Juno News - Economist EXPOSES the hidden cost of Carney’s carbon tax

00:00:00.000 Welcome to The Fighter. I am your host, Chris Sims. We have got a very insightful interview

00:00:10.900 for you coming right up in a second. Why? Well, because to put it in plain English,

00:00:16.540 if we continue along this path with strangling our natural resources, with having a huge

00:00:22.960 industrial carbon tax, with our current taxation plans that we have here in the heartland of the

00:00:29.000 economy known as Alberta, it will have a ripple effect on affordability. How well, to put it in

00:00:37.140 layman's terms, it will make our cost of production for things like natural gas, a barrel of oil,

00:00:44.660 and even electrical power cost too much. Costs too much in comparison to places like Texas and New

00:00:54.840 Mexico. Bottom line, this would increase costs for businesses, things like mining, things like

00:01:03.680 forestry, things like farming, things like fuel refinery, not to mention the direct oil and gas

00:01:10.000 industry. And it would increase costs for consumers. So when you're paying your power bill,

00:01:17.520 okay, if we stick with this ever-increasing industrial carbon tax that's embedded within

00:01:23.600 the Memorandum of Understanding, the MOU, the one that Prime Minister Mark Carney is pushing

00:01:28.300 really hard, okay? If we stick on our current track, it's gonna cost us more. Don't take my

00:01:35.960 word for it. Dr. Jack Mintz said this himself in a deep dive, far-ranging report. Let's listen.

00:01:45.440 Joining me now is Dr. Jack Mintz. He is the President's Fellow of the School for Public

00:01:50.800 Policy at the University of Calgary. He is also with the Fraser Institute and that's where I took

00:01:56.960 a look at this report that he wrote. It's more than 40 pages long. I strongly recommend people

00:02:02.560 go check this out. Dr. Mintz, what jumped out at me was the potential increased production costs

00:02:09.920 of everything from oil sands, oil, all the way through to natural gas. But before we get going,

00:02:16.720 some of the language in here, it wasn't just industrial carbon tax or carbon capture. It

00:02:22.600 includes things like business taxes. Can you explain to us what all things you considered

00:02:28.020 here as factors? Well, first of all, for years, in fact, it goes way back to 1984 when I first

00:02:35.860 went up to the Department of Finance. One of my tasks was to help the department develop what's

00:02:40.980 called effective tax rate analysis on new investment or marginal effective tax rates,

00:02:47.260 which is now commonly used. In fact, the department still uses that methodology for looking at how

00:02:54.180 taxes can impact investment and for comparing Canada to other jurisdictions. And so that

00:03:01.520 analysis includes, and I've been doing this for quite a long time, but we include corporate

00:03:08.380 income taxes not just the rate but also the base in terms of how you depreciate capital investment

00:03:14.700 tax because it's all the different aspects of the corporate income tax and we also include sales

00:03:19.340 taxes on capital inputs which is which you get with things like the retail sales tax on capital

00:03:26.380 inputs some jurisdictions have other types of sales taxes as well then we have then we also

00:03:34.380 look at taxes that are related to using assets you know for example canada one time had capital

00:03:42.060 taxes it still applies to financial institutions but other companies no longer pay it but you'll

00:03:48.460 find that also in a number of countries and an economy model also is a property tax which

00:03:54.540 we tend not to use a property tax not because we don't think it shouldn't be used it's just that

00:03:59.260 it's very hard to get data for canada on taxes paid by different sectors of the economy when it

00:04:06.060 comes to property taxes municipal property taxes particularly but generally all you know and it

00:04:11.420 includes a whole gambit of taxes on on capital inputs the trouble however is that when you're

00:04:17.420 doing analysis and you want to go beyond just taxes on capital you want to include something

00:04:22.380 like taxes on energy like fuel taxes which have been around a very long time uh we um

00:04:29.580 you really have to use a different type of analysis you don't just try to measure the

00:04:34.380 tax on capital but you also try to measure the tax on on energy and you can also measure the

00:04:40.780 tax on labor if you wanted to do that as well so there's a broader sense of how taxes can affect

00:04:47.100 what's called cost competitiveness and that's what we do and so we include uh in just the base case

00:04:53.500 fuel taxes we compare texas and new mexico with with alberta in terms of the taxation of

00:05:03.180 the resource sector oil gas sorry oil oil sands natural gas but also the power industry that

00:05:11.420 tends to use a lot of energy and produces energy as well and so we look at how these taxes

