• By: Dan Donovan

Voodoo Economics Comes to Canada

The Trudeau Government’s Battery Plant Funding for Volkswagen is yet one more financial debacle.

The Liberal government’s decision to funnel up to $30 billion of taxpayers’ money to fund two battery production plants in Ontario has been met with great skepticism. This misguided endeavour, touted by the government as a solution to support green initiatives and reduce carbon emissions, is the walking definition of Voodoo Economics, Canadian style.

Canada is a country blessed with an abundance of natural resources. As the world grapples with the urgent need to transition away from fossil fuels, Canada’s rare earth mineral resources offer a viable solution to provide the raw materials necessary to produce electric vehicle batteries and other clean energy applications. By tapping into these resources, Canada could not only meet its own needs but also become a global supplier, boosting its economic standing on the international stage and wealth, jobs, innovation, and opportunity at home.

Canada’s extensive deposits of rare earth minerals are crucial components in the manufacturing of batteries for e-automobiles and other industries, including clean energy technology. It seems obvious to most that this is where we should be staking a claim in our efforts to mitigate the climate change calamity. In addition, the country would benefit immensely from the hundreds of billions of dollars that would come from selling these rare earth minerals to clients worldwide.

Battery Plant Funding: A Misguided Use of Taxpayer Dollars

Incredulously, the ideologically driven Trudeau government has decided that mining and extraction of natural resources in Canada is generally a bad thing and instead of playing to our strengths and focusing on rare earth mineral extraction,  they have decided to provide billions of taxpayer dollars in incentives to two private sector auto companies — Volkswagen and Stellantis — to build electric vehicle (EV) battery plants in Ontario. This is part of their plan to boost what they call a clean energy supply chain and attract major projects.

The taxpayer windfall for Volkswagen comes despite the lingering smell of the Volkswagen emissions scandal, the largest consumer auto fraud ever.

In September 2015, Volkswagen (VW) was exposed in a massive emissions scandal that rocked the company’s reputation and resulted in significant financial repercussions. Commonly referred to as “Dieselgate,” it centered around VW’s use of software known as a “defeat device” in their diesel engines. This software was designed to detect when a vehicle was undergoing emissions testing and adjust its performance to meet the required standards. However, during regular driving conditions, these vehicles emitted pollutants, particularly nitrogen oxides (NOx), at levels far exceeding legal limits. This deceptive practice persisted for years, affecting millions of vehicles worldwide.

Global Impact: Millions of Customers Deliberately Deceived

VW’s emissions scandal had a substantial impact on customers. Approximately eleven million diesel vehicles globally were equipped with illicit software, resulting in unknowing customers driving environmentally harmful cars. The scandal’s effects extended beyond environmental concerns; car owners faced diminished resale values, loss of trust in the brand, and potential health risks due to increased air pollution.

Financial Repercussions

The financial consequences of the scandal were staggering. VW faced substantial fines, legal settlements, and compensation payments. The company agreed to a settlement of approximately $15 billion in the United States to compensate affected car owners and mitigate environmental damage. Additionally, the company was fined $2.8 billion for violating U.S. Clean Air Act regulations.

In Europe, where a significant portion of VW’s vehicles were sold, the company faced varying penalties across different countries. Germany, VW’s home country, levied a fine of €1 billion, while other European nations also imposed penalties.

In Canada in 2021, VW agreed to pay a fine of $196.5 million as part of a plea agreement aimed at addressing the environmental and economic implications of the scandal on the Canadian market.

The Volkswagen emissions scandal exposed a dark underbelly of the automotive industry, revealing the lengths to which a company went to deceive regulators and customers alike. Despite the criminality and the fines, the Trudeau government turned around and rewarded Volkswagen with $14 billion in taxpayers’ funds to build a new plant. Worse, Volkswagen will only contribute $7 billion of the 20-plus billion investment for ‘their plant.’

These decisions raise legitimate concerns about the fiscal judgment and competence of the government.

In their ideological haste to spur green innovation and job growth — the government bureaucrats set aside basic investment principles like a proper return on investment or even doing proper earnings before interest, taxes, and amortization (EBITA) check to measure the profitability of the payment and provide an accurate view of the investment value. Why, for example, would the taxpayers of Canada be paying $14 billion towards a Volkswagen plant when Volkswagen was only committing $7 billion to the plant? Worse, why would they be giving taxpayers hard-earned dollars or even doing business with a company fined just two years ago for a massive fraud against Canadian consumers?

This is yet another chapter in the annals of the Trudeau government’s gross mismanagement of taxpayer money.

In 2018, Kinder Morgan ceased operations and walked away from the Trans Mountain Pipeline extension project citing interference and difficulties in dealing with the Liberal government and the provincial government in B.C. The project aimed to increase the capacity of the existing pipeline, allowing for greater transportation of oil from Alberta’s oil sands to the British Columbia coast. In response, the Trudeau government purchased the Trans Mountain pipeline expansion project from Kinder Morgan for a hefty sum of $4.5 billion in taxpayers money. Proponents of the purchase argued that it would provide economic benefits, create jobs, and facilitate the export of Canadian resources to global markets. Critics contended that the government overpaid for the pipeline, with estimates suggesting that its market value was significantly lower, and that the government had overpaid by as much as $1 billion. The accusation of overpayment gained momentum as the project’s costs escalated, and various challenges emerged during its construction.

One of the most significant points of contention was the project’s environmental impact. The Trans Mountain expansion faced vehement opposition from environmental activists and Indigenous communities concerned about potential oil spills, greenhouse gas emissions, and damage to local ecosystems. The controversy underscored the challenge governments face when trying to balance economic growth with environmental sustainability and Indigenous rights.

As construction progressed, costs ballooned. The original price tag of $4.5 billion became a distant memory, as the project’s final cost surged to an estimated $12.6 billion, nearly triple the initial estimate. This dramatic increase in costs raised eyebrows among taxpayers and opposition parties, who demanded transparency and accountability for the expenditure of public funds.

Ultimately, the total expenditure on the Trans Mountain expansion project reached an estimated $16.5 billion, including the initial acquisition cost and the construction expenses. When combined with interest payments and other associated costs, the final bill reached a staggering $30 billion, a figure that prompted further criticism and fueled debates about the financial wisdom of the government’s decision.

The government overpayment and the subsequent cost escalation on the Trans Mountain project should have exemplified the importance of comprehensive project assessment, transparent decision-making, and diligent oversight to avoid unnecessary financial burdens on taxpayers.

Instead, the Liberals did none of that and doubled down on stupid and did the same thing again with the battery plants.

The Trudeau government’s acquisition and subsequent 30 billion dollar boondoggle on the Trans Mountain Pipeline expansion only served to highlight their cavalier attitude towards the public purse. Five years later it’s Groundhog Day all over again. The decision to spend another 30 billion taxpayer dollars to fund battery plants for two private sector auto companies in the face of abundant rare earth mineral resources raises questions about the alignment of its economic policies with the nation’s best interests. By directing investments toward mining and processing these valuable minerals, Canada could foster economic growth, job creation, and technological advancement — all while supporting the global shift toward sustainable energy solutions. Instead, taxpayers are screwed again.

It’s high time for a reevaluation of priorities. Canada’s unique position as a resource-rich nation places it in a prime spot to make significant contributions to the fight against climate change while bolstering its own economy. Reallocating funds from battery plant funding to rare earth mineral mining is the type of forward thinking and visionary approach needed to usher in a new era of prosperity and environmental responsibility. But that is not going to happen so long as we have misguided, financially inept ideologues running our country.

Photo: carscoops.com