The New Brunswick government is facing uncertainty over the distribution of revenue from the “carbon cost adjustor” charge on gasoline prices. According to officials, they are unable to determine who benefits from the additional six-to-seven-cent charge per liter of gasoline, which was implemented in July. Tom McFarlane, the deputy minister of natural resources and energy development, admitted that he is unaware of how the price adjustment is distributed between retailers, wholesalers, and refineries. This revelation sparked skepticism among legislators, such as Progressive Conservative MLA Andrea Anderson-Mason, who questioned whether the charge is truly benefiting small gas stations as claimed by the government.
The introduction of the carbon cost adjustor was a response to federal clean fuel regulations aimed at reducing greenhouse gas emissions in Canada. Under these regulations, oil refineries that decrease their carbon intensity receive credits that can be traded within the market. However, refineries, like Irving Oil, which primarily export to the United States, are not eligible for as many credits.
The concern is that the new rules may squeeze retailers who are regulated by the government in setting consumer gasoline prices. If the cost adjustment is not factored into the price formula, retailers might bear the financial burden. Moreover, the confidential nature of contracts between the Irving refinery, wholesalers, and retailers makes it difficult to track the flow of revenue generated by the carbon cost adjustor. The Energy and Utilities Board (EUB), which is responsible for setting maximum gasoline prices, consulted with industry players, including Irving Oil, to develop the formula for the adjustor.
Despite concerns, the EUB plans to review the adjustor formula after six months. If it is determined that the charge was excessive or unnecessary, there is currently no mechanism in place for customers to be reimbursed.
Sources:
– New Brunswick Legislative Assembly livestream
– CBC (Robert Short)
– Grant Thornton, provided consulting services to the EUB