The Push for Electrical Vehicles in Ontario

There is a massive push for electric vehicles in Ontario, with billions and billions of taxpayers money being poured into them. But does that make any sense? Let's attempt to figure this out.

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I didn’t pay attention before, but, in Ontario, there are two colors of license plates. The regular ones with black or blue letters, and the ones with green letters, which are specifically for electric vehicles. The message is clear: EVs are good; the other cars are bad.

But is there actually something of any value in these green license plates, introduced back in 2010? Do they reflect a genuinely green product, a genuinely green mode of transportation? Or are they just a green-wash, a virtue signalling ploy, by the government, aimed at marketing those vehicles?

Of course, it’s not just the licence plates. Ontario politicians are now convinced that a transition to EVs is absolutely necessary to save the planet, to make a difference in fighting climate change. They claim that the future of cars is necessarily electric. They are throwing billions and billions of taxpayers dollars at it.

So let’s have a look at all those policies and initiatives in Ontario, which is one of the jurisdictions, in the world, that is the most active at pushing electric vehicles. Let’s attempt to figure out if this makes any sense.

Spoiler Alert: Contrary to what you may have been told, there are no zero-emission vehicles. Zero-emissions vehicles don’t exist. Both electric vehicles (EVs) and internal combustion engine (ICE) vehicles emit CO2 throughout their lifecycle.

In the first part of the article, we will provide context, look at the carbon emissions from cars in the province, look at the importance of the automotive sector in the province, describe the quick evolution of policies encouraging EVs, look at the massive subsidies, both provincial and federal, decided upon to push EVs in Ontario, including through multi-billion battery giga-factories.

In the second part, we will look at issues of market access in the US and Europe, at competition from China, at the actual domestic market for EVs in Canada, at the great variability of electricity pricing among Canadian provinces, at opportunities and issues with mineral procurement for batteries, at the Canadian Parliamentary Budget Officer recent, highly critical report, questioning the multi-billion subsidies into 2 battery giga-factories in the province.

We will also attempt some conclusions and predictions, based on the analysis, which confirms our previous findings that there should absolutely be no rush to transition to EVs. There are indeed much simpler, cost effective, and actually measurable, means to cut CO2 emissions, without creating havoc, for the decades to come, in the automotive, transportation and energy sectors.

A Bit of Context

Different types of motorization for passenger vehicles have existed since passenger cars came to existence: gasoline, diesel, ethanol, liquified gas. Even coal and wood burning cars were used circa WW2.

Electric vehicles are far from new. Indeed, electric powered cars were produced in the late 19th century, before being eclipsed by ICE powered vehicles.

Price incentives are typically used to promote certain types of motorization, and people are generally speaking left with the choice of vehicle and associated motorization they wanted to drive.

An example was the promotion of diesel powered cars in Europe, which reached a record market share of 72% in France in 2011. Those cars were promoted because of their better fuel efficiency in terms of miles per gallon or consumption per 100 km.

But the wind has changed direction for both diesel and gasoline cars., as their sale, new, will be prohibited from 2035 in Europe, if recently passed regulations are maintained.

Not only in Europe, but also in North America and elsewhere, governments have now embarked in a huge push to phase in electric vehicles and phase out ICE (internal combustion engine) vehicles.

Yet, polls after polls show that populations usually don’t want electric vehicles. For example, an online poll by JustTheNews (US online publication), found that 80% would never buy an EV and 17% were not yet ready for it.

So, a total of 97% are not ready to do the move! 1% replied they already had an EV and only 1% said they wanted one. There are other polls with less opposition, but generally speaking, EVs remain vastly unpopular.

Volkswagen's managing director recently alluded to a survey, that does not seem to be accessible online, of 2,375 UK motorists, which found that just 2 per cent would buy an EV right now and that more than half are not planning to buy one until 2026 or later, despite the considerable pressure by governments on the public and car dealers to rapidly transition to EVs.

The reasons for this lack of popularity of EVs are well known: high price, low range, long charging time, scarcity of charging stations, low resale value because of the uncertain longevity of the battery pack, fire risk, etc.

And another issue emerged recently in the UK: considerably increased insurance premiums (from US$1,460 to US$5,500, for a Model Y, as reported in this article)

Pressured by governments, the automotive industry has to some extent embraced EVs, and developed many models which are becoming available on the market. The industry also has been very successful at securing big time largesses from governments, with extremely generous subsidies and other incentives, as discussed in this Ontario case study.

