Why is Alberta so Angry?

Alberta is frustrated, and understandably so.

Each year, the federal government delivers equalization payments to provinces whose fiscal capacity (ability to generate revenue from its own sources) falls below the national average. These distributions are intended to help ensure all provinces can offer the same public services without imposing significantly higher taxes. It is important to note that equalization payments come entirely from the federal government’s general revenues, which are funded by taxes collected from all Canadians, not from direct contributions by other provinces (Roy-César, 2025).

How are Equalization Payments Calculated?

Equalization payments in Canada are calculated by assessing each province’s ability to generate revenue from its own sources and comparing that fiscal capacity to the average across all provinces. The formula examines five categories of provincial revenue: personal income taxes, business income taxes, consumption taxes, property taxes, and natural resource revenues. For all categories except natural resources, the calculation estimates how much revenue a province could raise if it applied the same tax rates as other provinces, creating a standardized measure. Due to the diversity and location of natural resources, actual natural resource revenues are used instead of standardized rates (Roy-César, 2024). Each province’s fiscal capacity in these five categories is then compared to the national average. If a province’s capacity is below average, it becomes eligible for an equalization payment to make up the difference; if it is above average, like Alberta, the province receives no payment. 

Alberta’s Position

For another year, Alberta has received $0 in equalization payments, despite facing serious challenges: unstable oil prices, rising unemployment, and looming fiscal deficits. The province is now projecting a $6.6 billion (8.1%) revenue drop for 2025–26, the largest single-year decline in decades (Alberta Budget, 2025). Yet Alberta remains ineligible for equalization payments because, on paper, its per capita revenue-generating capacity still exceeds the national average. 

Many claim that the program encourages recipient provinces to make decisions that maximize their Equalization payments rather than their long-term economic growth (Roy-César, 2025). However, I do not believe that this is the biggest problem. I think that the main problem is that the formula derived in 1957 does not entirely reflect how provinces generate wealth today (Government of Canada). 

Back then, the five major categories of revenue made sense. But today, new forms of public revenue, are massive contributors to provincial economies and yet are not included in the fiscal capacity calculation. That’s a serious blind spot.

Take Quebec, for example. This year Quebec will receive $13.6 billion in equalization (Mohamed, 2025), yet its hydroelectric sector alone generates billions in revenue through exports and domestic supply, none of which is accurately reflected in the formula. Most of the money provinces make from hydroelectricity is not fully counted in the equalization formula. That’s because hydro is usually run by Crown corporations, like Hydro-Québec, which sell electricity at lower-than-market prices, especially within the province. The formula only includes the profits or dividends the government actually receives from these companies, and even then, it's counted as business income, not as natural resource revenue like oil or gas.

This means a province can earn a lot from hydroelectricity, but it won’t show up clearly in the equalization calculation. Due to this inconsistency, provinces like Quebec can keep electricity prices low, report less revenue, and still qualify for big equalization payments. Critics say this is unfair, that oil and gas revenues are counted more directly. This makes provinces like Alberta appear wealthier on paper, even though hydro-provinces, like Quebec, may be bringing in just as much.

If hydroelectric revenues were counted like oil and gas are, many provinces fiscal capacity would likely rise significantly, possibly disqualifying them from receiving equalization payments altogether (Mandryk, 2025).

This is the root of Alberta’s anger: the system recognizes and penalizes Alberta for its natural resource wealth but turns a blind eye to other modern provincial revenue streams.

Conclusion

We are in a moment where Canada’s foundations, economic and social, are being tested. From supply chain disruptions and tariffs to ongoing wars across our oceans. The solution to all of these problems isn’t division, it’s adaptation and unity.

Let’s modernize equalization to reflect the full picture of provincial wealth, not just the old categories of income, but the realities of today’s economy: exposure to trade risks, commodity market shifts, and modern revenue sources. If provinces are generating billions through public utilities like hydro, that should be part of the equation, just like oil and gas.

As Alberta prepares to host the G7 Summit on June 15, the world will be watching. This moment should be about showing how Canada works together, not against itself. It’s a chance for our world leaders to have honest conversations about fairness, economic sustainability, and how we support each other in building a stronger, more united world.

Proudly Canadian,

Carmen D’Orsay