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Beginning July 1, British Columbia will begin phrasing in a carbon tax on all fossil fuels. ((CBC) )

The high price of gasoline is about to get higher in B.C. once the provincial government's carbon tax is fully implemented.

Starting July 1, the price of gas will increase 2.4 cents a litre, and by 2012 it will be 7.25 cents more. And heating your home will also cost more with an extra 2.8 cents tax on both natural gas and furnace oil.

Finance Minister Carole Taylor officially introduced the Carbon Tax Act in the legislature on Monday, saying the tax will encourage families and businesses to lower their carbon footprint by using less fossil fuel.

The new tax is a hit with environmentalists and academics who filled the spectators gallery at the legislature to show their support.

Groups such as the Sierra Club and the David Suzuki Foundation have said taxing fossil fuels makes British Columbia a leader in the fight against climate change.

But the New Democrat Opposition says the carbon tax is unfair for northerners who will pay more for home heating oil, and unfair for rural residents who don't have public transit and have no choice but to drive.

NDP environment critic Shane Simpson says he can understand why environmentalists would support the tax.

"If I was sitting working for an environmental group, and I'd got the most anti-green premier in B.C. who all of a sudden had flipped overnight, I'd feel pretty good about that, too," said Simpson.

But while the New Democrats try to characterize the Liberals as anti-green, it is the now the NDP that has a track record of opposing the government's green initiatives.

The NDP has also voted against the bio-fuels bill that will mandate ethanol be added to all gasoline in B.C., and the cap-and-trade legislation that will require industries to control the amount of greenhouse gases they produce.

The finance minister finds the Opposition's stand perplexing.

"To say I'm astounded at the NDP position on our environmental initiatives would be an understatement," said Taylor.

Carbon tax will cut income tax

Taylor unveiled plans for the carbon tax in her budget speech on Feb. 20.

As part of the plan, carbon-based fuels — including gasoline, diesel, natural gas, propane, coal and home heating fuel — will be taxed at $10 per tonne of greenhouse gases generated, starting July 1, 2008.

The carbon tax rate will rise by $5 a year for the next four years, until it hits $30 per tonne of greenhouse gas generated in 2012, said Taylor.

The tax will earn the government an estimated $1.85 billion over three years, but Taylor said the government will give all of the money back to taxpayers in the form of tax breaks.

Income tax rates for the first $70,000 earned will be cut by five per cent in 2009 and the corporate tax rate will be cut one per cent to 11 per cent in 2009.

Taylor also said that in June, the government will issue a $100 rebate to every adult and child in the province to offset the cost of the carbon tax.

With files from the Canadian Press