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.News that the Alberta government wants a $130 per tonne carbon tax by 2050 signals that implementation of the Carney-Smith net zero emissions (NZE) agenda will likely require even more financial support from Alberta taxpayers, going forward.My earlier estimate was that the Alberta carbon tax would need to reach $371 per tonne by 2050 to reach Carney-Smith net zero. Now, with a $130 per tonne carbon tax by 2050 apparently on the table for discussion, the Carney and Smith governments are going to have to dig deeper into Alberta taxpayers’ pockets to meet this rabid NZE agenda.Not surprisingly, the Alberta government effectively boxed themselves in right at the start of negotiations with the Ottawa Liberals on implementation of the MOU by a ridiculous commitment to NZE. In fact, Premier Danielle Smith has been enthusiastically pitching her Alberta NZE agenda since July 2022, reaffirming it in the 2023 climate change strategy, talking about it extensively to Ottawa MPs, and officially signing on to it, along with the Carney federal Liberals, as the headline item of the Canada-Alberta MOU.Based on my latest research, I estimate that Alberta will need to capture about 140 Mt of greenhouse gas emissions (GHG) through carbon capture and storage (CCS) projects by 2050, including 75 Mt in the oil sands sector, to reach Carney-Smith NZE. In addition, about 75 Mt of emissions in Alberta will need to be captured through direct air capture (DAC) projects by 2050, a technology still relatively unproven commercially. Currently, DAC costs range between $400 and $3,000 per tonne..The major headline item of the Carney-Smith NZE agenda, as set out in the MOU, is reaching NZE in Alberta by 2050. This is to be facilitated by a significant increase in the Alberta industrial carbon tax; the construction and operation of the Pathways CCS project; building a one million barrels per day (bpd) northwest BC pipeline; and effectively doubling Alberta’s oil production to 8 million bpd by 2035.Assuming the application of a $130 per tonne Alberta carbon tax through 2050, the northwest BC pipeline, with an initial upfront capital cost of about $30 billion, will require about $150 billion in supporting new investment in the oil sands sector over the next decade, including maintenance and sustaining capital, optimization, and expansions. Capital investment in the Pathways CCS Phase 1 project is currently estimated at about $25 billion, with capital investment for additional phases needed to reach net zero in the oil sands sector by 2050 estimated at about $60 billion. Capital investment in CCS in sectors other than the oil sands is estimated at $75 billion. And capital investment in DAC is conservatively estimated at $40 billion. That’s a grand sum of $380 billion in upfront capital investment, and this does not even include the ongoing operating costs for these assets.Will the private sector fork out the full $380 billion initial price tag, given current uncertainty in federal and provincial policies and regulations, as well as the recent tendency toward improving efficiency of assets and returning cash to shareholders? Not very likely! In fact, I estimate that to effectively de-risk these various NZE-inspired projects, Alberta taxpayers could well be required to “pony up” between $80 billion and $250 billion in financial support. This could include a combination of such measures as substantial enrichments to CCS and DAC tax credits; loans backstopped by the Alberta Indigenous Opportunities Corporation (AIOC); having the Alberta Petroleum Marketing Commission (APMC) physically take royalty barrels in kind and commit those volumes to a long-term take-or-pay contract at a toll above current market rates, effectively guaranteeing a return to pipeline owners; and having the Alberta Heritage Fund Opportunities Corporation (AHFOC) finance equity investment in projects even to the extent of partnering with other sovereign wealth funds.I am very concerned that up to $250 billion in Alberta taxpayer financial support may be needed to implement the Carney-Smith NZE agenda. I believe that the Alberta government should scrap its NZE agenda and establish realistic and achievable emission reduction targets for the province.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.
