TOMS LAKE – B.C. Premier Gordon Campbell was forced to defend his government's carbon tax on the campaign trail Thursday after a national government advisory panel issued a report saying the tax isn't the way to go.

The National Round Table on the Environment and the Economy concluded in a lengthy report that hard caps on emissions and a scheme to trade them is a better alternative to a carbon tax.

The report noted that the carbon tax proposed by the federal Liberals in the last election was soundly defeated by voters.

But Campbell said his government is trying to do more than the report suggests needs to be done and a cap-and-trade approach simply won't accomplish that goal.

"What the report says is cap and trade is necessary and if you read the report, they're calling for a 20-per-cent reduction in green house gases by 2020," Campbell said while campaigning in the province's gas-rich northeast.

"We said in British Columbia it's going to be 33 per cent. We all support that. That's going to require not just a cap and trade, but a carbon tax."

As part of its green strategy, British Columbia introduced an escalating carbon tax last July adding 2.4 cents a litre on the price of fossil fuels, including gasoline. The tax will increase to about eight cents by 2012.

The province's green strategy also commits it to participating in a cap-and-trade scheme that has been endorsed by Quebec, Manitoba and Ontario and seven U.S. states.

NDP Leader Carole James pounced on the federal report's nod in her party's direction.

James is campaigning on a promise to eliminate the carbon tax and replace it with participation in a cap-and-trade system – a position that has drawn the ire of many traditional NDP supporters in the environmental movement.

"They (the report's authors) ruled out a carbon tax because they said it was important to have consistency and a level playing field across this country and the way to do that is through cap-and-trade because that's the way people are heading," James said before a town hall meeting in Kamloops.

Later in the report, however, the authors offers praise to the B.C. approach, noting the province's carbon tax establishes certainty because the increases are legislated, but also offers flexibility because the rates can be adjusted after four years.

This is a key feature for effective, long-term climate policy that doesn't hinder investment, the report says.

Campbell wore steel-toed work boots, coveralls and a hard hat to tour a natural gas drilling rig during a campaign stop in Toms Lake, in the heart of oil and gas country.

A spokesman for EnCana, a major industry player in the area, estimated the company will pay up to $5 million in carbon taxes to the government – a levy he says the company can live with if everybody pays their share.

But James said the controversial tax is taking money out of the pockets of regular British Columbians. She said it adds up to $300 in fuel costs per year for the average family.

Dirk Meissner and Greg Joyce report for The Canadian Press.