The ECB and Alberta's oil production tax holiday

4 minute read

The European Central Bank (ECB) is facilitating cheap funding access for the world's premiere tar sand producer, Canadian province of Alberta, which is now using borrowed capital to subsidise its industry.

Makes sense? We believe that it does not. In particular, we believe that that the ECB should drop the province of Alberta’s euro-denominated bonds (ALTA) from its Eligible Marketable Assets (EMA) list.

The climate change pressures the Alberta is facing is encapsulated in the sentiment that the development of oil sands is a key driver of Alberta’s and Canada’s economy.

Alberta's oil sands has the third largest oil reserves in the world, after Venezuela and Saudi Arabia. Indeed, Alberta is rare in its commitments to climate change accelerating activities, considering the state of climate change mitigation efforts in other parts of the world.

Allowing Alberta bonds into the ECB's various operations is basically a cost-of-capital subsidy. We believe it is simply irrational for European authorities to contribute such a subsidy. Alberta likely views the euro market as a cheap funding source.