The facts are actually pretty simple: industrial carbon pricing has remarkably low costs for industrial facilities and minimal impacts on their competitiveness. Even if it’s adjusted to deliver a higher carbon price. 

That’s by design. Governments have explicitly designed industrial carbon pricing to deliver big incentives for emissions reductions, but small costs for industry. And that principle still holds even if the federal and Alberta governments improve the way the policy works to ensure carbon credits trade at $130 per tonne, as each agreed to in their memorandum of understanding. 

Let’s take the oilsands as an example. There are essentially two numbers you need to know to get perspective on the actual impact of Alberta’s market-based policy. Spoiler: neither of those numbers are $130.   

The first number is the cost to oil sands producers today: 9 cents per barrel on average. 

The second number is the cost to producers by 2030 if the policy is strengthened: 50 cents per barrel—or roughly the price of a Timbit.

Let’s start with the first number and current costs. 

Based on the latest compliance data published by the government of Alberta, the math shows that these producers have out-of-pocket costs (net of royalty and tax deductions) averaging 9 cents per barrel of oil. There is variation: a few inefficient facilities pay more, upwards of $2 to $4, but an even larger number are earning carbon credits that actually improve their balance sheets. 

That variation is exactly how the policy is supposed to work. Different producers face different exposure depending on how carbon-intensive their operations are. Some facilities pay more because their emissions intensity exceeds their emissions limit benchmark. Others earn credits because they outperform it.

Overall, current costs are a small number for two main reasons. First, facilities aren’t paying a carbon price on all their emissions, but rather only those above an emissions intensity threshold. Second, the current credit prices are low (currently trading for around $30 per tonne).

Estimates that overweight the worst-performing facilities overstate costs. Estimates that mistakenly assume that facilities pay the price on all of their emissions wildly overstate costs. 

All of this is consistent with historical data and outcomes. 

Our team at the Canadian Climate Institute looked at nearly two decades of industrial carbon pricing to assess how it impacted the competitiveness of oil sands facilities. Using 17 years of provincial trade data covering 10 provinces and 19 industrial sectors. After accounting for commodity cycles and U.S demand, oil prices, and provincial trends, we found no statistically significant evidence of export contraction linked to carbon pricing; the average estimated effect was indistinguishable from zero. 

If current pricing were hollowing out competitiveness, it would have shown up somewhere in nearly two decades of data. It did not.

Let’s now look to the future. 

The second essential number to know is 50 cents per barrel. That’s the average cost per barrel in 2030 if the policy was strengthened to ensure carbon credits trade at a minimum of $130 per tonne, as the Alberta-Ottawa MOU commits to doing. 

That works out to about the cost of a Timbit per barrel in 2030, after considering inflation. It’s also about 0.06% of the price of Western Canadian Select, at current prices of around $80 per barrel. That’s a rounding error on balance sheets, not a competitiveness threat. Or put another way: if Canadian oil sands producers are truly so vulnerable to such minor costs, then they have much bigger structural competitiveness problems. 

Carbon pricing has never been a binary choice between climate ambition and competitiveness. It is a calibration exercise. It always has been.

In fact, the evidence is clear. Carbon pricing coexists with competitiveness by design.

The debate should move from conjecture and hand-waving to real-world evidence. If someone is claiming carbon pricing is hollowing out investment or crippling profits, they should provide receipts, and show their math. If you’d like to check ours, see our facility cost calculator here. 

Dale Beugin is Executive Vice President at the Canadian Climate Institute. Ross Linden-Fraser Research Lead at 440 Megatonnes, a project of the Canadian Climate Institute.

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