Investing in critical minerals comes out as a major line item for the Liberal government’s 2022 budget with greater emphasis put on transitioning medium- and heavy-duty vehicles and pushing Canada’s electrical grids to 100 per cent non-emitting sources

Canada’s 2022 budget, with $85 billion in new spending, was released against a less-than-ideal global backdrop in a move that demonstrates the government will not let national opportunities slide — particularly those in the zero-emission sector, which received nearly 10 per cent of the total budget funding.

Overall the budget is a positive for the clean mobility sector and reaffirms much of what was suggested or hinted at in last month’s 2030 Emissions Reduction Plan, and some of what industry stakeholders have lobbied for over the past 12 months.

“It’s a very interesting budget and we think it’ll go a long way to bringing us closer to our targets. All these pieces are coming together and we can feel the move. I think it’s a very big step in the right direction,” says Louise Lévesque, policy director at Electric Mobility Canada, in an interview with Electric Autonomy Canada.

“It’s pretty exciting to see Canada looking at the big picture of developing jobs and the economy in the green transition that we’re undertaking right now. The last few engagements from the Government of Canada have been very encouraging. We feel that they’re recognizing that electrification is an important part of fighting climate change.”

Significant cash infusions are earmarked to many different areas of the clean mobility industry, but it is critical minerals, purchase incentives for all classes of vehicles and electrical grids that emerge as the big ticket winners for funding.

“It was very interesting to see substantial amount — $3.8 billion over eight years — implementing a critical mineral strategy,” agrees Lévesque.

“The ZEV mandate is mentioned for light-duty vehicles and medium- and heavy-duty vehicles, which is great. Another element of this was the establishing the Pan-Canadian Grid Council. There’s a lot of work to be done there and we have multiple utilities and panels that need to be talking together.”

This year’s federal budget investment in the green sector builds on the $17.6-billion investment from last year’s budget into Canada’s “green recovery” and is a further signal of the far-reaching economic benefits Canada stands to realize from a complete transition to zero-emission mobility and net-zero infrastructure.

Canada’s first critical mineral strategy

As the electric vehicle adoption rate has gained momentum, the eyes of the world have become increasingly trained on Canada as a site for critical mineral mining, processing and refining.

In 2021, Canada released a list of 31 critical minerals found nationally, but since then few significant policy steps have followed to develop and scale mining operations to meet the growing demand EVs are putting on the supply chain.

“We’ve talked quite a bit about how Canada sits on an endowment of resources that will be critical for zero emission vehicle batteries going forward. But the challenge is, we don’t have infrastructure built in many instances,” says Brian Kingston, president of the Canadian Vehicle Manufacturers’ Association, in an interview with Electric Autonomy.

“We have challenges attracting investment into developing those resources and not just mining them, but actually processing them because that’s where a lot of value add is.”

The new budget addresses that gap by allocating roughly $3.8 billion over eight years to implement a Critical Mineral Strategy, a “real commitment” in funding, says Kingston. In addition, the government will provide up to an additional $1 billion to Innovation, Science and Economic Development Canada for the Strategic Innovation Fund. The Fund’s goal is to “make Canada a more attractive destination for critical minerals investment and to secure valuable agreements that would increase production of goods like electric vehicles and batteries.”

The strategy adopts a mines-to-mobility focus with everything from investments in new prospective mines to manufacturing to bolstering battery recycling eligible for funding support.

“For companies that are thinking about making these investments that suite of initiatives, I think, should make Canada pretty attractive,” says Kingston.

“My three member companies at the CVMA — General Motors, Stellantis and Ford — by 2025, those three companies alone are going to have a production capacity of eight million vehicles on an annual basis. A pivotal component of this transition, of course, is making sure that we have the critical minerals process to the quality necessary for battery production.”

ZEV incentives for more vehicles

An important pillar of the 2022 budget is the expansion of the existing federal iZEV (Incentives for Zero-Emission Vehicles) program and the introduction of a second, new purchase incentive program for medium- and heavy-duty vehicles (MHDVs).

For iZEV, the budget commits $1.7 billion in new funding to extend the program until March 2025. Significantly, the budget states, “Eligibility under the program will also be broadened to support the purchase of more vehicle models, including more vans, trucks, and SUVs, which will help make ZEVs more affordable.”

Specific details will be announced by Transport Canada in the coming weeks, but it’s assumed that “broadened” support means increasing the price ceiling for eligibility above the current $45,000 limit for EVs with six seats or less.

“The ZEV mandate for light-duty vehicles and medium-, heavy-duty vehicles is really top of mind right now for us,” says Levesque. “I do appreciate the attention that’s now being given to MHDVs; it’s the next step.”

For medium- and heavy-duty vehicles, the budget proposes to provide $547.5 million over four years to launch a new purchase incentive program. Additionally, $199.6 million over five years will go towards expanding the Green Freight Assessment Program (renamed the Green Freight Program) to support assessments and retrofits of internal combustion engine vehicles used for hauling freight.

