The following is the fifth in a series of French-language articles presented in collaboration with the Montreal Economic Institute. The English translation is included below.

Oyez, oyez! C’est le début d’une ère nouvelle en matière de politique industrielle au Canada!

Les gouvernements de tout le pays ont plaidé en faveur d’une transition nationale vers les véhicules électriques, et ils sont prêts à dépenser de grosses sommes d’argent pour y arriver. En fait, le gouvernement fédéral s’est engagé à ce que tous les véhicules vendus d’ici à 2035 soient zéro émission.

Chéquiers en main, les politiciens ont généreusement distribué des milliards de dollars de fonds publics pour inciter les fabricants de véhicules électriques à s’installer au Canada. À ce jour, les gouvernements du Canada se sont engagés à verser jusqu’à 52,5 milliards $ pour subventionner cette chaîne d’approvisionnement nationale, selon le directeur parlementaire du budget.

Parmi les principaux bénéficiaires, Northvolt, un fabricant suédois de batteries pour véhicules électriques, s’est vu attribuer 7 milliards $ de fonds publics. En échange, une région proche de Saint-Basile-le-Grand et de McMasterville accueillera une toute nouvelle usine de batteries pour véhicules électriques, d’une valeur de plusieurs milliards de dollars.

Dans leurs communiqués de presse, les politiciens proclamaient qu’il s’agissait d’un tournant important pour l’économie du Québec.

Mais moins d’un an après la conclusion de l’accord, il semble que la lune de miel touche à sa fin, alors que Northvolt est confrontée à de graves difficultés financières.

La faible demande pour les véhicules électriques, notamment en Europe, a contraint Northvolt à fermer l’une de ses usines et à mettre à pied 1600 employés. Dans un souci de réduction des coûts, l’entreprise a également annoncé son intention de limiter ses activités à la fabrication de cellules de batterie.

En juin dernier, BMW a annulé une commande de 2 milliards $, faute de pouvoir se procurer les pièces nécessaires auprès de l’entreprise.

Cette annonce avait alors suscité des inquiétudes quant à ses répercussions sur l’usine de la région de Montréal, mais l’entreprise avait rassuré les décideurs politiques en affirmant qu’elle respecterait ses engagements, moyennant quelques ajustements à l’échéancier.

Ces promesses n’ont cependant pas réussi à calmer les inquiétudes à Québec. La semaine dernière, le gouvernement provincial a commencé à évoquer publiquement la possibilité d’annuler l’approvisionnement en électricité de Northvolt si l’entreprise continue à se traîner les pieds dans la construction de l’usine après une certaine date butoir.

Malgré les annonces de l’entreprise, il ne fait aucun doute que des changements sont déjà amorcés. Ce qui était initialement prévu en matière de production pour le Québec est aujourd’hui menacé par les décisions stratégiques qui se dessinent en Suède.

Notamment, Northvolt a abandonné ses activités de production de cathodes en Suède, l’une des activités également prévues dans l’usine de Québec.

Mais comment en sommes-nous arrivés là? Pourquoi les Canadiens doivent-ils aujourd’hui subir les conséquences de la volatilité des entreprises étrangères?

Tout simplement du fait d’une politique industrielle inadaptée.

On entend par politique industrielle les mesures prises par les pouvoirs publics en vue de promouvoir et de soutenir des industries ou des secteurs spécifiques au sein de l’économie. Il peut s’agir notamment de mesures d’intervention dans le secteur manufacturier en vue d’obtenir des résultats économiques donnés, comme la création d’emplois, la hausse des exportations ou la promotion de l’innovation.

Les subventions ne sont qu’un outil parmi tant d’autres. Ainsi, lorsque le gouvernement tente de stimuler la demande pour les voitures électriques, on combine un pari considérable en faveur de la production de véhicules électriques avec un mandat de zéro émission.

Malheureusement, il ne semble pas y avoir de consensus quant à l’efficacité de cette politique industrielle, malgré les milliards que nous y consacrons. Les données probantes sur l’efficacité des instruments agissant sur la demande sont également peu nombreuses.

Ce qui nous ramène à la question de savoir pourquoi les Canadiens doivent aujourd’hui s’inquiéter de la situation financière de ce fabricant suédois.

Tout simplement parce que les gouvernements, se croyant capables de déterminer les gagnants sur le marché, ont lié l’argent des contribuables au destin de Northvolt. De telles subventions obligent les contribuables à assumer les risques liés à une entreprise privée.

Cette décision intervient à un moment où les Canadiens sont de plus en plus sceptiques à l’égard des dépenses publiques.

Selon un sondage IEDM-Ipsos réalisé en juillet dernier, 63 pour cent des Canadiens estiment que le gouvernement fédéral dépense trop. En ce qui concerne la gestion de ces dépenses par le gouvernement, 70 pour cent d’entre eux estiment qu’Ottawa fait piètre figure.

