Published on
In the era of Trump’s tariffs, accelerating electric school bus (ESB) adoption is not just a health and environmental imperative, but a strategic economic move as it can help shield our economy from the volatility of global markets and the risks posed by threatening U.S. tariffs.
Investing in a resilient, homegrown ESB supply chain can help create sustainable jobs, generate business and tax revenue and protect Canada’s transition to clean transportation from geopolitical disruptions. In Ontario alone, electrifying 65% of the school bus fleet by 2030 could create 10,800 jobs and add $1.5 billion to GDP, plus 2,400 jobs and $300 million from charging infrastructure. At a national level, these benefits would be even greater, considering the 51,000 school buses in Canada. Beyond economics, this shift would deliver profound environmental and public health gains, cutting 1.17 million tonnes of GHG emissions annually across Canada, reducing fossil fuel consumption by 243 million litres and improving public health by lowering air pollution for children, drivers and local communities.
At a time when provincial and federal governments are seeking to strengthen interprovincial trade, Canada can create a fully integrated ESB supply chain by enhancing trade around EV-related goods and components and leveraging regional strengths. Provinces like Québec, Ontario, Manitoba, and British Columbia can provide critical minerals while Alberta and Saskatchewan refine them. Québec and Ontario can manufacture batteries, motors, and electronics, with support from local steel and aluminum production. Nova Scotia, Ontario, Alberta and Quebec can contribute tire production, and Ontario’s auto glass industry can supply windshields. Québec can lead bus assembly. We have the ingredients for a self-sufficient ESB ecosystem.
The current set of public interventions aimed at establishing a homegrown ESB manufacturing sector focuses on derisking private investments, through subsidies, public procurement and loans. This approach makes green projects financially viable by using public support to reduce investment risks and attract private capital, though it may also shift certain financial risks to the public sector if projects underperform.
A recent derisking example can be seen in Lion Electric, which, despite receiving substantial public investment ($200 million), has faced financial challenges leading to a request for creditor protection. Moreover, this derisking strategy has another layer of public support: In addition to public funding provided by federal and provincial governments to stimulate supply through manufacturer subsidies, demand for the company’s ESBs was also largely influenced by funding programs for school bus operators through programs such as the federal Zero Emission Transit Fund (ZETF), Quebec’s Programme d’électrification du transport scolaire (PETS), and other funding initiatives. These subsidies played a crucial role in making ESBs more accessible and contributed to expanding Lion Electric’s order book—with more than half of the vehicles in Lion’s order book tied to funding from ZETF. However, it also created market dependency on continued subsidy support. By November 2023, delays in processing ZETF subsidy applications contributed, among other factors, to the reduction of the company’s order book from 2,500 units to just over 1,500 units a year later, jeopardizing the ESB transition in Canada, where ESBs account for only 4% of school buses. As the order book shrank, so did the anticipated future revenues and cash flows, placing increasing pressure on the company’s liquidity and operational sustainability. This shift was reflected in Lion’s financials: after posting record profits of $5.4 million USD in Q3 2023 with 245 vehicles delivered, the company reported a $16.1 million gross loss in Q3 2024, with deliveries dropping to just 89 units—a 156-vehicle decline from Q2 2023.
The case of Lion Electric demonstrates that establishing a homegrown ESB manufacturing sector requires more than market forces and public investment alone. It calls for a more intentional approach—one that combines strategic planning, targeted investment, and interjurisdictional coordination within a coherent and disciplined industrial strategy to ensure that economic and environmental benefits are sustained over time. To realize this vision, public support should not only be stable and constant, but also strategically designed with forward-looking conditions—ensuring that investments generate lasting public value through local job creation, long-term green industrial development, and inclusive economic participation.
Building on international lessons—such U.S.’s CHIPS and Science Act which tied government support to limits on share buybacks, supply chain efficiency, and improved labor standards—Canada should move away from unconditional subsidies and instead enhance capital discipline by attaching clear, strategic conditions to public funding. This could include governments taking equity stakes and offering tax breaks and subsidies, while setting performance requirements to ensure high ESB production volumes and regulated pricing to keep buses affordable for operators. Alongside consistent public funding, such requirements could contribute to steadier demand, allowing operators to plan purchases more reliably and helping to maintain stable ESB production levels over time. Public funding could also go beyond performance requirements by including labour conditions—like fair wages, benefits, and collective bargaining rights—tied to apprenticeships or retraining programs. This would support skilled, long-term employment and help address labour shortages in green industries. Public funding could also actively redistribute economic opportunities to address historical inequalities by, for example, requiring joint ventures with Indigenous communities.
By ensuring that public investment is stable, sustained, and anchored in clear conditions, Canada can turn its ESB potential into a durable source of public value—delivering strong economic, environmental, and health returns on investment.
