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Here’s why the rest of Canada doesn’t want Alberta to leave the CPP


4 minute read

From the Fraser Institute

By Tegan Hill Associate Director, Alberta Policy, Fraser Institute

Provincial and territorial finance ministers recently met with federal Finance Minister Chrystia Freeland to discuss a hot topic—Alberta’s potential withdrawal from the Canada Pension Plan (CPP). According to Nova Scotia Finance Minister Allan MacMaster, “there was real consensus” from his peers that they want Alberta to stay in the CPP. This is unsurprising; while an Alberta pension plan would benefit Albertans, it would come at great cost to the rest of Canada.

Why might Albertans want to leave the CPP?

Albertans pay a basic CPP contribution rate of 9.9 per cent, typically deducted from their paycheques. According to a report commissioned by the Smith government, that rate would fall to 5.91 per cent for a new CPP-like provincial program for Albertans, which means each Albertan would save up to $2,850 in 2027 (the first year of the hypothetical Alberta plan) while maintaining the same retirement benefits. In sharp contrast, to keep the CPP afloat without Alberta, the basic contribution rate for the rest of Canada would increase to 10.36 per cent. In other words, smaller paycheques for the rest of Canada.

The report’s calculation is based on several assumptions, which some analysts have criticized, arguing that Alberta’s estimated share of CPP assets—$334 billion—is not fair or realistic. To be clear, this share (equal to 53 per cent of the CPP) is based on specific legislation that governs the withdrawal of any province from the CPP. But, even if the share of assets to Alberta were much lower, the province would benefit from reduced contribution rates with an Alberta pension plan.

For instance, if Alberta left the CPP and received merely 25 per cent of the CPP’s assets in 2025 ($150 billion), the contribution rate in Alberta would fall from 9.9 per cent to 7.8 per cent, which would mean $1,086 in savings annually per Albertan. Meanwhile, the contribution rate for the rest of Canada would have to increase. If you dropped Alberta’s share to 20 per cent ($120 billion in 2025), Alberta’s contribution rate would fall to 8.2 per cent, equivalent to approximately $836 in savings annually per Albertan.

Put differently, even if Alberta’s share of assets were less than half the report’s estimate, Albertans would benefit from lower contribution rates for the exact same benefits while the rest of Canada may pay higher contributions to maintain current benefits. Why does Alberta mean so much to the CPP? Because Alberta generally has higher employment rates and a comparatively younger population, which means more workers pay into the fund and less retirees take from it. Albertans also have higher average incomes, which means there’s a higher level of premiums paid into the fund. As such, Albertans have paid significantly more into the CPP than its retirees have received in return.

It’s not surprising that the rest of Canada doesn’t want Alberta to leave the CPP for an equivalent provincial plan because—even if Alberta’s share is less than $334 billion, Alberta’s withdrawal would come with big costs for other Canadians across the country.

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Premier Smith reacts to Liberal Government’s announcement on new methane reduction targets at COP 28

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Federal methane emissions targets: Joint statement

“Once again, the federal government is setting unrealistic targets and timelines. Infrastructure can only be updated as quickly as technology allows. For example, Alberta will not accept nor impose a total ban on flaring at this time, as it is a critical health and safety practice during production. Any regulation that completely prohibits this is putting lives at risk”

Premier Danielle Smith and Minister of Environment and Protected Areas Rebecca Schulz issued the following statement on the federal government’s proposed methane emissions regulations:

“The federal government has unilaterally established new methane emissions rules and targets to help win international headlines. Instead of building on Alberta’s award-winning approach, Ottawa wants to replace it with costly, dangerous and unconstitutional new federal regulations that won’t benefit anyone beyond Environment and Climate Change Minister Steven Guilbeault’s post-office career.

“Managing emissions from Alberta’s oil and gas industry is our constitutional right and responsibility, not Ottawa’s, and we are getting the job done. Using a province-led approach, Alberta has already reduced methane emissions from the oil and gas sector by 45 per cent – hitting our target three years early – and we’re just getting started.

“Meanwhile, not only is it illegal for Ottawa to attempt to regulate our industries in this manner, Ottawa also hasn’t even hit one of its past arbitrary and unscientific emissions targets largely because it has little to no credible expertise regulating the natural resource, agricultural and other industry sectors in this space.

“Ottawa could have helped us keep reducing emissions with joint incentive programs in line with Alberta’s Emissions Reduction and Energy Development Plan. It could have listened to the Supreme Court’s declaration that the Impact Assessment Act was unconstitutional and abandoned this kind of arrogant and ineffective scheme. Instead, these new regulations threaten our successful province-led approach and impede good work that’s already underway.

“Once again, the federal government is setting unrealistic targets and timelines. Infrastructure can only be updated as quickly as technology allows. For example, Alberta will not accept nor impose a total ban on flaring at this time, as it is a critical health and safety practice during production. Any regulation that completely prohibits this is putting lives at risk. A total ban would also be costly, resulting in shut-ins and loss of production.

“This approach will also cost tens of billions in infrastructure upgrades, yet Ottawa has provided virtually no financial support to do so. Thousands of Albertans could be put out of work in the coming years due to these costly regulations. A federal government willing to invest $37.7 billion into just three battery plants in Ontario and Quebec cannot credibly refuse to provide tax credits and financial incentives for producers in Alberta and Saskatchewan to assist with achieving a carbon-neutral economy by 2050.

“For years, Alberta, not Ottawa, has done the hard work and achieved results. We strongly support reducing methane emissions and have invested tens of millions into developing these technologies. Minister Guilbeault must work with us, and not against us, to keep cutting methane emissions and charting a course for carbon neutrality by 2050.

“Given the unconstitutional nature of this latest federal intrusion into our provincial jurisdiction, our government will use every tool at our disposal to ensure these absurd federal regulations are never implemented in our province.”

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Alberta’s Methane Target Reached Early

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Gas processing plant in northwest Alberta, courtesy of EnergyNow


Courtesy of ENERGYminute
See more articles and infographics from ENERGYminute HERE

In a pat-yourself-on-the-back moment, Alberta’s oil and gas industry successfully achieved a 45 percent reduction in methane emissions, surpassing the province’s mandated target ahead of schedule.

Background: Alberta was the first province in Canada to commit to a 45 percent reduction in methane emissions from the oil and gas sector by 2025, based on 2014 levels. Spoiler alert: Alberta achieved its methane mission three years early.

  • Their targeted approach to reducing methane emissions from flaring, venting and fugitives has become an example globally, earning national and international awards for its effectiveness and cost-efficiency.

Alberta strong: The government credited the early success to close collaboration with the industry, implementing early action programs such as carbon offsets, tough regulations for all facilities, and enhanced leak detection and repair methods.

Minister of Environment Rebecca Schulz highlighted that this made-in-Alberta approach not only achieved the goal three years ahead of schedule but also resulted in roughly  $600 million in savings for the industry compared to the proposed federal program.

Getting the job done: Alberta allocated $57 million from the Technology Innovation and Emissions Reduction fund for methane emissions programs, including:

  • $25 million in rebates to companies adopting emissions reduction equipment.
  • $17 million supporting alternatives to detecting and quantifying emissions.
  • $15 million to help small- and medium-sized operators assess methane reduction opportunities.

Overall, the initiatives eliminated 16.6 million tonnes of carbon dioxide equivalent from the atmosphere.

Looking ahead: Alberta is committed to building on this momentum and collaborating with industry experts to determine the next steps in their emissions reduction journey, aligning with the goal of carbon neutrality by 2050.

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