North America's first carbon tax rolls out under fire

VANCOUVER, British Columbia Fri Jun 27, 2008 5:32pm EDT

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VANCOUVER, British Columbia (Reuters) - Civic leader Scott Nelson says he is as worried as anyone about global warming, but that does not make him happy to be one of the first North Americans to pay a carbon tax to curb climate change.

Nelson, the mayor of Williams Lake, British Columbia, says record high energy prices mean that the levy, for all its good intentions, could not come at a worse time for residents in his community, a small lumber and ranching town about 525 km (340 miles) north of Vancouver.

"The last thing they need now is a tax on top of these soaring prices to add insult to injury," said Nelson, predicting that a taxpayer revolt will eventually scuttle the new tax, which takes effect on July 1.

Carbon taxes already exist in Europe. But the tax on fossil fuels will make the Pacific province of British Columbia the first North American jurisdiction to bring in a broad-based levy designed to cut emissions of the greenhouse gases that are blamed for global warming.

Quebec has a limited carbon tax that applies to energy firms.

The British Columbia government unveiled the tax in February, calling it a key element in a pledge to cut greenhouse gas emissions by 33 percent by 2020.

The tax applies to nearly all fossil fuels, including gasoline and home heating fuel, starting at C$10 per tonne of carbon emissions in 2008 and increasing by C$5 a tonne annually for the next four years.

For drivers, that will mean an additional 2.41 Canadian cents on a liter of gasoline (about 9.13 cents per U.S. gallon), starting Tuesday. The current gas price in Vancouver, British Columbia's biggest city, is around C$1.40 a liter.

The government says the tax is designed to reduce carbon use, and not generate new revenue. It is cutting other taxes to offset the carbon tax take, and mailing a one-time C$100 rebate out to each British Columbia resident this week.

But critics say it is nothing more than a new gasoline tax that unfairly targets the poor and rural residents who have no choice but to travel long distances in a province that is the size of Germany and France combined.

The opposition left-leaning New Democratic Party has launched an "axe the tax" campaign. The party says it would aim carbon taxes only at businesses and major industrial emitters not at individual consumers.

ENVIRONMENTALIST SAY STAY THE COURSE

Environmentalists, who have scrambled in recent days to defend the tax amid mounting criticism, acknowledge it is coming at a difficult time, but they want the province to stick with its plan as an example for others.

"I think reversing it would be a huge setback for effective government action on this issue, certainly in Canada and perhaps in all of North America," said Matthew Bramley of the Pembina Institute, an environmental research group.

Canada's federal Liberal Party is seeking a national carbon tax, but the plan has been panned by Prime Minister Stephen Harper, whose Conservative government has launched attack ads against it. Environmental issues and the Liberals carbon tax plan are expected to be key issues in the next federal election.

Supporters of British Columbia's plan deny that the new tax will hurt the economy or unfairly target the poor. They say not dealing with the issue will cost the province far more in the long run as it grapples with the impact of climate change.

"I'm just amazed at how much misinformation that is being spread right now," said Mark Jaccard, who has been advising the province on its climate change policies.

The provincial government estimates the tax will reduce carbon emissions by about 3 million tonnes a year, or the equivalent of the emissions from about 787,000 cars, as people reduce their use of carbon to save money.

But Nelson says rising energy prices are already doing what the taxes is intended to do by forcing people to cut energy use, and the carbon levy was an idea ahead of its time.

(Reporting Allan Dowd; editing by Rob Wilson)

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