Everyday, however, one hears dissenting voices from industry, with calls for gas, diesel and hybrid vehicles not to be phased out and to instead co-exist with EVs. And of course, many countries around the world have not joined the EV bandwagon, and may never join it, so manufacturers will continue selling ICE vehicles elsewhere.

The CEO of Ford, which has been reported to have massive losses, of some US$60,000, per EV it produces, recently declared: "Electric vehicles are great for certain customers who don’t travel long distances, who use it more in a commuting atmosphere and are wealthier. It's not for everyone.”

It’s mostly governments, through subsidies, taxes, regulations, advertising, etc. that are moving the EV agenda forward. Governments are pushing EVs, yet their agenda is at odds with what the population and industry actually want.

Ontario Carbon Emissions from Cars

The Canadian province of Ontario is, with a population of 15 million, the most populated of Canada’s provinces and territories. A majority of the population lives in urban centres such as Toronto, Ottawa, Mississauga, Brampton and Hamilton.

A large share of the Province’s electricity is generated by nuclear and hydro, with respectively 59% and 24% of total energy production.

Wind and solar represent respectively 8% and 1% of the generated electricity. With aging reactors and increased demand, the province intends to further invest in nuclear energy.

Ontario produced 150.6 megatons of carbon emissions in 2021, which is 0.4% of the world emissions.

Note that Canada, with 545.63 million tons in 2021, contributed to just 1.47% of the world emissions, estimated at 37.12 billion tons in the same year.

These figures don’t include forest fires and other land-use associated emissions. So far, in 2023, Forest fires in Canada this year have released a massive 290 million tons of carbon, doubling a previous annual record.

In Ontario, the largest emitting sectors are transportation at 32%, buildings (residential and commercial) at 25%, and industries and manufacturing (including iron, steel, and chemicals) at 23%.

Out of the transportation emissions, cars and passenger light trucks (vans, SUVs, etc.) represent respectively 20% and 25% of the total emissions. Other categories include trucks (34%) and passenger air travel (5.9%).

So, roughly speaking, cars, vans, SUVs represent about 45% of 32%, i.e. 14.4% of the province’s CO2 emissions, or 21.6 million tons of C02.

This represents about 0.06% of the world’s CO2 emissions. So it’s not even one tenth of a percent of the world’s CO2 emissions.

What Emission Reductions Could EVs Bring to Ontario?

A transition to EVs will not bring to zero these 0.06% of world emissions. Indeed, EVs are NOT zero emissions vehicles. Very far from that.

In the Volvo EV/ICE comparison we previously reviewed, there are very favorable assumptions in favor of the EV, such as no battery replacement over 200,000 km and a rather high gasoline consumption of the compared ICE vehicle - 26 MPG (Mile per Gallon) or 9.05 liters per 100 km.

Even with these optimistic (and biased) elements for comparing, the achieved reduction in CO2 emissions is only 28% over the life cycle of the vehicle (with European electricity mix), and net savings are only achieved from km 77,000.

Before the car is driven 77,000 km, i.e. for several years after purchase, the EV emits more, not less CO2.

If one makes an optimistic assumption for CO2 reductions, of 30%, it means that about 6.5 million tons of CO2 could be saved per year, which is about 4% of Ontario’s annual emissions, excluding the forest fires of course.

Yes, just a reduction of some 4% of Ontario’s CO2 emissions could possibly be achieved.

If this is not bad enough, one needs to realize that this theoretical reduction in emissions will only achieved after many years, as emissions will first increase with the expansion of EVs.

Initially, CO2 emissions will be higher than what would occur in the absence of a transition to EVs.

Also, keep in mind that some countries like China are steeply increasing their annual CO2 emissions. China actually relies mostly on coal and continues opening up new coal-fired power plants - estimated by some at two new coal power plants per week - to fulfill its ever growing energy needs.

So, whatever net savings are, maybe, achieved one day by Ontario through this transition to EVs, it will be an insignificant blip in total CO2 emissions globally.

Accordingly, any claims that Ontario will have any form of impact on the climate by doing a transition to EVs is simply not substantiated.

Let that sink in.

The Importance of the Car Industry in Ontario

Ontario is the epicenter of Canada’s car industry. Honda, Toyota, Ford, General Motors and Stellantis, as well as truck manufacturer Hino, are established in the province. It’s the only province where cars and light vehicles are assembled.

