Industrial policy imitation: the perils of matching the US Inflation Reduction Act to attract battery plants

Abstract

[EN] Implementation of the US IRA in 2022 significantly changed the practice of automotive-related industrial policy in the USA. We scrutinise its influence on a third country, Canada, where, in response to the IRA, more than CAD 42 billion has been committed to secure three battery plants with a value of CAD 19 billion. The purpose of our research is to determine if the incentive packages offered by the Canadian Government were truly necessary to secure the investments and if Canada can expect benefits comparable to those that similar support would engender in the USA, where the IRA was conceived. Based on our analysis, Canada's obligation to provide substantial incentives do not guarantee benefits on par with those of a core automotive country. Hence, as a semi-peripheral automotive nation, Canada's three new battery plants are unlikely to produce core country-like results, raising doubts about the effectiveness of Canada's strategy.