00:05:18.220 impact on on the cost and cost competitiveness and and that is really critical if you want to

00:05:25.260 understand how taxes impact on production decisions of businesses and of course the

00:05:30.940 higher the taxes the less production you're going to get which is which is what you would normally

00:05:36.940 think will happen so business taxes include not only the taxes like the corporate income tax but

00:05:42.780 also includes other taxes and capital and includes fuel excise tax on energy and then we add in

00:05:49.980 carbon taxation on top of that can you get into the industrial carbon taxation uh because to

00:05:56.940 paraphrase because i can't put it the way you put it um to paraphrase your report you said the the

00:06:02.780 current one, the current industrial carbon tax rate before the MOU was still competitive. It's

00:06:09.260 still allowed for our price of a barrel of oil or production cost of a barrel of oil to be

00:06:14.300 competitive. And then from what I'm understanding from your report is going forward, the new

00:06:21.100 increasing industrial carbon tax costs combined with the cost of carbon sequestration and carbon

00:06:26.860 capture etc all in the mou would help make the production cost of a barrel of oil too high in

00:06:35.260 alberta compared to places like you said new mexico and texas have i got that right um not quite

00:06:42.620 that's why i had you on the show yeah so the exercise is uh first of all uh to understand

00:06:48.460 tax competitiveness what we and this is very commonly done uh by by analysts including myself

00:06:54.460 and others is you try to try to see whether your tax system is tax competitive which is a little

00:07:01.580 different than just competitive and the reason i say that is that we isolate the tax system by

00:07:08.460 assuming the same type of other economic variables for production in in in the various jurisdictions

00:07:17.100 so in other words they're using the same uh structure of debt versus equity they're using

00:07:22.460 the same uh you know they have the same sort of costs that would otherwise be there um you know

00:07:28.700 uh you know in producing the product so uh so in that sense uh what we're the focus is on what's

00:07:35.260 called tax competitiveness and so not just competitiveness but tax competitiveness in

00:07:40.620 other words which jurisdiction tends to tax more heavily um you know an industry or sector uh

00:07:47.500 compared to other jurisdictions and so uh what we do is we do that with the with the concept that

00:07:54.620 all else is equal now of course all else is not equal you can get different costs and for example

00:08:01.180 wage costs in canada would be less than the united states uh and so it's possible to for the system

00:08:08.860 to be not competitive um let's say in alberta relative to texas but it doesn't mean that the

00:08:16.220 whole industry is not competitive it may be that there's some other advantages that you know that

00:08:22.300 is possible that that still maintains competitiveness what's important about tax

00:08:27.260 competitiveness is we want to know how the tax system including subsidies by the way how that

00:08:32.620 can impact on on consumers and on the decision where to produce between jurisdictions and of

00:08:39.900 course if all else is equal but your tax system tends to make costs higher in the jurisdiction

00:08:46.220 then that's a tax disadvantage that has to be considered but there could be other advantages

00:08:51.180 that might be relevant but that's not what's the point of the analysis the point was to look at

00:08:57.100 whether the tax system is still advantageous in canada relative to the united states and is it

00:09:05.100 well i mean this is the issue that i've been very interested in for a number of years actually

00:09:10.140 um in fact you know i've done a lot of work on comparative analysis lately uh philip bezell who

00:09:16.300 works with me uh quite closely we've been doing a lot of work for the inter-american development

00:09:20.620 bank on mining taxation around the world and comparing canada with that and uh it's typically

00:09:27.980 you know the work that you know we've done in the past you know where we include royalties

00:09:31.580 and taxes just like we've done in this study but i've always sat and wondered uh what about

00:09:38.380 carbon taxation because carbon taxes are levied in canada but they're not levied in the united states

00:09:45.100 and the question is like you know to what extent is that putting us offside relative to the united

00:09:50.940 states or not and that's the reason i was very interested in this topic was to was to see how

00:09:57.260 you can introduce carbon taxes into modeling uh cost competitiveness between jurisdictions and

00:10:04.460 and so the results that we got i think are quite interesting i mean if you first of all forget

00:10:09.500 about the industrial carbon tax for a moment and you just look at fuel excise taxes on the energy

00:10:16.140 and you look at the other taxes on the capital what we found actually was that actually there

00:10:21.580 was a tax advantage for investments in alberta relative to texas and and and new mexico which

00:10:29.100 is the other major producer of oil in the United States. Of course, there's other states too,

00:10:34.860 but we focused on two of them. And that's kind of interesting, and of course, the question is why.

