From the Canadian Energy Centre

By Will Gibson

Study finds legislation’s massive cost outweighs any environmental benefit

The negative economic impact of Canada’s proposed oil and gas emissions cap will be much larger than previously projected, warns a study by the Center for North American Prosperity and Security (CNAPS).

The report concluded that the cost of the emissions cap far exceeds any benefit from emissions reduction within Canada, and it could push global emissions higher instead of lower.

Based on findings this March by the Office of the Parliamentary Budget Officer (PBO), CNAPS pegs the cost of the cap to be up to $289,000 per tonne of reduced emissions.

That’s more than 3,600 times the cost of the $80-per-tonne federal carbon tax eliminated this spring.

The proposed cap has already chilled investment as Canada’s policymakers look to “nation-building” projects to strengthen the economy, said lead author Heather Exner-Pirot.

“Why would any proponent invest in Canada with this hanging over it? That’s why no other country is talking about an emissions cap on its energy sector,” said Exner-Pirot, director of energy, natural resources and environment at the Macdonald-Laurier Institute.

Federal policy has also stifled discussion of these issues, she said. Two of the CNAPS study’s co-authors withdrew their names based on legal advice related to the government’s controversial “anti-greenwashing” legislation.

“Legitimate debate should not be stifled in Canada on this or any government policy,” said Exner-Pirot.

“Canadians deserve open public dialogue, especially on policies of this economic magnitude.”

Carbon leakage

To better understand the impact of the cap, CNAPS researchers expanded the PBO’s estimates to reflect impacts beyond Canada’s borders.

“The problem is something called carbon leakage. We know that while some regions have reduced their emissions, other jurisdictions have increased their emissions,” said Exner-Pirot.

“Western Europe, for example, has de-industrialized but emissions in China are [going up like] a hockey stick, so all it’s done is move factories and plants from Europe to China along with the emissions.”

Similarly, the Canadian oil and gas production cut by the cap will be replaced in global markets by other producers, she said. There is no reason to assume capping oil and gas emissions in Canada will affect global demand.

The federal budget office assumed the legislation would reduce emissions by 7.1 million tonnes. CNAPS researchers applied that exclusively to Canada’s oil sands.

Here’s the catch: on average, oil sands crude is only about 1 to 3 percent more carbon-intensive than the average crude oil used globally (with some facilities emitting less than the global average).

So, instead of the cap reducing world emissions by 7.1 million tonnes, the real cut would be only 1 to 3 percent of that total, or about 71,000 to 213,000 tonnes worldwide.

In that case, using the PBO’s estimate of a $20.5 billion cost for the cap in 2032, the price of carbon is equivalent to $96,000 to $289,000 per tonne.

Economic pain with no environmental gain

Exner-Pirot said doing the same math with Canada’s “conventional” or non-oil sands production makes the situation “absurd.”

That’s because Canadian conventional oil and natural gas have lower emissions intensity than global averages. So reducing that production would actually increase global emissions, resulting in an infinite price per tonne of carbon.

“This proposal creates economic pain with no environmental gain,” said Samantha Dagres, spokesperson for the Montreal Economic Institute.

“By capping emissions here, you are signalling to investors that Canada isn’t interested in investment. Production will move to jurisdictions with poorer environmental standards as well as bad records on human rights.”

There’s growing awareness about the importance of the energy sector to Canada’s prosperity, she said.

“The public has shown a real appetite for Canada to become an energy superpower. That’s why a June poll found 73 per cent of Canadians, including 59 per cent in Quebec, support pipelines.”

Industries need Canadian energy

Dennis Darby, CEO of Canadian Manufacturers & Exporters (CME), warns the cap threatens Canada’s broader economic interests due to its outsized impact beyond the energy sector.

“Our industries run on Canadian energy. Canada should not unnecessarily hamstring itself relative to our competitors in the rest of the world,” said Darby.

CME represents firms responsible for over 80 per cent of Canada’s manufacturing output and 90 per cent of its exports.