Les subventions accordées aux entreprises du secteur des véhicules électriques s’élèveront à près de 6 milliards $ chaque année. Il s’agit du double des recettes additionnelles provenant de la nouvelle tranche d’imposition introduite par le gouvernement Trudeau en 2016, qui s’élevaient à 2,88 milliards $ cette année.

Les Canadiens devraient pouvoir dépenser cet argent eux-mêmes; s’ils ont envie de parier, qu’ils puissent le faire à leur guise.

Par ailleurs, l’IEDM a constaté que si cette tranche d’imposition supplémentaire n’avait jamais été introduite, et si ces milliards étaient restés dans les poches des Canadiens, quelque 9820 entreprises canadiennes auraient pu voir le jour entre 2016 et 2020. Que Northvolt parvienne ou non à respecter ses engagements, cette saga est révélatrice de la faille fondamentale de toute subvention.

Les gouvernements ne sont pas en mesure de prédire le succès d’une industrie donnée et, lorsqu’ils essaient de le faire, ce sont les contribuables qui se retrouvent à payer les pots cassés.

Les subventions ne garantissent pas la réussite commerciale; elles introduisent une distorsion du marché, en soustrayant les entreprises aux risques qu’elles devraient assumer. Pendant ce temps, les contribuables subissent les contrecoups lorsque les choses tournent mal, comme nous pourrions bien l’apprendre à nos dépens une fois de plus avec Northvolt.

Northvolt’s struggles a cautionary tale for Canada’s risky industrial policy

Come one, come all! A new era of industrial policy has emerged in Canada!

Governments across the country have called for a nationwide transition to electric vehicles, and they’re willing to spend big bucks to make it happen. In fact, the federal government has mandated that all vehicles sold by 2035 be zero emission.

With chequebooks open, politicians have been generously doling out billions of dollars of taxpayer money to entice electric vehicle manufacturers to set up shop in Canada. So far, Canadian governments have pledged up to $52.5 billion in order to subsidize this domestic supply chain, according to the Parliamentary Budget Officer.

Among the main beneficiaries is Northvolt, a Swedish-based electric vehicle battery manufacturer, which received $7 billion in public funds. In exchange, an area near Sainte-Basile-le-Grand and McMasterville will be the site of a brand new multi-billion-dollar electric vehicle battery plant.

In their press releases, politicians were trumpeting this as a turning point for Quebec’s economy.

But less than a year after the deal was inked, it appears that the honeymoon phase is coming to an end, as Northvolt is facing severe financial difficulties.

Sluggish demand for electric vehicles, especially in Europe, has compelled Northvolt to close down one of its sites and lay off 1,600 employees. Amid the need to cut costs, the company also announced plans to restrict its activities to the manufacture of battery cells.

BMW, unable to procure the parts needed from the company, cancelled a $2-billion order in June.

Worries began circulating that this would impact the Montreal-area plant, but the company has reassured policymakers that, notwithstanding changes to the timeline, it will uphold its commitments.

Such assurances have not been able to calm the concerns in Quebec City, however. Last week, the provincial government began publicly discussing the prospect of cancelling Northvolt’s energy supply if it continues to drag its feet on plant construction beyond a certain deadline.

Despite what the company has said, changes are undoubtedly already underway. What was originally planned for production in Quebec is now at risk due to strategic decisions we see playing out in Sweden.

For one thing, Northvolt has ceased its cathode-related activities in Sweden—one of the operations also intended for Quebec.

So, how did we get here? Why are Canadians now caught up in the business volatility of foreign corporations?

The answer: bad industrial policy.

Industrial policy refers to government actions aimed at promoting and supporting specific industries or sectors within the economy. These include intervening in manufacturing with the goal of achieving specific economic outcomes, such as creating jobs, boosting exports, or encouraging innovation.

Subsidies are just one tool. Thus, with government trying to spur demand for electric cars, a sizeable bet on electric vehicle production is combined with a zero-emission mandate.

Unfortunately, there doesn’t seem to be widespread consensus that industrial policy works, despite the billions we’re throwing at it. The evidence regarding the effectiveness of demand-side instruments is also scanty.

Which brings us back to the question of why Canadians are now worried about the financial well-being of this Swedish-based manufacturer.

The answer is that governments, somehow believing they are good at picking winners on the market, have tied taxpayer dollars to Northvolt’s fate. Subsidies like these force taxpayers to assume the risk for a private venture.

This comes at a time when Canadians are growing increasingly skeptical of government spending.

According to an MEI-Ipsos poll conducted on July, 63 percent of Canadians believe the federal government spends too much. On the question of government stewardship of those funds, 70 percent find that Ottawa does not manage its money well.

Subsidies to electric vehicle companies will amount to nearly $6 billion per year. This is double the additional revenue gained from the new tax bracket the Trudeau government introduced in 2016, which amounted to $2.88 billion this year.

This is money that would be better spent by Canadians; if they have an appetite to gamble, let it be their choice.

Moreover, the MEI found that had this extra tax bracket never been introduced, and had these billions remained in Canadians’ pockets, some 9,820 Canadian companies could have been launched between 2016 and 2020.