In 2021, Canada exported $29B in cars, making it the 8th largest exporter of cars in the world. Canada imported $27.2B in cars, becoming the 6th largest importer of cars in the world. The same year, cars was the 1st most imported product in Canada.

The US is the main trading partner of Canada when it comes to cars, representing $26.4B of exports and $13.8B of imports. Other important trading partners are China, Mexico, Japan and Germany.

There are vehicle assembly lines in Ontario, in Brampton, Windsor, Ingersoll, Oakville, Markham, Alliston, Cambridge and Woodstock.

Canada’s automotive manufacturers assemble around 1.9 million vehicles per year, yet only 12% of cars manufactured in Canada are sold in Canada.

As of early 2023, the following vehicles were produced in Canada/Ontario: Dodge Charger; Dodge Challenger; Dodge Caravan; Chrysler 300; Chrysler Pacifica; Chrysler Grand Caravan; Chevrolet Equinox; Lincoln Nautilus; Ford Edge; Ford GT; Toyota RAV4; Lexus RX; Honda Civic Sedan; Honda Civic Coupe; Honda CR-V.

The bulk of these models are on the heavy side and typically lack high fuel / energy efficiency, and we will comment on that further in the analysis.

Ontario’s auto supply chain is comprised of more than 700 parts firms and more than 500 tool, die and mold makers.

In 2020, the automotive industry in Canada directly employed 117,200 people, with most of these jobs located in Ontario.

In addition to these direct jobs, 371,400 people were employed in motor vehicle sales and services in 2020.

Approximately 14,800 people work in the auto parts manufacturing sector, 7,100 in engine production, and 4,600 people in the automotive electronics sector in Canada.

See more automotive industry stats here.

Why this Push for EVs in Ontario?

Ontario’s commitment towards a low-carbon economy was outlined in its 2016 Climate Change Action Plan which states that electric vehicles are “crucial” to lower greenhouse gases.

The document does not provide information as to why EVs are so crucial for combating climate change, but, in an attached backgrounder, it argues instead why people should transition to EVs.

Like with many policies promoting EVs, there are underlying (false) beliefs that EVs are necessarily good for the environment and the climate, and that they are “zero emission” vehicles.

Examples of arguments found in the action plan’s backgrounder are:

“Cost: There are many affordable EV options in the marketplace and the energy costs of operating EVs are lower than for comparable gasoline-powered vehicles …”

“Get where you need to go: Battery electric vehicles can typically travel at least 100 kilometers on a single charge …” (yes 100 km - no typo!)

“Great perks: You get a green licence plate that identifies you as an EV owner and allows you to drive in all provincial high occupancy vehicle lanes …”

Just those excerpts clearly show that this is not a serious document.

The document does not provide any information and quantification of how a transition to EVs will lower greenhouse gases or have any impact on global warming.

It presents those vehicles as green, simply ignoring their many negative social and environmental impacts.

Without proof, it asserts that electric vehicles are superior to ICE vehicles.

And accordingly, the transition to electric vehicles is presented as “crucial” to combat climate change.

“accelerating the shift to battery electric, plug-in hybrid electric and hydrogen vehicles will be crucial if Ontario is to achieve its climate change targets.”

While several specific measures have changed, the current Ontario government, led by Premier Doug Ford, is pursuing this climate action plan and argues that EVs are a solution to climate change:

“I believe in climate change, let’s make that clear,” … “And we’re doing everything to prevent it by building electric vehicles, having investment into the battery plants.” Ford declared in May 2022.

Note that, at the provincial level, Doug Ford’s “Progressive Conservatives” (yes you read it well) won an overwhelming majority at the 2022 elections, and this party, which is independent from the federal conservative party, essentially embraces the Liberal agenda of a rapid transition to EVs.

(In case you don’t know, in Canada, Liberals are in control at the federal level, though through a minority government.)

This pro-EV stance by Doug Ford and his Progressive Conservatives party is at odds with what occurs for example in the US, with leading voices such as Tump and DeSantis opposed to any EV mandates.

But this Progressive Conservative agenda is in tune with what UK Conservatives, led by Rishi Sunak do as the UK has an even more aggressive agenda towards EVs.

Conservatives are not united, they are actually a bit all over the place, when it comes to EVs!

EV Industrial Strategy

Ontario has developed an industrial strategy to transition from ICE to EV vehicles, but no information can be found in that document about the rationale for this transition.