00:10:41.340 And one of them is, first of all, Alberta lowered its corporate income tax rate,

00:10:44.780 its provincial one to 8%, the federal one is 15%, it's 23%, which is roughly in keeping with Texas,

00:10:54.060 which is at 21, and New Mexico, which is a little bit higher, close to the Alberta rate.

00:11:01.800 But the key point is that when you look at other things, like other taxes,

00:11:08.040 Texas has a gross receipts tax.

00:11:11.020 They have these very high severance taxes on the oil and gas sector.

00:11:15.780 Same thing with New Mexico.

00:11:17.840 And they also have retail sales taxes, which are very significant taxes on business inputs.

00:11:23.080 and the interestingly not it's not a major factor but i was surprised i actually feel excise taxes

00:11:29.900 they're a little higher in new mexico and texas compared to alberta so when you put it all

00:11:34.660 together actually alberta had a tax advantage relative to texas and new mexico and i think

00:11:39.320 that's that's quite interesting so then the big question is okay what happens if you put in the

00:11:44.080 industrial carbon tax and there we found that actually at 95 dollars what happens oh first of

00:11:50.080 well, I should backtrack, with the case of just looking at these taxes

00:11:56.280 and ignoring the carbon taxes, there is one sector that is more heavily taxed

00:12:01.280 compared to Texas and New Mexico, and that's conventional oil.

00:12:05.340 And that's because of the very high royalty rates in Alberta.

00:12:09.200 So that was one factor that's disadvantaged from a tax perspective in Alberta

00:12:18.540 before you get into carbon taxation.

00:12:21.540 Now, once you add in the carbon tax,

00:12:23.680 obviously, since there's no carbon tax in the United States,

00:12:28.680 conventional crude is even worse off relative to Texas and New Mexico.

00:12:34.340 But then what happens to the oil sands?

00:12:36.720 Well, we found actually there was a tax advantage

00:12:39.140 for oil sand investments without the carbon tax.

00:12:43.600 But once you bring in the carbon tax,

00:12:45.100 most of the, at a $95 per ton carbon tax, most of that tax advantage is gone. So, at least under

00:12:53.260 the 2025 system, as we called it. And so that, I think, is important to understand. Natural gas

00:13:00.220 still has an advantage, mainly because of these very high severance taxes that are in Texas,

00:13:06.460 particularly. So, you know, that part stays the same. The one industry that is really out of

00:13:13.820 whack is the power industry it had a tax advantage without carbon taxation but once you introduce

00:13:18.780 carbon taxation even the the one that we currently had in alberta uh it it put uh power investments

00:13:26.540 offside now utility companies aren't going to move very quickly so i don't think that's a key issue

00:13:32.380 but it does mean that our tax system in alberta once you put in the carbon tax means that

00:13:39.420 you know probably consumers and businesses that are going to buy electricity

00:13:44.700 and you know electricity that are going to be taxed more heavily and will have face higher

00:13:49.740 prices as a result which goes right through the whole economy so it's a it's a bit of a concern

00:13:54.620 when you have that happening and then we looked at the old system by the way the paper was

00:14:00.060 originally written before the mou came out so we had something at the very end about the mou

00:14:06.380 which of course attracted a lot of the interest um but when we when we looked at the 170

00:14:12.060 dollar carbon tax that was due in 2030 um uh and uh and further uh reductions in you know in

00:14:20.220 allowances um although assuming that there would still be a low credit rate uh um you know for

00:14:26.860 selling carbon credits uh to companies that need to buy them to satisfy their their carbon uh

00:14:32.780 require you know uh their the carbon regulation in alberta uh what we found actually was that

00:14:40.780 the oil science loses its good tax advantage altogether not to it's not too badly off relative

00:14:47.580 to to the uh to the u.s uh but um uh obviously conventional crude is worse off natural gas

00:14:55.420 starts losing its tax advantage too although still has some tax advantage under that system

00:15:02.300 then the mou came along and we decided to look that now it wasn't easy because you didn't have

00:15:10.540 the same amount of time before this paper coming up but after going through it what we found is

00:15:15.900 that by 2040 after the carbon price moves up from 95 to 140 dollars and uh and the car and there's

00:15:26.460 this minimum credit price which is going to be make the carbon tax even higher as a result plus

00:15:35.740 further reduction in allowances that would be available to the companies that what we found

00:15:43.180 actually is pretty well in every sector there'll be a tax disadvantage for them and as a result

00:15:51.420 to and in particular the power industry was going to be most effective and so that would suggest

