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Powering Up: Preparing for the Ontario Economic and Energy Boom

(Side view of the Toronto Skyline)

The Federal and Ontario Government’s Economic Strategy

If there’s ever one safe investment for governments and the private sector to make, it’s always energy and infrastructure. Public dollars invested into either of these avenues almost surely end with an economic boon, more jobs, and useful public projects that benefit people for generations. For Canada, pressure from the public and businesses has forced the federal and provincial governments to invest billions in energy and infrastructure. While Canadian businesses are demanding more labour through higher immigration targets, the public is demanding more infrastructure like transit, energy, housing, and healthcare. As a result, the federal and provincial governments are working hard with subsidies, tax credits, and investments to meet the unprecedented demands they must meet for the future of their country. 

As premier of the country’s economic engine, Ford is looking to push Ottawa and other provinces to collaborate more effectively on energy and infrastructure projects. Unfortunately, while Ottawa seems the most willing partner to work with Ontario to develop the premier’s economic vision for the province, other provinces like Quebec, Alberta, and the Maritimes will be infinitely more hesitant about any initiative that may hinder their government revenue coffers. For Alberta and Saskatchewan, it’s the threat of the federal government looking to undermine oil, gas, and mineral production; Quebec’s concerns will surely be associated with language or cultural clashes; and the Maritimes will always look to undermine any policy that may reduce their ability to generate government revenues to fund their public services. 

But what lies common between all provinces is an interest in improving the ability to conduct business, heightening economic and material conditions, and achieving a higher quality of life. What Premier Ford gets right is starting the conversation on how Canada can collectively collaborate on infrastructure projects that will inevitably benefit all provinces. 

Ontario's Investment in Nuclear Power: Embracing a "New Clear" Day!

On the energy front, the Ontario government is looking to upgrade one of its largest nuclear reactors. Ontario’s population is forecast to grow by 2 million by 2050, and the province would further require 88,000 megawatts of electricity to meet that population growth. Ontario produces a total of 42,000 megawatts today, and the new reactor announced would boost production by 4800 megawatts. If built, the expansion could make the Bruce Nuclear Generating Station the largest nuclear power plant in the world.

Ontario is also seeing a refurbishment of the Darlington nuclear facility, which is both on time and under budget for completion. According to reports, the Ontario Power Generation - the sole public owner of the power plant - is scheduled to fully complete refurbishment for the plant’s 4 units by 2026, with construction completed halfway as of now. The completion of unit 3 as of July 2023 will power 350,000 homes for an entire year. For reference, the Bruce upgrade alone will be able to power 4.8 million homes in a year.

As demand for electricity increases in every province based on an ever-increasing population base, the federal government is looking to provide a 15% refundable tax credit for new projects and refurbishments in non-emitting electricity generation systems, natural gas electricity generation (targeted for provinces still using coal), non-fossil based electricity storage systems, and equipment for transmission between provinces. Moreover, the federal government has also mandated that the CIB to allocate $20 billion to support the “building of major clean electricity and clean growth infrastructure projects.” As the provincial governments are solely responsible for the development of electricity generation systems, the federal government can only provide financial incentives and funds to steer provinces into a clean energy future.

Ontario to Host Billions in EV and Battery Investments

Recent investments by the federal and Ontario governments have pooled 10s of billions for automobile manufacturing. Recent announcements have revealed that the Stellantis battery plant in Windsor Ontario has received $15 billion worth of tax breaks over a 10-year term from both the federal and provincial governments. Volkswagen, another company setting up a battery plant in St. Thomas Ontario, is set to receive $13 billion in tax break subsidies. According to the federal government, the Volkswagen battery plant will be worth over $200 billion to the Canadian economy over the coming decades.

Ontario is already a massive cog in North America’s automobile manufacturing supply chain, and these investments will strengthen Ontario’s position as a strong contender for global auto manufacturers to set up shop. With the government willing to put billions into the shift towards EVs in the auto sector, Ontario has permanently established itself as Canada’s hub for auto manufacturing. Without this investment, critics argue that Canada could lose portions of its auto manufacturing sector, which employs 135,000 jobs (of which 124,000 are in Ontario), produces 1.4 million vehicles (as of 2020), and contributes $16 billion to Canada’s GDP. 

The risk in not providing these public funds is large, take Australia as an example, Australia used to have a thriving auto sector employing over 100,000 people, the country now hardly produces any vehicles due to its suboptimal proximity to foreign markets and unsupportive government policy towards auto manufacturers in the 1990s and 2000s. Canada should take great caution in taking a hands-off approach, as otherwise auto companies will have no issues leaving for countries with cheaper labour and fewer regulations. 

Furthermore, in Premier Ford’s sights lies a rich 5000 km square area in northern Ontario of mineral deposits that could prove highly beneficial for EV, battery, and technology manufacturing in the province. Also dubbed the Ring of Fire, this mineral-rich depository contains chromite, nickel, copper, platinum group elements, gold, zinc, and other minerals that could permanently provide an economic boost and attract international investment to Ontario.

