Alberta-Ottawa carbon pact risks major loss in competitiveness for Canada
The Alberta–Ottawa carbon-pricing memorandum of understanding could significantly raise oil production costs and undermine competitiveness, economist Dr. Jack Mintz warned during an interview.
The Alberta–Ottawa carbon-pricing memorandum of understanding could significantly raise oil production costs and undermine competitiveness, economist Dr. Jack Mintz warned during an interview with the Canadian Taxpayers Federation’s Kris Sims.
The discussion focused on the potential impact of higher industrial carbon taxes, carbon capture requirements, and market conditions tied to the MOU.
Mintz said the industrial carbon tax alone would raise marginal production costs by more than US$5 per barrel.
Jeffrey Rath, general counsel for the Alberta Prosperity Project, similarly commented on the rising costs of the industrial carbon tax stemming from the memorandum of understanding in an exclusive interview with True North.
“That Stupid MOU is going to add $6 to $10 a barrel to the cost of production of Alberta oil, which is already the most expensive oil in the world to produce,” Rath said, citing Mintz’ article with the Financial Post.
Mintz cautioned that the impact could extend beyond Alberta, with cheaper foreign imports gaining an advantage and exporters unable to pass costs along to U.S. buyers. He said the combined cost of industrial carbon pricing and carbon capture requirements could reach as much as US$10 per barrel, depending on the final framework.
“Add it all up, we’re talking about potentially production costs in Canada of $6.4 to $10 per barrel, which means that we’re not going to be very competitive in export markets,” said Mintz. “You can’t build a pipeline if people are not willing to produce more oil.”
Economists already consider new oilsands developments marginal, Mintz noted, with many projects requiring between US$60 and US$70 per barrel to be competitive. He warned that additional carbon-related costs would further reduce the likelihood of new investment, which Alberta needs to increase production or fill future pipelines.
Mintz also examined the carbon capture and storage cost-sharing arrangement, with governments expected to pay roughly 62 per cent of project costs and producers covering the remainder. He noted that estimates for total CCS costs vary significantly, making the final impact uncertain.
He said the financial burden would affect both producers and consumers. However, Mintz was unsure whether producers would try to recover the added burden through higher prices for gasoline, diesel, or other products. He suggested that the additional cost could be added to other consumer prices as well, noting that it’s hard to predict how businesses will try to recover their additional capital costs.
Sims asked Mintz about Prime Minister Mark Carney’s statement that the carbon price would be “six times higher” under the MOU. Mintz said the comparison was likely based on the difference between the $110/tonne target and current credit prices, which have been trading at around $20 to $24.
Mintz said both industry and consumers would share the economic burden. While the legal tax liability falls on producers, the economic incidence will be split depending on market conditions.
He distinguished between export and domestic markets, explaining that producers cannot pass added carbon costs to U.S. buyers; these expenses will largely be absorbed by the industry. In Canada’s domestic market, he said, some cost pressure could appear in fuel or goods due to the integrated North American energy system.
The interview also addressed Alberta’s optimism that eliminating the emissions cap, suspending tanker restrictions, and easing Bill C-69 provisions could boost investment and pipeline development. Mintz cautioned that global competitors do not impose similar carbon capture requirements, which could hinder Alberta’s ability to attract international capital.
In fact, he said only two countries require carbon capture and storage — the United Kingdom and Norway, neither of which he argued were main competitors with Alberta when it comes to oil exports.
Mintz said Alberta should push for the lowest possible industrial carbon price before April and continue negotiating over CCS cost-sharing. While governments currently cover 62 per cent of the cost, leaving 38 per cent to the producer, Mintz described that taxpayers are covering the cost either way.
He emphasized that the memorandum of understanding (MOU) remains a process document rather than a finalized agreement, noting that key elements—including the ultimate carbon price, the structure of the credit market, and the cost-sharing model for carbon capture—will not be settled until the two governments complete a binding agreement by April 2026.
However, the MOU does call for the industrial carbon price to be ramped up to a minimum effective credit price of $130 per tonne through the Technology Innovation and Emissions Reduction Regulation (TIER) program.