Alberta economy set to shrink under federal climate mandates. Is that the price of net-zero?
There’s been a lot of discussion about how federal and provincial climate change policies, including the push for net-zero emissions by 2050, will impact Alberta’s economy. While governments at both levels talk a lot about net zero and carbon neutrality, they haven’t provided a clear, public assessment of what these policies actually mean for Albertans.
To address this gap, I used Navius Research’s respected gTech-IESD model to simulate the effects of these climate policies on the Alberta economy. Navius Research is an independent Canadian firm specializing in the economic and environmental impacts of energy and climate change policies. My findings are profoundly worrying: if Alberta follows a path to net-zero emissions by 2050, the province’s economy will face significant challenges, including reduced oil production, job losses, and lower overall economic growth.
The numbers tell the story: Alberta oil production could drop by 54 percent by 2050, translating to a loss of 2.220 million barrels per day. Job losses would be substantial, with up to 198,000 fewer jobs by 2050, representing a five percent decrease in employment. Alberta’s economy would shrink by $32 billion, or four percent, by 2050, and the cumulative GDP between 2025 and 2050 would be $848 billion, or six percent, lower. Provincial government revenues would also take a significant hit, falling by $221 billion, or 11 percent, over that same period.
However, not all the news is bleak. Some of these negative impacts can be mitigated if governments implement policies that encourage the adoption of new technologies like carbon capture and storage (CCS), direct air capture (DAC), renewable energy, and battery storage. By driving down the costs of these technologies, we could preserve some oil production, jobs, and GDP growth. For instance, under more optimistic assumptions about technology costs, Alberta could retain 765,000 barrels of daily oil production by 2050 and save about $22 billion in GDP that would otherwise be lost.
In my analysis, I looked at two main scenarios. The first is the “Legislated Policies Scenario,” which includes all the current federal and provincial climate policies but excludes additional measures like the Oil and Gas Emissions Cap (OGEC) and the Clean Electricity Regulation (CER). This scenario includes an industrial carbon price that rises to $170 per tonne by 2030 and a federal fuel charge at the same level.
The second scenario is the “ERP net-zero scenario.” This includes all current climate policies, proposed measures like the OGEC and CER, and a 75 percent reduction in methane emissions from the oil and gas sector. Under this scenario, the carbon price continues to rise to $170 per tonne by 2030, and net-zero policies are phased in after 2030, leading to a steady decline in emissions to reach net zero by 2050.
To add caution to the analysis, I used a pessimistic technology cost sensitivity, assuming that technologies like CCS and renewable generation remain expensive through 2050. When compared to an intermediate cost scenario – where these technologies become more affordable – the economic impacts are less severe, showing that the right policy choices can soften the blow to Alberta’s economy. For example, under the intermediate technology cost scenario, Alberta could save 155,000 jobs and $98 billion in cumulative provincial revenues between 2025 and 2050.
Despite these potential improvements, it’s clear that achieving net zero will impose significant economic costs on Alberta. The path to net zero means fewer jobs, less oil production, and a smaller economy unless governments take action to drive down technology costs and create incentives for the private sector to adopt these technologies.
In the end, both the federal and Alberta governments need to be transparent with Albertans about what these climate policies mean. They should clearly explain the trade-offs and costs associated with reaching net-zero emissions, and they should explore every possible option to reduce the negative impacts on jobs, oil production, and government revenues.
Given these findings, it’s crucial that the public understands the stakes. Alberta’s future, and its economy, depend on thoughtful policy choices that balance environmental goals with economic realities.
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 economic, fiscal and emissions impacts of federal and provincial climate change policies.
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