Rather than the cap legislation, the Ottawa-based organization wants the federal government to offer incentives for sectors to reduce their emissions.

“We strongly believe in the carrot approach and see the market pushing our members to get cleaner,” said Darby.

This article supplied by Troy Media.

By Lennie Kaplan

Alberta has the leverage and the responsibility to push for serious reform of Canada’s equalization system

Albertans are projected to send $252.5 billion more to Ottawa than they get back over the next 15 years —a staggering imbalance that underscores the
urgent need to overhaul federal-provincial fiscal arrangements.

That figure represents Alberta’s net fiscal contribution—the difference between what Alberta sends to Ottawa in taxes and what they get back in
return. Alberta, like all provincial governments, does not directly contribute to federal revenues.

These projections are based on fiscal estimates I’ve prepared using the same framework as Statistics Canada’s annual fiscal reports. Between 2025 and 2039, federal revenues raised in Alberta are expected to total nearly $1.42 trillion, while spending in the province will reach only $1.17 trillion. That leaves a gap of $252.5 billion.

This gap isn’t static. On an annual basis, Alberta’s contribution is projected to grow significantly over time. It’s forecast to rise from $12.7 billion in 2025, or $2,538 per person, to nearly $20.6 billion, or $3,459 per person, by 2039.

This isn’t new. Alberta has long been a major net contributor to Confederation. Between 2007 and 2023, Albertans paid $267.4 billion more to
Ottawa than they received in return, according to Statistics Canada. The only exception came in 2020 and 2021, years heavily impacted by COVID-19.

Albertans face the same federal tax rates as other Canadians but pay far more per person due to higher average incomes and a strong corporate tax base. This higher contribution translates into billions collected annually by Ottawa.

In 2025, the federal government is projected to collect $68.8 billion from Alberta, about $13,743 per person. By 2039, that will grow to $127.2 billion, or $21,380 per person. More than half will come from personal income taxes.

Meanwhile, federal spending in Alberta lags behind. In 2025, it’s expected to be $56.1 billion, or $11,205 per person—rising to $106.6 billion, or $17,831 per person, by 2039.

This includes transfers to individuals—about $17.5 billion in 2025, and $28.8 billion in 2039—and federal transfers to the provincial government, which are projected to grow from $12.9 billion to $20.9 billion. These include the Canada Health Transfer and the Canada Social Transfer, which help fund health care, education and social services.

Alberta does not receive equalization payments, which are meant to help less wealthy provinces provide comparable public services. Equalization is funded through general federal revenues, including taxes paid by Albertans. That imbalance is more than a budget line—it speaks to a deeper fairness issue at the heart of federal-provincial relations. Alberta pays more, gets less and continues to shoulder a disproportionate share of the federal burden.

That’s why Alberta must take the lead in pushing for reform. The Alberta Next Panel process—a provincial initiative to gather public input and expert advice on Alberta’s role in Confederation—gives the government an opportunity to consult with Albertans and bring forward proposals to fix the tangled mess of federal transfer programs.

These proposals should be advanced by Premier Danielle Smith’s government in discussions with Ottawa and other provinces. Alberta’s fiscal strength demands a stronger voice at the national table.

Some may argue for separation, but that’s not a viable path. The better solution is to demand fairness—starting with a more rigorous, transparent process for renewing major federal transfer programs.

Right now, Ottawa often renews key programs, like equalization, without proper consultation. That’s unacceptable. Provinces like Alberta deserve a seat at the table when billions of dollars are at stake.

If Alberta is expected to keep footing the bill, it must be treated as a full partner —not just a source of cash. Fixing the imbalance isn’t just about Alberta. A more open, co-operative approach to fiscal policy will strengthen national unity and ensure all provinces are treated fairly within Confederation.

Lennie Kaplan is a former senior manager in the Fiscal and Economic Policy Division of Alberta’s Ministry of Treasury Board and Finance. During his tenure, he focused, among other duties, on developing meaningful options to reform federal-provincial fiscal arrangements. 

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