B.C. Liberals are questioning a key tenet of North America’s only carbon tax, enacted into law by former premier Gordon Campbell.

With the first budget of Mr. Campbell’s successor – Premier Christy Clark – the Liberals are committing to a “comprehensive” review of using carbon-tax revenues to pay for tax breaks.

Mr. Campbell vigorously sold the tax as revenue-neutral when it was enacted in 2008 and during the 2009 provincial election campaign in which the B.C. Liberals won a third term. The environmental movement rallied around the Liberals because of their commitment to the tax while the New Democrats were intent on killing it because of its impact on fuel prices. The Liberals have since been averse to calls to direct carbon-tax revenues into such areas as transit.

Also, the Liberals are not announcing a new schedule of increases in the tax beyond the one that ends in 2012.

But Mr. Falcon rejected a reporter’s suggestion on Tuesday that he is laying the groundwork for the demise of the tax.

“I wouldn’t make that leap,” he said at a news conference during the budget lockup.

Instead, he said the government has been proud to lead in addressing climate change through the tax.

“The issue is: four years on is the right time to review where we are at,” he said.

The minister added that he is especially interested in whether the tax is affecting economic competitiveness, especially in the agricultural sector, which faces competition abroad from rivals unburdened by such a tax.

Mr. Falcon said B.C. always expected other provinces and jurisdictions to adopt carbon taxes, leading to an “equalizing effect.”

But he said that has not happened, and B.C. is isolated.

The review will be done over the next year with public submissions welcome, leading to a decision in 2013 on how to proceed.

Budget documents noted that in 2011/12, the government is providing more money in tax breaks than it takes in through carbon-tax revenue, Finance Ministry officials said on background, because is it not possible to design a tax system that returns exactly the same amount of money to taxpayers. The carbon tax generates $960-million in revenues against $1.1-billion in tax breaks.

Environmentalists said the future appears gloomy for the tax they have long saluted.

“I’d say it’s on life support right now, and in trouble,” said Ben West, communities campaigner for the Wilderness Committee. “I’d say there are going to be some pretty serious changes in the way the carbon tax works, would be my guess.”

He said it was disappointing that no new schedule of increases was announced with the budget.

“This was really the moment where the government had to make a decision about whether we were going to see the value per tonne continue to increase or not,” he said.

And yet he acknowledged that such a hike appeared unlikely because Ms. Clark had tweeted earlier that her first budget would have no tax increases.

But he noted that the carbon tax could be consistent with the ideology of the B.C. Liberals, who have long championed tax cuts.

“The carbon tax is supposed to be how a fiscally conservative government addresses an issue like climate change,” he said. “Instead of doing it by regulating and being tough on industry, you simply put a signal out there in the marketplace and it’s supposed to generate outcomes.

“But the signal has to get to the point where it’s actually motivating change. At the moment, it’s too low to get us there. The plan was always that this would increase.”

George Heyman, executive director of the Sierra Club BC, called Mr. Falcon’s remarks a clear signal.

“There’s no way to read the minister’s hints except that they’re definitely looking for a way to get out of the carbon tax,” he said.

“This is a government that, at one point, showed leadership on pricing carbon. What they’re saying now is: ‘We expected everyone to follow us and they didn’t so we’re going to back out of it.’”