00:15:57.340 that you know that certainly the you know that certainly the industrial carbon taxes

00:16:02.380 was going to create a now a tax disadvantage for alberta while previously without carbon taxation

00:16:09.500 there wasn't a tax advantage so that's the basic story of the whole report is it okay if i bring up

00:16:16.140 this graphic now and we can talk about that a little bit yes we can perfect sean if you can

00:16:21.660 pull this up uh dr mince uh these are some big numbers that i'm looking at here um so we've got

00:16:28.220 a 19.6 increase in the cost of production for oil sands oil 25.6 increase for conventional oil

00:16:38.940 this is a wowser 35.9% for electrical power and 39.1% for natural gas. So we're talking electrical

00:16:49.980 generation here at 35.9 and then almost 40% for natural gas. Now, can you break that down for us?

00:16:56.860 I don't know if we need to keep the graphic up while you describe it. Is this how would this

00:17:01.900 increase costs to consumers if this is an increased cost of production?

00:17:07.100 well we have to remember that uh before the carbon taxation came in place we did have taxes on on

00:17:13.100 these businesses and in fact uh you take like the case of natural gas and i don't have the numbers

00:17:18.140 in front of me right now but uh you know the effect of tax rate was around 23 24 percent

00:17:25.500 so the carbon tax actually adds something on but they started a very high high rate in the first

00:17:30.140 place um part of a part of the issue is that uh the carbon tax is paid no matter what your

00:17:36.300 profitability is um you know you could have high profits or low profits and and one of the issues

00:17:41.820 around with natural gas is that prices are relatively low you know very relative to what

00:17:46.940 you can get in the united states so that's uh so that carbon tax really bites more heavily

00:17:52.140 in that case uh because the because of that um and so that's you know that's something to uh

00:17:59.180 you know it has to be kept in mind um but with the uh uh and power you know obviously is another

00:18:06.380 area where we've had actually low prices for consumers in alberta at least relative to number

00:18:11.820 of jurisdictions around the world uh but uh again uh those taxes tend to pile on uh more heavily

00:18:19.500 when your prices are low and your costs are low in other words you know because it's a fixed tax

00:18:24.380 it doesn't it's not related to the actual cost per se and so and so that's why that's one of

00:18:30.620 the reasons why those sectors tend to get more heavily impacted but i think the other graph if

00:18:38.380 would be the op-ed i put out today in the in the national post where you where there's a table

00:18:44.300 comparing texas and new mexico under the mou for 2040 compared to alberta for the oil sands and

00:18:52.860 conventional crude natural gas and power and you can see quite clearly there that

00:18:59.180 the tax advantage is really quite significant in fact it's much higher in alberta it's almost

00:19:04.700 twice higher than what you now find in in new mexico and texas more than twice higher except

00:19:11.740 for the oil stats it's not too far off the the texas and the and the new mexico tax rates

00:19:17.980 and so you're getting you're you really see some significant differences now of course that's by

00:19:25.460 2040 the world's going to change a lot between 2025 and 2040 most likely but it does tell you

00:19:35.160 the direction and of course when companies are making investment decisions they're they're

00:19:40.180 looking at the long run they're looking at many many years in terms of profitability and if they

00:19:46.500 see that in 15 years they're going to be you know much higher taxes in canada relative to the united

00:19:53.300 states it's going to probably put a just you know probably discourage investment in in canada uh as

00:20:01.460 a result because the the future looks more gloomy at least from a tax perspective it doesn't mean

00:20:08.500 that there's other things that will be positive for the industry in canada is it fair to say and

00:20:14.340 i don't want to put words in your mouth is it fair to say then under the current system if things

00:20:18.900 don't change looking into the future down a railroad track that this would increase cost

00:20:23.780 of production of various forms of energy and increase cost to consumers is that fair to say

00:20:29.940 yes and to increase cost to businesses that are buying energy right i mean we have to remember

00:20:35.140 you have forest companies that have to use uh you know uh fuel that they they buy the energy sector

00:20:42.500 You have even, you know, high-tech industries that depend on electricity, et cetera.

00:20:48.660 So yes, what this is saying is that you're going to have prices going up for consumers,

00:20:55.140 but it's also going to make other businesses in the economy less competitive.

00:21:00.420 Are you getting traction with the Alberta government, if you don't mind me asking?

