A new study from the Fraser Institute warns that Alberta's $140 per tonne industrial carbon tax and mandatory carbon capture requirements will substantially increase energy production costs, undermining the province's competitiveness against U.S. energy-producing states.
Cost increases across all energy sectors
The study, authored by Jack M. Mintz, president's fellow at the University of Calgary's School of Public Policy, compared production costs in Alberta with those in Texas and New Mexico. It found that by 2040, under the combined impact of corporate taxes, royalty taxes, fuel taxes, the industrial carbon tax, and carbon capture obligations, production costs will rise significantly.
Specifically, conventional oil production costs will increase from US$43 to $54 per barrel, a 25.6% jump. Oil sands costs will rise from US$51 to $61 per barrel, a 19.6% increase. Natural gas production costs will climb from CDN$1.56 to $2.17 per gigajoule, a 39.1% increase. Electricity generation costs will rise from CDN$39 to $53 per megawatt hour, a 35.9% increase.
Competitive disadvantage versus U.S. states
Critically, these added costs do not apply to energy producers in U.S. states such as Texas and New Mexico, putting Alberta at a significant disadvantage for attracting investment. Mintz noted, "By increasing the marginal costs to produce energy in Alberta, federal and provincial policymakers are in effect encouraging investors to look at other energy-producing jurisdictions where costs are lower and returns on investment are higher."
The industrial carbon tax and carbon capture requirements stem from a Memorandum of Understanding between the federal and Alberta governments. The study argues that these policies make Alberta less attractive for capital investment compared to its American rivals.
Broader economic implications
Mintz emphasized that higher electricity costs will ripple through the entire provincial economy, raising costs for all producers. "As energy becomes more expensive to produce as a result of the increased taxes and regulations, investors will inevitably look to other energy-producing jurisdictions where costs are lower," he said.
The Fraser Institute, an independent, non-partisan Canadian public policy think-tank, released the study on June 25, 2026. The institute does not accept government grants or contracts for research. The full report is available on the Fraser Institute website.
