Bruce Lourie is president of the Ivey Foundation. Bentley Allan is resident fellow of Transition Accelerator.
Earlier this month, it was reported that Ontario may lose a $2.5-billion investment from LG Chem in a Windsor plant that would play a role in the electric-vehicle supply chain. The reason: The province was unable to guarantee the power supply to the new plant.
Even if Ontario sorts this deal out, this episode provides a clear message: Canada has a crisis of electrification readiness. We need a strategy for industrial transition toward a net-zero economy that ties together clean power planning and green economic diversification.
We need climate policies that reduce emissions while optimizing jobs and investment, cutting the cost of critical technologies, and preparing Canadian firms to be competitive in delivering low-carbon products. In doing so, we would be able to supply, for example, the clean energy required in the electric-vehicle supply chain, which in turn produces green cars.
The urgency of building our clean energy infrastructure is compounded by the importance of the proposed Windsor plant, which would have produced “cathode active material.” A cathode is the most valuable component of a battery and is the linchpin of the battery metals supply chain. Cathode production connects mining to battery manufacturing by processing metals into battery grade material. Without this plant, we’d have to ship Canadian minerals abroad and then reimport them for use in batteries.
Cathode production is essential for both geopolitical and economic development reasons. China dominates the global market for cathode production; Canada needs to develop domestic capacity in this area to make our supply chains more efficient and resilient. Cathode production also provides downstream pull on mining, and produces an exportable product that can be competitive despite U.S. protectionism on batteries and vehicles.
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To facilitate long-term energy transition, we need to tie together the strategies for critical minerals, clean power, hydrogen, biofuels and other structural elements of a net-zero economy. These cannot be understood or planned in silos. Moreover, government investments by all departments need to support Canada’s legislated commitments to clean electricity, electric vehicles and heavy-duty trucks. Investing billions of dollars with no connection to clear outcomes is a poor way to spend public funds.
Getting this right requires a more aggressive and active approach than what the federal, provincial and territorial governments have deployed thus far. Here is how to do that.
The federal government can build on its successes in the electric-vehicle supply chain by developing sectoral and regional strategies in high priority sectors. The government has nascent strategies for hydrogen and cement, but we also need action on steel, aluminum, buildings, low-carbon agriculture and value-added forestry.
These sectoral and regional plans need to be integrated and supported by national initiatives for grid modernization, critical minerals, green transportation corridors and skills development. Such cross-cutting priorities provide the interchanges where a net-zero economy can be planned and built in an experimental way.
This doesn’t need to be, nor should it be, a top-down approach. Rather, Canada’s regional development agencies should partner with the provinces to forge strategies, and use their independent statuses to drive them over the long-term.
The danger here is that the government will choose to work predominantly with large, incumbent firms. We must go beyond status quo interests to convene the future economy – bringing emerging firms, research institutes, Indigenous organizations and civil society to the table.
These plans will help public and private finances be actively deployed. Existing funds are largely passive – they wait for applications from firms (especially those with the resources to manage complex government grant processes). And even when the federal government develops sectoral approaches, as in the case of hydrogen, they lack a strategic focus on getting to net zero.
Finally, the federal government must clarify and co-ordinate the roles of the Prime Minister’s Office and the departments of Finance; Natural Resources; Innovation, Science and Economic Development; and Environment and Climate Change within integrated strategies. In doing so, Canada can and must learn from successful industrial approaches in other countries.
Indeed, if we don’t act quickly, Canada will lose out on investments to Britain, the European Union, Australia and South Korea, which are all deploying industrial policy to build a net-zero economy.
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