00:21:03.860 Because I've brought some of this stuff up myself with the Alberta government and it just kind of

00:21:08.740 seems to be glossed over and they say the mou is worth it and we'll work it out later

00:21:13.940 um whereas some of these numbers i'm looking at here like 35.9 increase in the cost of production

00:21:22.100 for electrical power in alberta you know like that's alarming um and for folks who are outside

00:21:28.100 of alberta who are used to hydro um our power is generated using natural gas largely here in alberta

00:21:34.660 so that is why those two things would be connected i would argue these are alarming numbers like are

00:21:40.020 you are you getting some feedback from the alberta government with their mou and their industrial

00:21:45.540 carbon tax and all this stuff uh well they certainly know this work uh let me put it that

00:21:51.060 way um yeah but i think uh i think the more interesting thing and i've heard this from not

00:21:57.060 only you hear it publicly but i've heard this from a number of people privately including people who

00:22:02.340 reacted to the study that came out yesterday who are in the industry it basically confirms what

00:22:07.860 they've been trying to tell the alberta government as well now but you have to be really careful is

00:22:13.700 those those numbers there don't say that the price of prices are going up 35 percent just

00:22:22.660 the carbon tax correct what it means is that taxes are adding on to the marginal cost of production

00:22:29.700 for um for the for that industry and and adds another third to the cost so for example if you

00:22:37.940 can sell electricity let's say at 10 cents a kilowatt uh taxes are adding three cents on to

00:22:46.340 that 10 cents you know three point three point five cents onto the 10 cents and and so that that's the

00:22:53.060 way to look at those numbers okay well dr jack mince i sincerely appreciate your work on this

00:22:59.460 i hope that you're ringing some bells up there in edmonton and that people are paying attention to

00:23:03.860 this because uh at the end of the day people are strapped they can't afford to spend more for

00:23:08.820 energy and i really appreciate your insights especially on business so the big business in

00:23:14.900 oil sands or oil and gas electricity energy something like that mining um is looking to

00:23:20.100 come to Alberta and they're looking 10, 15, 20 years down the road and they're doing a comparison

00:23:25.540 shot between Alberta and Texas. From this report, what I'm reading is Alberta would be at a

00:23:32.340 disadvantage, correct? A tax disadvantage. It doesn't mean there may not be some other advantages

00:23:38.900 that goes Alberta's way. Including our charming personality. Dr. Mintz, thank you so much for 0.78

00:23:46.820 your time today my pleasure thank you take care once again that is dr jack mince he is an obviously

00:23:54.820 an economist super smart gentleman and he is the president's fellow of the school for public policy

00:24:00.980 at the university of calgary and it's really important that we speak with documents because

00:24:07.860 a he's obviously very smart b he does a lot of completely non-partisan deep dive look at the

00:24:16.180 numbers look at the future look at all these variable rates and he puts it all into a report

00:24:22.100 that ding ding ding government can't ignore and industry reads so while you're often going to get

00:24:30.660 a 10 second clip somewhere else we think it's important here in independent journalism to do

00:24:36.820 long-form interviews with very intelligent people like dr mints please head on over to the fraser

00:24:42.900 Institute's website. It's one of the first links you can find on their website. If you just Google

00:24:48.260 Jack Mintz report, it'll usually be one of the first things that pops up. I think the C.D. Howe

00:24:54.500 Institute has also posted it. It's on many different websites. And take a look at the

00:24:58.980 executive summary. And that's where you can see charts like this, okay, where they're talking

00:25:04.440 about tax disadvantages. And then talk to your friends, especially those who plan long-term in

00:25:11.100 business, who want to create jobs here in Alberta and Canada, and who ultimately, from the Taxpayers

00:25:17.920 Federation perspective, want lower taxes. Like Albertans, a huge chunk of Albertans are fighting

00:25:25.640 to afford everyday life. The idea of making something as simple as oil and gas, fuel refineries

00:25:33.760 cost more, power production costs more, ultimately trickling down to you spending more on your power

00:25:39.660 bill. We can't afford this, folks. And that's the message that the Alberta government needs to hear

00:25:46.140 in clear playing language like Dr. Mintz just gave us. Thank you so much for watching. If you

00:25:51.840 haven't done so yet, be sure to head on over to Juno News. Subscribe to Juno News because that's

00:25:57.140 where you get unvarnished direct independent journalism. And hey, if you're watching this on

00:26:02.020 YouTube, why haven't you hit the like button yet? So hit the like button, subscribe to this YouTube

00:26:07.920 channel, and most importantly, share this show with people who need to know.

Juno News - June 29, 2026

Economist EXPOSES the hidden cost of Carney’s carbon tax

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