Northvolt subsidies not worth it to attract a single firm
Montreal, September 28, 2023 – The subsidies granted to attract Northvolt to the Montérégie region are not worth it according to the Montreal Economic Institute.
“As usual when it comes to subsidies, the government doesn’t mention the opportunity cost of this type of expense,” explains Emmanuelle B. Faubert, economist at the MEI. “Leaving this money in taxpayers’ pockets—instead of sending it to Northvolt, a Swedish firm—would stimulate Quebec’s economy.”
The Quebec government plans to give Northvolt a subsidy of $1.37 billion. This is the equivalent of all provincial income taxes paid by 217,480 Quebec taxpayers in one year, which is almost one and a half times the population of the city of Saguenay.
The federal government has announced subsidies of up to $ 1.34 billion, including a production subsidy. This is the equivalent of all federal income taxes paid by 196,197 Canadian taxpayers in one year, which is more than the total number of people living in the city of Kingston.
Both levels of government have also pledged to send up to $4.6 billion in production subsidies.
Thess federal subsidies are on top of the subsidies already granted to Volkswagen and Stellantis for the development of two battery plants in Ontario.
A recent MEI study found that Canada could have had 9,820 additional firms had Ottawa not introduced a new top personal income tax bracket in 2016. The tax hike brings in annual revenues equivalent to the annual production subsidies awarded to Volkswagen and Stellantis.
“Quebec’s economic development and prosperity didn’t come about as a result of subsidies, but rather in spite of them,” explains Ms. Faubert. “The government needs to realize this, before it creates a new Gaspésia or McInnis Cement.”
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The MEI is an independent public policy think tank with offices in Montreal and Calgary. Through its publications, media appearances, and advisory services to policy-makers, the MEI stimulates public policy debate and reforms based on sound economics and entrepreneurship.
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