Meanwhile, a total of $900 million in new funding for charging infrastructure was also proposed: $500 million from the Canada Infrastructure Bank for large-scale urban and commercial ZEV charging and refuelling infrastructure, and $400 million to Natural Resources Canada to fund deployment of ZEV charging infrastructure in suburban and remote communities through the Zero-Emission Vehicle Infrastructure Program (ZEVIP).

The budget is also allocating $2.2 million over five years “to renew the Greening Government Operations Fleet Program, which will continue to conduct readiness assessments of federal buildings required to facilitate the transition of the federal vehicle fleet to ZEVs.” 

While the budget claims this investment will keep Canada on track for the government’s target of installing 50,000 more public EV chargers, the Global Automakers of Canada, a not-for-profit trade association, is not convinced.

“[T]hese budget commitments are inadequate. Nothing will dissuade a consumer from purchasing an EV faster than not knowing if that they can charge their vehicle quickly when they need to, and where they need to,” says David Adams, president of the Global Automakers in an emailed press statement.

“In many cases, the commitments to EV and hydrogen fueling infrastructure are more
important [than purchase rebates] as these investments need to be made right now to remove the friction from the consumer transition to electrified vehicles.”

It’s a sentiment echoed by Kingston.

“We’re definitely disappointed. We’re seeing the government increase the ambition of their sales targets and yet we look at the budget and there’s nothing new in there on on consumer adoption,” says Kingston. “If the government’s going to keep increasing the ambition on the sales target side, they better keep pace with the industry and put forward a more…integrated plan that connects all of the dots between a critical mineral supply chain, zero-emission vehicle manufacturing in Canada, and consumer adoption.”

When asked what the three key pieces needed to make a cohesive strategy are, Kingston said, for the CVMA, it comes down to increasing purchase incentives and raising the price caps on rebates; conduct studies at a federal level to identify Canada’s public charging needs, including identifying multi-unit residential building charging needs, and boosting public education on EVs in tandem with automakers.

Clean energy supply

To make a transition to zero-emission possible on both the refuelling and manufacturing sides, a significant amount of clean energy will be needed to ensure that the ZEV value chain has as low a carbon footprint as possible.

Canada’s clean grids are overwhelmingly powered — over 80 per cent — by non-emitting sources. But costly and extensive grid upgrades are needed in specific areas in order to achieve the government’s 100 per cent net-zero grid by 2035 target.

“Powering electric vehicles off a coal-fired grid doesn’t make sense,” says Kingston. “[A]s the zero-emission vehicle fleet increases, it’s going to be really important that government is coordinating with provinces and utilities to make sure that investments are being put into clean electricity generation.”

Accordingly, the 2022 budget is pledging just over $1 billion dollars to develop clean energy projects of “national significance,” support grid modernization projects and establishing a Pan-Canadian Grid Council, “which would provide external advice in support of national and regional electricity planning.”

The budget points specifically to small module reactors (SMRs) powered by nuclear energy as an area of key interest and benefit to Canadians. “[A] 300-megawatt small modular reactor could supply enough clean power for an estimated 300,000 homes,” reads the budget.

The SMRs could be of particular use in remote communities, Saskatchewan and New Brunswick, which still rely on diesel generators or coal-burning for electricity. Last year at COP26, the global environmental conference, the Canadian government set a target of stopping coal-burning by 2030 and announced a $1 billion investment in the Climate Investment Funds Accelerated Coal Transition initiative as part of its role co-leading the international Powering Past Coal Alliance.

Areas for future work?

While Budget 2022 is a comprehensive investment in the clean mobility ecosystem, there are a few areas where some stakeholders will be keen get clarity.

Autonomous vehicles, including R&D and regulations, are missed entirely in Budget 2022.

Hydrogen is mentioned a handful of times in the budget as a potential area for new investment, but without any concrete amounts attached.

Also absent from the main budget document is specific reference to status of Canada’s procurement of 5,000 zero-emission public transit and school buses in five years that the government previously committed to. With no update given it’s unclear whether or not that program is on track either financially or with vehicle supply. The promise, when originally made in 2021, was a key piece of the Liberal’s $2.75 billion Zero Emission Transit Fund plan, with additional financial support from Canada Infrastructure Bank.

This absence of a further explicit investment in hydrogen and zero-emission buses follows a $10-million investment last month from the federal government into the Canadian Urban Transit Research & Innovation Consortium (CUTRIC) from the Zero Emission Transit Fund for the research body to help bus fleets transition to zero-emission vehicles.

But just because a specific area isn’t labelled in the budget, doesn’t mean it is being forgotten or ineligible for funding, says Lévesque. There are many avenues for securing investment through various funds and even various levels of government — while the federal government may support widespread adoption of zero-emission buses, to execute actually doing so may make more sense to come from more localized governments.

“There’s a multiplying effect that Canada can have with other jurisdictions; the provinces are going to be doing stuff, cities and municipalities. If the federal government can help leverage some of these initiatives there’s a multiplying effect so they don’t have to be the ones investing for everything.”