssnaps

And, of course, always out: George Bernard Shaw.

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