Canada Infrastructure Bank: The Canadian Economic Darkhorse 

The Canada Infrastructure Bank - a major public corporation responsible for investing in technologies of the future - is looking to invest 10s of billions of dollars in manufacturing, transit projects, mining, EV charging stations, renewable energies, and technologies to bolster the Canadian economy for the long-term. The CIB has recently hit $10 billion in investment commitments out of $35 billion of total allocated money. Using these funds, the aim of the bank is to attract private investors to “new or stalled Canadian infrastructure projects” that may be too risky or too expensive to start and finish. According to Ehren Cory, the CEO of the CIB, the agency is ready to invest $3 billion to $5 billion each year in new projects. CEO Cory also assures that although the CIB has been slow to invest in the early years, the CIB will experience a “natural ramp up” before projects start coming to speed.

In terms of sustainability, the investment priorities of the CIB have been defined by the government as EV charging, nuclear power generation, carbon capture, low-carbon fuel use like Hydrogen, and other emerging green technologies. In Budget 2023, the government directed the CIB to invest $10 billion in clean power and another $10 billion in green infrastructure (as mentioned before). Notable projects include a $970 million investment with Ontario Power Generation to create Canada’s first small modular reactor, $277 billion to build Canada’s largest biorefinery, and $800 million for battery storage projects with renewable energy producers like Northland Power and Aucon Group.

All Aboard the Ontario-Quebec High-Frequency Rail Line!

Recent news for a new state-of-the-art High-Frequency Rail line between Toronto and Quebec City has revealed that 3 private consortiums have been chosen to submit their proposals for the design and development of the line. 

Some Quebec politicians are pressuring Ottawa to develop a high-speed rail line rather than simply a high-frequency one. Lieutenant of Quebec and Minister of Canadian Heritage Pablo Rodriguez was quick to shut down on these demands, arguing that such speeds were “not feasible, given the number of stops the trains will make.” On the other hand, Minister of Transport, Omar Alghabra, has stated the government is open to both high-speed and high-frequency if such a business proposal were to be feasible, arguing both goals are not “mutually exclusive.”

According to internal government documents, increasing population and transportation demand in the dense regions of metropolitan Ontario and Quebec will necessarily lead to a rail service that will efficiently provide passengers with a way between the regions in an economically beneficial way. The federal and provincial governments are looking to develop the project as a means to boost economic productivity by billions, reduce emissions, and increase passenger rail usage.

Axing Provincial Trade Barriers Would Boost GDP by 10s of Billions

What remains is one crucial national policy that has yet to be implemented in Canada: a holistic free trade agreement between all provinces and territories. To this day, Canada suffers from internal trade barriers between its jurisdictions that significantly deters its GDP per capita by at least 4%, according to an IMF study. According to this same study, the loss of GDP per capita could be as high as 16% in a province like Prince Edward Island.

In a recent article from the Toronto Star, Minister of Immigration Sean Fraser reveals that back when he was Parliamentary Secretary to the Minister of Finance from 2019 to 2021, the department told him that the two biggest policies that could boost Canada’s GDP and income levels were creating a national daycare system and removing interprovincial trade barriers. Although a national daycare system is currently well under development, Canada’s provinces still suffer from a lacklustre and fragmented free trade structure. Some provinces are better than others though; Alberta, British Columbia, and Ontario are relatively open to trade, while Manitoba, Prince Edward Island, Nova Scotia, Quebec, and Newfoundland and Labrador have high trade barriers.

A November 2021 report by Deloitte found existing interprovincial barriers have the same impact as a 6.9 percent tariff on goods. Removing these barriers could increase Canada’s GDP by 3.8% ($80 billion) and increase wages by 5.5%, resulting in a 5% increase in household income.

According to the CEO of the Business Council of Canada (BCC), his meetings with foreign business leaders always mention a comment that it’s “easier for Canadians to do business internationally than intranationally.”

At a time when household budgets are tight due to inflationary pressures, a revitalized national economic strategy would give households the long-term catchup they need for their incomes. And although every business and government recognizes this problem, the provinces would have to come together in unison with the federal government to hash out a new national free trade agreement. The prognosis seems obvious enough, but it's up to our political leaders to set aside their provincial biases to improve the economic conditions of Canadians. Just as they’ve done for childcare, it’s time for the provinces to sign a national framework on improving free trade, labour mobility, and investment.

For Canada’s largest province and economic engine, an interprovincial free trade agreement will allow easier access and investment mobility for its businesses to other provinces. Such a change should improve the economic output of the province, increase household incomes, and increase wages permanently. Likewise, businesses from other provinces would seek to benefit from selling goods and services to the largest market in Canada. Fortunately, such a collective initiative is still very feasible.

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