Report: Carbon policies put Alberta’s energy sector at major disadvantage to Texas and New Mexico

A new Fraser Institute report released Thursday finds that federal and provincial carbon policies are eroding Alberta’s competitive position in oil, natural gas and electric power production compared with key U.S. states.Economist Jack Mintz’s study, Impact of Carbon Policies on Competitiveness in Oil, Natural Gas, and Electric Power: An Alberta–U.S. Comparison, measures the impact using the marginal effective tax rate on costs (METC) — essentially how much taxes and carbon rules inflate the cost of bringing new production online.Without carbon policies, Alberta is generally more competitive than Texas or New Mexico for oil sands and natural gas. Conventional oil faces higher royalties in Alberta, but overall the province holds an edge on marginal projects.Once carbon taxes and the TIER system are factored in, that advantage disappears — and quickly turns into a clear disadvantage.At a $95-per-tonne carbon price (the 2025 level), the report shows:Oil sands marginal costs jump from $51 to as high as $75 per barrel under maximum exposure — a 47% increase.Conventional oil costs rise sharply.Natural gas faces an added 22 cents per gigajoule.Electricity wholesale prices climb from $41 to $69 per megawatt-hour — nearly a 50% jump.Under the May 2026 federal-Alberta carbon agreement, the study projects these policies will add roughly $3 per barrel to oil sands and conventional oil costs by 2040, 22 cents per GJ to natural gas, and $12 per MWh to power — translating into billions in extra costs for the province’s energy sector. Carbon capture and storage (CCUS) subsidies help blunt some of the pain, but they do not restore competitiveness at the margin. The report notes that while Canadian CCUS incentives are strong at higher carbon prices, the underlying carbon tax still leaves Alberta projects more heavily burdened than comparable operations in Texas and New Mexico, where broad carbon pricing on these sectors largely does not exist.“Alberta’s marginal projects are less taxed than those in Texas and New Mexico when carbon policies are ignored,” the study states. “However, with carbon taxation, Alberta becomes more heavily taxed, especially as policies tighten.”.The findings come as Alberta’s energy industry continues to face investment decisions that increasingly weigh regulatory and tax burdens against those in the U.S. Gulf Coast and Permian Basin, where producers operate without equivalent carbon pricing.Mintz, a University of Calgary professor and former head of the School of Public Policy, concludes that while carbon policies reduce emissions, they do so at a significant cost to the competitiveness of Alberta’s core industries.The report underscores long-standing concerns from Alberta’s energy sector and provincial government that Ottawa’s climate framework — layered on top of the province’s own TIER system — is tilting the playing field in favour of American producers.For a province whose economy remains heavily tied to oil, gas and power exports, the numbers in the Fraser Institute analysis paint a stark picture: higher costs, reduced margins on marginal projects, and a structural disadvantage relative to U.S. competitors that face far lighter carbon-related burdens.

Report: Carbon policies put Alberta’s energy sector at major disadvantage to Texas and New Mexico

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