New Brunswick consumers may face double carbon charges on July 1

New Brunswick drivers appear likely to face two new carbon-related charges this time next month that could add as much as 12.4 cents per litre to the price of gasoline and 14.2 cents to diesel, factoring in all changes, including the effect of the HST.

In a province that consumes 1.4 billion litres of the two fuels each year, it's a potential cost to consumers in excess of $175 million, less than one-third of which will be subject to rebates.

Final amounts will depend on an upcoming decision of New Brunswick's Energy and Utilities Board, but a double increase on each fuel on July 1 appears inevitable according to the province's new public intervener Alain Chiasson.

"Unfortunately, that sounds about right," said Chiasson.

On gasoline, the two charges include a 3.26-cent-per-litre annual increase in regular carbon taxes applied at the pump. 

Diesel, which contains more carbon than gasoline, is facing a 3.97-cent-per-litre increase.

Those increases, added to existing carbon taxes imposed in earlier years, will all be recoverable by consumers when carbon tax rebates in New Brunswick begin in October.

The second and more controversial July 1 charge, estimated to be as high as 7.5 cents per litre on gasoline, is to be imposed to compensate oil companies for extra costs caused by new federal "clean fuel" regulations.

A similar charge on diesel could be as high as 8.4 cents and unlike carbon taxes, neither of those will be subject to rebates.

There is a dispute between the federal and New Brunswick governments over whether oil companies or consumers should deal with the costs of the clean fuel program, but it's New Brunswick's decision. In December, the province changed legislation clearing the way for consumers to pay.

New Brunswick Natural Resources and Energy Development Minister Mike Holland told the legislature that costs of the clean fuel regulations to "manufacturers and importers" of petroleum products would be "significant."

"These cost will be passed on to wholesalers and retailers, so it will be critical to have these costs reflected in the weekly price calculation," said Holland.

Through its legislation, the province authorized a new "carbon cost adjuster" to be added to regulated fuel prices to  mitigate costs to oil companies of the new clean fuel rules and then left it to the Energy and Utilities Board to decide on an amount.

The board hired the consulting company Grant Thornton to advise it on how to proceed and the company developed a formula that estimated amounts that would have to be charged to consumers to pay for new federal levies facing industry.

A hearing was held by the board at the end of April, and although it has not released a decision yet on what clean fuel charges it will authorize, Chiasson does not see many options.

"The board will make its decision," said Chiasson.

"Maybe they'll come up with some other formula but I doubt they would go against their experts so we're probably looking at a seven- or eight-cent increase plus the carbon tax."

What is the clean fuel standard?

Unlike the carbon tax, which is meant to affect consumer decisions about the use of fossil fuels, the clean fuel standard is aimed at affecting industry practices.

Its goal is to encourage an expansion of the production and distribution of products like ethanol and biodiesel and to force changes inside refineries like the use of renewable energy in the manufacturing process.

Targets have been set to lower the carbon intensity of what refineries produce and how they operate, and financial rewards and penalties are in place if those targets are exceeded or missed.

Critics have complained passing costs of penalties onto consumers will lower incentives for industry to make changes. In a letter to the Energy and Utilities Board last week, federal Environment Minister Steven Guilbeault urged the board not to authorize any increase in prices to consumers for clean fuel costs.

He said companies have a year to take actions that will reduce penalties they might face and claimed the costs of not meeting targets are being exaggerated in any event.

"It is the position of the Government of Canada that the Clean Fuel Regulations will not necessarily lead to significant cost increases to refiners particularly in the short term," he wrote.

"Seeking immediate consumer price increases to account for estimated costs under a worst case scenario projection could lead to a scenario where a company later chooses a lower cost option (and) pockets the increased revenue from consumers."

Guilbeault's letter also made the point that refiners earned record amounts of money in 2022 and could afford to pay for the clean fuel changes, but his intervention may be too little too late.

The letter arrived a month after the board's hearing into the issue had already concluded with no sign that the body is officially taking it into consideration. 

As of Wednesday, it had not been added to the official record of the carbon cost adjustor matter.

Chiasson said all indications are double carbon charges are coming to New Brunswick July 1. The only question is how large the second of the two will be.