KAPLAN: Alberta’s $130 carbon tax chaos puts $200 billion in oil sands investment at risk

Lennie Kaplan spent over two decades in the public service of Alberta, including as a senior manager in the Fiscal and Economic Policy Division of the Ministry of Treasury Board and Finance.There is less than two weeks before the April 1 deadline to conclude a deal between the Carney Liberals and the Danielle Smith government on Alberta’s $130 per tonne industrial carbon price, under the provincial Technology Innovation and Emissions Reduction (TIER) regime.However, as the deadline fast approaches, there seems to be a great deal of confusion about the impact of Alberta’s $130 carbon tax on current oil sands projects, proposed oil sands optimization and expansion projects, the Pathways Alliance carbon capture and storage (CCUS) project, and the proposed northwest BC pipeline. This is all very disconcerting, and the blame lies to some extent with the provincial government’s lack of transparency around its impact analysis of the $130 TIER carbon tax.In the past couple of weeks, we have seen estimates of the impact of Alberta’s $130 per tonne carbon tax on the oil sands sector ranging from as low as 50 cents per barrel to as high as $20.00 per barrel. In my opinion, the confusion around the impact of the Alberta carbon tax is partly due to the fact that the provincial government has not provided its own impact analysis to investors and Albertans. This is creating uncertainty for nearly $200 billion in potential private sector investment over the next decade in the oil sands, CCUS, and pipelines.I estimate that supporting proposed egress, such as the 1 million bpd northwest BC pipeline being touted by the Alberta government, will require about $150 billion in new investment in the oil sands sector over the next decade, including maintenance and sustaining capital, optimization, and expansions. The proposed northwest BC pipeline project's cost is estimated at up to $30 billion. And the private sector share of investment in the Pathways Alliance, Phase 1 project is now estimated at about $8 billion. That’s a total of nearly $200 billion in private sector investment requirements over the next decade. How does the Alberta government take the steps to unlock this investment?.We all know that a well-functioning Alberta TIER market is one crucial element in facilitating this nearly $200 billion in private sector investment. Recall that, back in December 2022, it was the Smith government that announced, through a ministerial order, that it would ramp up its TIER headline price to $170 per tonne by 2030. However, the effectiveness of TIER was later impaired with the Alberta government’s May 2025 decision to indefinitely freeze the TIER headline carbon price at $95 per tonne of emissions. This partly caused an excess of credits in Alberta’s TIER market, driving down effective prices to under $20 per tonne prior to the signing of the MOU in late November 2025.Standard and Poor’s (S&P) Global Commodity Insights recently noted that “while Alberta Emission Performance Credits (EPCs) and Alberta Emission Offset credits had risen after the signing of the MOU, TIER pricing had begun to plateau as participants await clarifying documentation for the MOU. According to one market participant, my concern with what will come from the MOU update and timing is that the governments are notoriously slow and have a tendency to 'make announcements about announcements' as opposed to actually releasing documents of substance quickly.”As the Alberta government presumably enters into the final stages of negotiations with the federal Liberal government around the provincial carbon tax and sector-specific stringency factors for large industrial emitters, such as the oil sands sector, it needs to keep its commitment to a market-based carbon pricing system and release its impact analysis. We know the analysis has been done. In fact, in early December 2025, Premier Danielle Smith indicated that the provincial government was seeking independent modelling on its carbon tax. So, in the spirit of openness and accountability, the Smith government should release the results of all the modelling of its “made-in-Alberta” $130 per tonne carbon tax and explain its impact on various large emitters, including the oil sands sector. Some $200 million in private sector investment over the next decade could be at stake.Lennie Kaplan spent over two decades in the public service of Alberta, including as a senior manager in the Fiscal and Economic Policy Division of the Ministry of Treasury Board and Finance, where he worked on cross-ministry initiatives evaluating the fiscal and economic impacts of federal and provincial energy and climate change policies. In 2019, he provided initial policy advice to the Alberta government, leading to the development of the Technology Innovation and Emissions Reductions (TIER) regime.

KAPLAN: Alberta’s $130 carbon tax chaos puts $200 billion in oil sands investment at risk

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