British Columbia Finance Minister Carole Taylor wore a new pair of green shoes Tuesday as she delivered a budget heavy on environmental action -- including a carbon tax.

"We're not just going to be talking about climate change," she said. "We are acting. This could be a social movement in British Columbia."

On July 1, 2008, the province will begin phasing in the carbon tax, which will hit gasoline, diesel, natural gas, coal, propane, and home heating fuel. The starting rate will be based on $10 per tonne of carbon emissions, and rise $5 a year to $30 per tonne by 2012.

• Highlights of the British Columbia budget

For diesel and home heating oil, it works out to about 2.7 cents per litre, rising to 8.2 cents by 2012. Meanwhile, drivers will have to pay an extra 2.4 cents on a litre of gasoline at the pumps, increasing to 7.24 cents per litre.

British Columbians already pay 3.5 cents per litre to help fund transportation projects.

Taylor said the B.C. carbon tax is expected to generate $1.8 billion over the next three years, but that money will be given back to residents in the form of personal income tax cuts and business tax cuts.

The B.C. government has promised to table annual legislation to determine exactly how the revenue will be returned to residents.

She also said every adult will receive a one-time $100 Climate Action Dividend in June, while children will receive $30. The money is supposed to be used to start a greener lifestyle.

Budget won't hurt economy

In presenting her government's budget, Taylor said the document attempts to balance the needs of fighting climate change while continuing to nurture a healthy economy.

"It is a budget that confronts and completely overturns the outdated notion that you have to choose either a healthy environment or a strong economy," she said. "That either-or thinking belongs to the past."

The bottom two personal income tax rates will drop two per cent in 2008 and five per cent in 2009 on the first $70,000 income.

Laura Jones, the Vice-President of the Canadian Federation of Independent Business was watching the speech in Victoria Tuesday morning.

She said that while a tax reduction could result in $4,000 in savings for some businesses, many others that drive or deliver will be hard-hit by the carbon tax.

"If you drive a taxi cab and your gas prices go up, that's your bottom line," she said. "There are better ways to get cleaner and greener, and the carbon tax isn't it."

"At the end of the day, it's a wash," she added. "We were hoping we'd get more than a wash."

B.C.'s Sierra Club disagreed, saying that the new tax was a "bold" measure that would make the province a leader in tackling climate change.

Taylor also targeted homelessness with $104 million over the next four years, and an additional $78 million to allow emergency shelters to stay open 24 hours a day.

The total government revenue was projected at $38.5 billion, and a surplus of $50 million is projected. The surplus for last budget year was $2 billion.

With files from CTV British Columbia and The Canadian Press