British Columbia's "world-leading" carbon tax is being reviewed because the rest of North America hasn't followed through on pledges to keep up, the province's finance minister says.
"We think now is the time to say no further increases after the scheduled increase that takes place July 1 and let's have an opportunity to have a look at the carbon tax, both the good and some of the criticism we've received," said Kevin Falcon.
He brushed aside suggestions that he was telegraphing the demise of the controversial tax by saying he "wouldn't make that leap."
"It is still, I think, an important public policy position we took."
Environmentalists said the move to review the carbon tax is a step backwards for the province.
David Suzuki Foundation spokesman Ian Bruce said the province's Liberal government is losing an opportunity to use the environment to drive economic changes and innovations.
"This is a new government and when it comes to the environment they haven't set out a direction nor have they outlayed a vision for British Columbians about the importance of environmental innovations and addressing problems like climate change," he said.
Sierra Club spokesman George Heyman said it appears the B.C. government is no longer prepared to take a long-term approach to fighting climate change.
"At a time when scientists are saying we need to take immediate measures to curtail global warming, it's disappointing to see this government pull back on its commitment on the carbon tax."
The carbon tax, implemented July 1, 2008, was a key plank in an ambitious plan unveiled by former premier Gordon Campbell to reduce greenhouse gas emissions by one-third by 2020.
It was greeted with praise by environmentalists and outrage from people angry that it would mean a steady climb in the price of gas. But Campbell's Liberals managed to win the 2009 election with the carbon tax as a key point of discussion. The Opposition NDP opposed the tax.
Since then, everything has changed, Falcon noted.
The world economy tanked in the months after the first phase of the tax was implemented and suggestions by U.S. President Barack Obama and other provincial premiers that they would follow suit in one way or another simply didn't come to pass.
"We had always anticipated that others would follow us down that path," Falcon said.
"It didn't happen."
The last scheduled increase for the tax is to take place July 1. It will increase to $30 per tonne, amounting to 6.67 cents per litre, up from the current tax of 5.56 cents.
When the tax was introduced, the Liberals promised it would be revenue neutral, meaning the money that it generated would be returned to businesses and consumers.
Budget documents released Tuesday show the province actually gave back more of the tax than it took in. For 2011-2012, the carbon tax generated $960 million, but $1,152 million was returned in personal and business tax measures, an overpayment of $192 million.*
For the coming year, tax cuts will exceed revenue generated by the tax by $103 million.
The budget pledges to eliminate that gap by next year and going forward. The money that won't be returned will instead be plowed into other tax credit programs announced in the budget, such as a renovation grant for seniors and a credit for children's arts and sports programs.
Falcon said the review of the carbon tax will take place over the next year and will look at all aspects of it. The results of the review will be announced in the next budget.
Of particular concern, he said, is the tax's impact on the agricultural sector, including the greenhouse business.
Falcon said that industry will suffer further when the provincial sales tax replaces the Harmonized Sales Tax. The HST had allowed those businesses to get a significant rebate.
"The industry is, in many cases, export-driven," Falcon said in his budget speech. "It sells to international markets where competitors with similar or lower cost structures enjoy greater economies of scale and create downward pressures on prices.
"In that highly competitive environment, the carbon tax is a concern."
*Story updated at 11:30 a.m. on Feb 25, 2012.