Lennie Kaplan was 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.The misguided decision by Alberta Premier Danielle Smith to accept Ottawa’s demands to increase the province’s effective industrial carbon tax to $130 per tonne by 2040 will impose an estimated additional $33 billion in cumulative carbon costs (an average of $1.26 per barrel across all oil sands production) on the oil sands sector between 2030 and 2040. However, this initial $33 billion in estimated additional carbon costs is just a down payment on an estimated $244 billion cumulative Alberta carbon tax bill (an average of $5.83 per barrel across all oil sands production) that will be imposed on the oil sands sector between 2030 and 2050. The estimated $244 billion carbon tax bill on the oil sands sector results from the full implementation of the radical Carney-Smith net zero emissions (NZE) agenda. The $244 billion in cumulative additional carbon taxes between 2030 and 2050 could well result in serious competitiveness issues for the oil sands sector, possibly resulting in oil sands production constraints down the road, as oil prices return to pre-Iran war levels.It should be noted that average costs per barrel are costs across all oil sands production, and that marginal costs, the costs associated with producing one more oil sands barrel, probably is a better metric for making oil sands sector investment decisions, and will likely be higher than the average costs on a per barrel basis..These results are based on my preliminary modelling of the major elements of Prime Minister Mark Carney’s and Premier Danielle Smith’s most recent agreement on escalating the Alberta carbon tax. They are based on a high oil sands production scenario, including new pipeline egress, as favoured by the Alberta government.It is amusing to hear the Alberta government actually claim it is saving Alberta industry partners approximately $250 billion in costs between 2030 and 2050 through the latest Carney-Smith agreement on Alberta carbon taxes when it was actually the Alberta government that imposed these costs on industry in the first place, back in December 2022. It was Justin Trudeau and Danielle Smith who forged the December 2022 agreement to increase the Alberta carbon tax to $170 per tonne by 2030. I estimate that this flawed December 2022 agreement would have cost the oil sands sector about $70 billion in cumulative carbon costs (an average of $1.73 per barrel across all oil sands production) between 2030 and 2050. At the time, the Smith government actually said the $170 Trudeau-Smith carbon tax was “good news” for the province. Now, the Alberta government is trying to rewrite the history of their wholehearted initial support for the Trudeau-Smith $170 carbon tax. But it just won’t wash with Albertans.The increase in the Alberta carbon tax to $130 per tonne through 2040 is just the first step in implementing the radical Carney-Smith NZE agenda. The latest Carney-Smith agreement enthusiastically reaffirms, yet again, the misguided commitment to reach NZE in Alberta by 2050. My preliminary modelling reveals that the additional cumulative carbon costs on the oil sands sector from Carney-Smith NZE could reach an estimated $244 billion between 2030 and 2050, an average of about $5.83 per barrel across all oil sands production..With the average supply costs for crude bitumen (mining and in-situ) projects sitting at between $62.50 and $66.50 Canadian per barrel, before the application of the latest rise in the Alberta carbon tax, a $5.83 per barrel average carbon cost increase under Carney-Smith NZE could drive oil sands project average supply costs up to between $68.35 and $72.35 per barrel. With oil prices returning to pre-Iran War levels, this could be problematic for oil sands project economics, including net present value (NPV) and internal rates of return (IRR). The supply cost for an oil sands project is the minimum constant dollar price needed to recover all capital expenditures, operating costs, royalties, and taxes (including carbon taxes) and earn a specified return on investment. The supply cost indicates whether the oil sands project is economically viable.Alberta’s rising carbon tax will take a greater bite out of oil sands’ total costs as the Carney-Smith NZE agenda is implemented. While the weighted average in oil sands supply costs has shown great improvement over the past two decades, a $5.83 per barrel increase in oil sands costs under the Carney-Smith NZE carbon tax could weigh heavily on private sector investment decisions. Oil sands companies make investment decisions, whether it be optimizations, expansions, or greenfields, based on a long-term planning perspective, not short-term gyrations in world oil markets, or some artificial deadline of a $130 carbon tax by 2040. Oil sands projects have long-term production cycles and will be seeking clarity and certainty on Alberta’s carbon pricing regime between 2041 and 2050, before making final investment decisions. The Carney-Smith agreement on Alberta’s carbon pricing regime does not provide that clarity or certainty for oil sands producers between 2041 and 2050.The Alberta oil sands sector also competes for market share with other heavy oil grades, such as those found in some areas of the United States (i.e. California), and in Russia, Venezuela, and Iran, on costs and now on emissions intensity. Adding a new $5.83 per barrel cost to the costs already imposed on the oil sands through existing federal and Alberta government policies, rules and regulations could impact overall sector competitiveness, lead to some market share displacement, and result in constraints on oil sands production from business-as-usual (BAU)..The Alberta government knows full well the negative impacts of Carney-Smith NZE on industry competitiveness in terms of the increases to industry average costs arising from the application of the $130 carbon tax; effectively, the precursor to much higher net zero Alberta carbon taxes, between 2041 and 2050, for industries such as the oil sands. Since December 2025, Alberta Environment and Protected Areas (AEPA) have been conducting extensive modelling of the impact of the Alberta carbon tax on TIER compliance cost levels through 2050. But the Smith government will not share these documents with Albertans. Why?In light of the negative impact on oil sands sector costs, and in the spirit of Alberta sovereignty within a United Canada, as championed by the Alberta government, the Carney-Smith NZE agenda, including its first act, the $130 Alberta carbon tax, must be put on the 2026 fall provincial referendum calendar. That way, Albertans can decide for themselves whether this perilous path towards NZE is worth pursuing. I am confident that, when presented with full impact analysis information, including the impacts of Alberta NZE carbon taxes on industry costs and competitiveness, Albertans will tell the provincial government to scrap its commitment to NZE 2050 and come up with more realistic policies.Lennie Kaplan was 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.