Whether or not Northvolt manages to follow through on its commitments, this entire saga reveals the fundamental flaw of subsidies.

Governments are not equipped to predict which industries will succeed, and when they try to do so, it is taxpayers who are left holding the bag.

Subsidies don’t guarantee market success; they distort the market, shielding corporations from the risks they ought to bear. Meanwhile, taxpayers shoulder all the downsides when things go awry, as we may well learn the hard way once again with Northvolt.

Imagine a world where you fear talking about your aspirations for the future. Imagine a world where, because of that fear, you back away from trying new things, trying to improve your community or your country. The last thing Canada needs is incentive to be less ambitious. For this, and other reasons, the Business Council of Alberta is deeply concerned about the amendments to the Competition Act brought about in June’s passing of Bill C59, otherwise known as the “greenwashing provisions.”

We worry the amendments were rushed and ill-considered. They were developed hastily, without consultation, using poor language, and have left the Competition Bureau, an agency whose commissioner told the Standing Committee on Finance that he did not feel the Competition Act was the right vehicle to dictate what a company can or cannot say when it comes to environmental claims, to develop the guidance and framework for implementing these amendments. They, by their own admission, are the wrong body to develop the framework for a vague legislative amendment.

We worry that the Bureau, and its associated Competition Tribunal, will be flooded with frivolous and vexatious claims, forcing them to add additional resources at the cost of the taxpayer to review and vet these actions. We worry about the uncertainty created through vague language on “internationally recognized methodologies” as the standards by which company statements will be assessed.

We worry about the reverse onus put on a company to defend an environmental claim while absolutely no onus is placed on the entity or individuals initiating a claim. This is the legal equivalent of legitimizing the comments section in online media. We worry that at a time when the public is expecting companies to talk more about their environmental performance, they will say less—not because they aren’t doing things, but because talking about it risks challenge, cost, and uncertainty.

But what worries us most is that it could very well eventually kill Canadian business ambition and innovation, making us all poorer and worse off. How might changes intended to ensure Canadian companies don’t mislead the public about their environmental activities lead Canadians to be poorer, you might ask?

The uncertainty created through these changes, which will only be cleared up after years of decisions and judgements creating precedent, will result in companies not talking about their performance or aspirations. If companies don’t talk about their performance, their plans, or their successes, they won’t attract investment. If they can’t attract investment they can’t hire Canadians. If Canadians aren’t hired, our incomes and prosperity go down. We become worse off.

This was made crystal clear in a small, hard-to-find recommendation from the Competition Bureau in a bulletin released July 22 2024 entitled “Deceptive Marketing Practices Digest – Volume 7.” In it, the Bureau recommends that companies “avoid aspirational claims about the future.”

We now have a government entity recommending that companies do not make aspirational claims about the future. This is incredibly disappointing and will have far-reaching implications for Canadian prosperity.

Every business started with an entrepreneur thinking, and communicating, their aspirational claim for the future. Every business, and therefore every job and tax dollar created, is about aspiration for the future. This country itself is an aspiration.

Aspiration is a key aspect of innovation. Aspirational claims drive us forward—they push us to work hard to achieve, to improve, or to make something better—the environment, a life, a day, an experience. Without aspirational claims for the future, we would not have medicines, lifesaving procedures, technology capturing CO2 directly from the air, cell phones, vehicles, enough food; the list goes on. Do we always achieve them? No. But without them, we’d never try.

Now, with a government agency recommending that companies avoid making aspirational claims, how long will it be before companies who can’t talk about being aspirational, simply become less aspirational?

Businesses are proud to talk about what they do, and their performance, particularly about the environment. Even before the amendments to the act, they were under a legal obligation not to use deceptive tactics or greenwashing. Truth in advertising is a common good. But now, they are told they shouldn’t even talk about the future.

It is innately human to have aspirations, to make inspiring statements about what you hope to achieve. Can every claim be backed up with perfect timing, knowledge, data, and precision? No. Because we can’t predict the future.

How can our entrepreneurs, businesses, scientists, and innovators feel that Canada is now a place where they can do their finest work and create companies, jobs, and investment? How can we attract capital to invest in Canadian companies that are working to reduce emissions, protect our environment, or improve the landscapes if those companies are advised not to talk about how their innovations could make things better? How can Canadians earn good and stable paycheques if companies cannot grow because they cannot talk publicly about what their plans are for the future?

The answer is we can’t.

The unintended consequences of this last-minute, poorly drafted amendment could be very material for Canada. It is likely to mean fewer paycheques for Canadians because companies will either invest elsewhere or will simply be started in another country that welcomes ambition, aspiration, and innovation. Canadians are already poorer compared to most of our peer nations. This could, very likely, make us that much poorer.

It is not too late to reverse or amend this change to the Competition Act. Will government make the right decision? I don’t know. I can’t predict the future. But I hope that they do, exactly for a better future.