There are however, greenish catch phrases, here and there, in the document.

Phase 2 of “Driving Prosperity: Ontario’s Automotive Plan” seeks to promote “next generation of green automotive technology” through an “EV ecosystem.”

“The future of vehicle production is electric” states the strategy.

A similar message emanates from the federal authorities and their associate think tanks. For example, the May 2021 report “Turning Talk into Action: Building Canada’s Battery Supply Chain” states:

“The world’s largest economies are ramping up their climate ambitions and radically re-imagining their economies. Canada too must not only identify where our strategic opportunities lie in a future net-zero world—but also take steps today to ensure those opportunities don’t pass us by.”

“Canada has a once-in-generation opportunity to establish itself as a major player in the global battery sector, but that window will close with or without us.”

Even if EVs are not more net-zero than they are zero-emission vehicles, the official message is clear: Canada must become an EV powerhouse, and manufacture countless batteries, with Ontario at the forefront of this effort.

The transition to EVs will cost billions and billions to citizens both in terms of taxes and increased cost for passenger vehicles. This will make car ownership unaffordable for many. It will also prevent public expenditures from being allocated much more wisely, to other uses.

In sum, despite the mega public expenditures, it seems there is little substance upon which governmental authorities justify this major transformation of the automotive, transportation and energy sectors.

It’s seen as a fait accompli that EVs are good for the climate and the environment.

It’s seen as a fait accompli that EVs are green, even if they are not.

Massive Subsidies into EVs

Ontario is all in the development of EVs, especially the batteries, which actually happen to be, as we discussed, their Achille heels.

The amounts of subsidies, provincial and federal, being poured into EV development, and especially batteries, in Ontario are staggering.

It is in billions and billions of dollars, for investments that would in principle not require any public subsidy if they were so sound, risk-free and profitable.

And keep in mind that the whole objective here is to replace cars by … cars, the latter ones are currently perceived by politicians and the public as more ecological, more friendly to the climate, while they are not.

So the whole operation is what, in French, is referred to as “grands travaux inutiles,” which approximately translates into “the large useless projects.”

The amounts spent are especially staggering as they focus on batteries manufacturing, with two major multi-billion investments in the province.

And a similar, heavily subsidized, battery mega-factory investment, by Swedish corporation NorthVolt, has been announced in Québec, with the provincial and federal governments respectively contributing C$2.9 billion and C$4.4 billion.

If these would be profitable investments, corporations would borrow from banks and no public money would be needed. But long forgotten seems the concept of free market. Politicians believe they know better and corporations are getting very good at shopping around for the most generous jurisdictions and politicians (who tend indeed to be very generous when it’s not their own money - a pretty universal rule :).

Just for two “giga” factories in Ontario, federal and provincial governments are to provide up to $11.3 billion in performance incentives for a Stellantis-LG Energy Solution and C$13 billion in tax credits, plus a C$700 million grant, to Volkswagen.

To put things in context, Ontario has a population of just 15 million inhabitants. In the US, similarly sized battery factory subsidies have been announced, but the US has a population of 330 million inhabitants, that is over 20 times larger.

There are other substantial EV aid packages in Ontario. With no up to date complete list that could be easily found on the web, here are some examples:

$259 million for a GM plant in Oshawa

$259 million for a CAMI (GM) facility in Ingersoll

Note that things clearly are not going as planned in Ingersoll, which had to suspend its operations, because of battery related procurement issues.

$471 million for Magna International, including $265 million for an EV battery enclosure facility in Brampton

$3.1 million to support a $102.3 million investment by Mitsui High-tec (Canada), Inc. a manufacturer of motor cores, the basic structure of the motor used in electric vehicles (EVs).

$131.6 million in grant support for a $1.4 billion investment by Honda of Canada Mfg. (HCM), a division of Honda Canada Inc., to upgrade and retool its plants in Alliston for manufacturing electric and hybrid vehicles

$56.4 million investment in the Ontario Vehicle Innovation Network to drive deals and secure production mandates for hybrid and electric vehicles, create a domestic battery ecosystem, and strengthen Ontario’s position as a North American automotive and electric vehicle (EV) innovation hub.

So yes, there is giga-money being poured by Ontario into the expansion of EVs, even if the rationale for these massive subsidies is rather futile.

The analysis will be continued in Part 2.

Comments and suggestions are welcome.

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