Alberta ground zero for Canada’s decade-long investment crisis

It’s widely acknowledged among policy analysts that Canada’s stagnant investment performance, which began around 2014, has hurt productivity and living standards. Less discussed is the substantial disparity in investment performance among provinces since 2014 and particularly the sharp decline in energy-producing provinces such as Alberta.

One way to measure investment is to track the growth of the “net stock” of productivity-enhancing assets, which include infrastructure, plants, machinery and equipment, and intellectual property products such as software (after adjusting for inflation and excluding investments in residential housing). When the net stock of these assets increases, Canadian workers have more and often better tools to produce goods and services, and the resulting increased productivity raises incomes and living standards.

As noted in my new study published by the Fraser Institute, for Canada as a whole, from 1990 to 2014, this net stock grew at a relatively healthy annual average rate of 2.4 per cent before declining to 1.1 per cent from 2014 to 2018, then declining further to 0.99 per cent from 2018 to 2025 (again, all numbers adjusted for inflation).

Meanwhile, from 1990 to 2014, all 10 provinces experienced positive growth of their net stocks, led by Alberta (4.4 per cent annual average growth rate) and Saskatchewan (3.3 per cent). All 10 provinces also experienced positive growth rates from 2014 to 2018, although Alberta’s growth rate was essentially zero while Saskatchewan’s growth rate was slightly above the national average. However, from 2018 to 2025, annual average growth was negative for three provinces (Alberta, Saskatchewan, and Newfoundland and Labrador) with Alberta suffering the worst decline (1.1 per cent on an average annual basis). Indeed, the net stock of productivity-enhancing assets in Alberta was actually smaller in 2025 than in 2014.

Why did these three provinces experience this decline in investment?

In short, the Trudeau government assumed office in 2015, and for the next 10 years, enacted policies that discouraged investment in the oil and gas sector, which drives economic growth in Alberta (and to a lesser extent in Saskatchewan and Newfoundland and Labrador). The lagging investment performance of Canada’s main energy-producing provinces not only detracts from Canada’s overall investment performance (and from federal tax revenue that benefits other parts of Canada), it contributes to political friction between the federal and provincial governments, particularly between Ottawa and Alberta, which undermines national unity.

To the extent that oil and gas production remains the major source of economic growth in Alberta, the federal government will face a challenge in its efforts to reduce carbon emissions while keeping intact the political underpinnings of confederation. Diverging provincial economic fortunes will also discourage Ottawa’s efforts to promote interprovincial free trade, as policymakers in provinces with lagging rates of investment and economic growth will face intense pressure to protect local industries and producers from competition, even when the competitors are based in other provinces.

In this context, the federal government’s recognition of the geographically concentrated impact of national energy policies, particularly through the recent memorandum of understanding (MOU) between Alberta and the federal government, is more than an acknowledgment of Alberta’s legitimate economic concerns—it’s a contribution to an economically and politically stronger Canada.