What's driving Canada's big bet on EV batteries

Standing before a backdrop that declared Quebec's commitment to a clean economy, Prime Minister Justin Trudeau and Premier François Legault outlined the details of what they both described as a "historic" project.

The numbers are eye popping. A new manufacturing facility to be built by Northvolt, a Swedish battery giant, will occupy 170 hectares — an area the size of more than 300 football fields — on Montreal's South Shore, in a parcel of land spanning two communities.

Eventually, it is projected to have an annual battery cell manufacturing capacity of up to 60 gigawatt-hours (GWh), which is enough to power roughly one million electric vehicles a year.

This first phase, set to be complete by the end of 2026, will also include facilities to produce cathode active materials (a component of the batteries used in electric vehicles) and recycle batteries.

The government says the project will create as many as 3,000 jobs.

WATCH | Breaking down the case for and against EV financing:

It comes at a high cost: The federal and provincial governments are putting a combined $2.7 billion in taxpayer money toward the project.

There will also be government production incentives totalling up to $4.6 billion — one-third of which will come from Quebec — as long as similar incentives remain in place in the U.S.

The deal is the latest in a series of announcements supporting the burgeoning electric vehicle industry in Canada.

Such projects have faced questions, given the amount of public money involved, but experts say public financing is crucial to compete against cut-throat international competition. 

Last month, Ottawa and Quebec announced an investment of more than $640 million for a new Ford EV plant in Bécancour, Que.

The federal government has also committed billions in Ontario to save the Stellantis-LG electric vehicle battery plant in Windsor and subsidize the Volkswagen battery plant in St. Thomas.

It will take 20 years for the federal and Ontario governments to break even on the pledge to give $28 billion in production subsidies for those two plants, the Parliamentary Budget Officer concluded.

The auto industry has a long history of being propped up by the government, said Greig Mordue, the chair of advanced manufacturing policy at McMaster University's school of engineering, and a former Toyota executive.