06/30/2012 04:00 EDT | Updated 08/29/2012 05:12 EDT

B.C.'s pollution-fighting carbon tax to increase 1 cent on Canada Day

VICTORIA - British Columbia's pollution-fighting carbon tax is set to rise another penny on Canada Day, adding almost seven cents to the cost of a litre of most fuels.

However the tax appears to be running out of gas with the B.C. Liberal government, and the groundbreaking climate change initiative may be in for a tune up.

The provincial government announced a review of the carbon tax earlier this year and has since signalled its goal of creating jobs in the natural gas sector includes relaxed environmental standards.

Many British Columbians say they support environmental initiatives, but grumble about paying the carbon tax, wondering where their money actually goes.

Environmental groups fear the province is losing its leadership position on climate issues and has virtually given up on reaching its legislated target of cutting greenhouse gas emissions by one third by 2020.

"More isn't always best," said Victoria resident Dennis Briggs, while filling up his truck. "They need to actually rethink how to go about business."

Briggs said he's environmentally conscious, but doesn't think about the carbon tax — which is supposed to help convince people to change their vehicle-use habits — when he's filling his tank.

"I think the idea's right," he said. "I don't think the process is proper. If we could clearly see those dollars being returned to green projects and road infrastructure, sure, I would support it. But that aside, if I can't see it, I don't understand it."

Finance Minister Kevin Falcon announced in last February's budget the government will undertake a comprehensive review of the carbon tax to assess its impact on the province.

He said the review will focus on the ongoing revenue neutrality design of the tax, which returns the tax's revenue earnings to taxpayers and business. The review will also consider how the carbon tax impacts the competitiveness of B.C. business, said Falcon.

Finance Ministry budget estimates forecast the carbon tax will generate $1.17 billion in revenue this year.

The carbon tax increases to 6.67 cents per litre from 5.56 cents per litre on July 1.

Environment Minister Terry Lake said despite the planned review the carbon tax is not on the chopping block.

"There are no plans to get rid of the carbon tax," he said. "Premier Christy Clark has made it very clear we want to be a leader on climate action policies. But when you are a leader you expect others to follow."

"When other jurisdictions aren't following, you get into a problem of competitiveness," said Lake.

The tax was hailed as world-leading when it was introduced in 2008, but jurisdictions didn't follow as the then-Gordon Campbell government expected.

B.C. food producers have said the carbon tax hurts their bottom line. The Business Council of B.C. has described the carbon tax as unfair because B.C.-based businesses pay the tax, but their competitors from outside of the province do not.

Lake said the revenue neutral aspect of the carbon tax provides competitive advantages for British Columbians because it lowers taxes for business and taxpayers.

He said the carbon tax and other B.C. environmental initiatives have led to behaviour changes that favour the environment.

"We're seeing leadership in terms of moving to hybrid vehicles and moving now to electric vehicles," he said.

Environmental groups have said previously the carbon tax needs to hit $200 a tonne or about 44.5 cents per litre by 2020 for the province to meet its target of cutting greenhouse gas emissions by one third. It now amounts to $30 per tonne.

Ian Bruce, a spokesman with the David Suzuki Foundation, expressed disappointment with the Liberal government's recent decision to use natural gas as a power source for at least one of three proposed liquefied natural gas plants in northwest B.C.

The Liberals say exporting B.C. natural gas to Asia is a generational opportunity that could create thousands of jobs, but environmentalists say burning natural gas increases harmful greenhouse gas emissions.

"It will take British Columbia away from its leadership on climate change and will increase global warming emissions," Bruce said.

Opposition NDP environment critic Rob Fleming said residents would have more confidence in the carbon tax if they knew it was going to support investments in green infrastructure.

"In most communities in British Columbia that would likely be an expansion of public transit services," he said. "Right now, as the Liberals have configured the carbon tax, the money mostly goes towards tax cuts, primarily for large corporations, many of whom are the biggest polluters in the province."