B.C. Minister of Environment Terry Lake agrees that industrial emissions should not be exempt from carbon pricing. It's just a matter of which carbon pricing scheme we use to capture them -- either the carbon tax, or a California-led regional cap and trade system that B.C. is still considering joining. "There are ways to capture those fugitive emissions and I quite agree that we should," he told the Tyee. "If we didn't want to go with cap and trade, we certainly could expand the carbon tax to capture those non-combustible emissions as well."

"Devil in the details"

Marc Lee, an economist with the Canadian Centre For Policy Alternatives, gives Gordon Campbell credit for bringing in "a policy industry did not want." But while other pundits laud B.C.'s carbon tax shift, Lee is underwhelmed. He doesn't buy Elgie's "early days" optimism.

"At $25 a tonne, the carbon tax is too small to have (created) any change in behaviour, even now that we're in the fourth year," Lee says. In his view, the tax must continue to rise each year, hitting $200/tonne by 2020, to really make a dent in our greenhouse gas emissions. But the tone of Lee's voice displays his pessimism about that actually happening. "We're languishing," he says. A November report from a B.C. government finance committee recommends the carbon tax be capped next year when it hits $30/tonne.

And while British Columbia has launched a climate action plan, we continue to subsidize the dirtiest sectors of our economy most responsible for greenhouse gas emissions. We're spending billions through our Gateway Program to expand freeways between suburban Langley and East Vancouver, and building power-grid connections to carbon-spewing resource companies for free. "We have to recognize this contradiction between what the left and right hands are doing," Lee says.

Lee also cautions against overstating the benefits of B.C.'s carbon tax. Any tax that makes fossil fuels more expensive is technically a carbon tax, sending a price signal to consumers and business to use less. He cites Ontario's application of the HST to gasoline and diesel as an example. Raising the tax in July 2010 from five per cent (under GST) to 13 per cent (with HST) created a higher tax on the carbon in a litre of motor fuel than our own B.C. carbon tax.

And in a report published in February, Lee points out that B.C.'s carbon tax is not "revenue neutral" as widely reported, but in fact "revenue negative." In other words, the B.C. government has given back $200 million more in tax cuts than it has actually collected from the tax.

Those tax cuts were based on the government's inaccurate projections of how much money the carbon tax would bring in. In addition to creating a gaping hole in public finances, the way the cuts were structured to favour business means that an ever-growing share of this foregone revenue will go to big corporations, at the expense of personal income taxes and support for the poor.

Lee challenges the idea that carbon tax revenue should be recycled to taxpayers at all. "Big chunks" need to flow to green investments as well as vulnerable British Columbians, he says.

"People may not like taxes, but when they do pay taxes, they expect them to pay for stuff like schools and hospitals," says Lee. "If we're going to have a carbon tax, it would make sense to be spending it on things like transit improvements, energy efficiency upgrades and green jobs."

Industry is feeling lonely

Jock Finlayson, a policy director at the Business Council of BC -- representing 250 of B.C.'s biggest companies -- insists he's not against carbon taxes in principle. "The biggest issue we have with the carbon tax isn't the design, it's the fact that we're the only jurisdiction in North America implementing it."

The scheme was implemented at a time when it was assumed many others would follow suit with carbon pricing, says Finlayson. But then came the crash of 2008, the rightward shift of federal Conservative leadership and, in the U.S., the Tea Partiers, surging gasoline prices and ongoing fears of economic collapse. The tax should not keep going up if B.C. continues to go it alone, he says.

The biggest problem moving forward, says Finlayson, is that for certain industries, like cement manufacturing, no "cost-effective" low carbon alternative products or technologies exist. Citing the tax as a disadvantage, cement industry reps claimed in March that Asian imports into B.C. were up about 15 per cent from 2008.

Stewart Elgie says the carbon tax must continue to go up to have the required environmental effect, but concedes that the most carbon-intensive industries need to be protected from "adverse economic effects." In the Swedish experience, for example, most industry pays less than the rest of society.

Others, like Jaccard, suggest the carbon price could continue to rise, but the amount of increase might be contingent on whether others join us in pricing carbon. For example, in setting its emission goals, the European Union devised not one, but two separate targets: A 20 per cent reduction by 2020 if they continued to go it alone, and a 30 per cent reduction if countries like China and the U.S. also got serious about emissions.

Marc Lee calls it absurd to give additional handouts to dirty industries that are already making huge profits by offloading the cost of their carbon pollution onto society.

"If we were to be aggressive in carbon pricing, it would dramatically undermine the competitiveness of industries like oil and gas, but that's the whole point," Lee says. "Weaning ourselves off dirty industries into clean industries... is going to create a lot more jobs than we are going to lose in oil and gas or mining."

Back to politics

The future shape of B.C.'s carbon tax may hang on how Gordon Campbell's successors interpret the concept of "revenue neutrality." Both the NDP and Christy Clark's BC Liberals are eyeing the huge amounts of money the carbon tax generates -- $848 million in the two fiscal years from mid-2008 to mid-2010. Both have suggested that revenue could do more than just cut taxes.

Therein lies political opportunity -- and hazard. About half of all carbon taxes in the world today fund carbon mitigation programs and government budgets. But to start spending B.C.'s carbon revenue -- even on "green" objectives -- after selling the tax to British Columbians as revenue neutral, only reinforces the kind of scepticism toward campaign promises that makes it so risky for politicians to impose decisive climate policy in the first place. The voting public, even those who want to do the right thing about climate change, already have enough reason not to trust politicians to keep their word.

Take Australia, where Prime Minister Julia Gillard first promised the public there would be no carbon tax. Yet, as these words are being written, Gillard has successfully created just that.

In Australia, as in B.C., the political dilemma is acute. If vote seekers are tempted to appease tax-fatigued cynics by stepping away from a carbon tax with bite, the latest scientific findings starkly reveal the cost of doing nothing. Just Monday, the United Nations weather agency announced that global concentration of C02 had exceeded most forecasts, hitting record levels.

Next Monday: B.C. has helped promote a "cap and trade" approach to reducing emissions -- but is the commitment still there?