Canada’s oddly specific EV credits for Honda amounts to poor industrial policy

Prime Minister Justin Trudeau and Ontario Premier Doug Ford attend an announcement at Seneca College, in King City, Ont., on Feb. 9.Kevin Yin is a contributing columnist for The Globe and Mail and an economics doctoral student at the University of California, Berkeley.on Thursday that it would build out its EV supply chain in Ontario is an enormous victory for both the Canadian economy and the government’s climate goals.

To believe in its efficacy, we have to imagine that global car manufacturers who are currently unimpressed by Canada’s sizableThe problem is not that offering such incentives will be costly, but rather the opposite; it is unlikely that many companies take advantage of it. A tax credit that costs the government very little is a tax credit that isn’t making a difference..

Given that we are willing to ask for large commitments from EV companies the focus should have been giving Canadian engineers the expertise to develop better batteries and cathode active materials on their own. This is precisely thethat Taiwan took with regard to semiconductors in the 1970s — with radical success.

But these incentives could have been broad enough to be useful to other prospective investors while still being generous enough to sway Honda. They also could have asked for less in the way of physical capital and more in the way of intellectual property exchange. Throwing out a poorly constructed tax credit to secure the investment of one firm smacks of “picking winners.”

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