A wide range of new measures to address climate change, promote greener choices, and encourage economic investment will allow British Columbia to meet the challenges of the future, Finance Minister Carole Taylor announced with the release of Balanced Budget 2008.

"This budget marks a turning point," said Taylor. "It overturns the notion that you have to choose either a healthy environment or a strong economy. It will help keep British Columbia vibrant and growing, it takes a big step toward meeting the challenge of climate change, and it strengthens key public services like health care and education."

To help reduce B.C.'s greenhouse gas emissions by one-third by 2020, Balanced Budget 2008 includes a revenue-neutral carbon tax, provides $440 million for a one-time Climate Action Dividend, and over $1 billion for a broad range of climate action programs and tax incentives.

Effective July 1, 2008, subject to approval by the legislature, British Columbia will introduce a fully revenue-neutral carbon tax with built in protection for lower income British Columbians. The tax will begin at a low rate and increase gradually to give individuals and businesses time to adjust. It will apply to virtually all fossil fuels, including gasoline, diesel, natural gas, coal, propane, and home heating fuel - making it among the broadest and most comprehensive in the world.

Legislation will require a plan to be tabled in the legislature each year, showing how the revenue raised will be returned to businesses and individuals. None of the carbon tax revenue will be used for expenditure programs.

"The principle is simple," said Taylor. "Tax carbon-emitting fuels to discourage their use, and give the money back to people, back to businesses, so they have control. They can make their own choices about how the tax affects them. At the same time, by making greener choices more commercially viable, it will stimulate innovation and open up new economic opportunities across British Columbia."

The carbon tax is forecast to generate approximately $1,849 million over three years.

This revenue will be returned to businesses and individuals through a new Climate Action Credit for persons with lower incomes ($395 million) and reductions to personal income tax rates ($784 million), the small business income tax rate ($255 million), and the general corporate income tax rate ($415 million).

In addition to the revenue-neutral tax reductions, every British Columbia resident will receive a one-time, $100 Climate Action Dividend to help people adopt greener lifestyles. At a total cost of $440 million, the dividend payments will be issued in June, before the new carbon tax takes effect. It is the government's hope that British Columbians will apply the funds toward purchases that can help reduce
their greenhouse gas emissions and, by doing so, the amount of carbon tax they would otherwise pay.

The budget also provides, over four years, more than $1 billion to encourage energy efficiency, implement new regulatory requirements, undertake cutting-edge research and make low-carbon investments. These climate action initiatives include: new funding for home energy audits and retrofits; sales tax exemptions for ENERGY STAR appliances; up to $2,000 in reduced sales tax on the purchase of fuel efficient vehicles; a new biodiesel production incentive; an expanded venture capital program aimed at clean technology companies; and funding to reduce emissions at B.C.'s ports and commercial truck stops.

"While the economic forecast sees British Columbia continuing to outperform Canada and the U.S., weakening conditions south of the border and international uncertainty show how important it is to maintain a prudent approach," said Taylor. "It's also a reminder that we must always explore new ways to make B.C.'s economy more competitive, innovative, and diverse."

Balanced Budget 2008 delivers $407 million in targeted tax reductions and $428 million in new investments to improve British Columbia's competitiveness and build on our strengths.

Tax measures include: improvements to B.C.'s Film Tax Credits; lower provincial property tax rates on major industrial properties; replacing the financial institutions capital tax with a minimum tax; improvements stemming from the Provincial Sales Tax Review; and changes to the International Finance Act to expand the types of patents and activities eligible for tax refunds.

"This year, our province celebrates 150 years of growth and progress," said Taylor. "As we look back on the legacies of the past, it reminds us that we all have a choice about how future generations will remember us. I hope we will be remembered as the generation that took action, that showed respect for the environment, who set the foundation for a strong economy, and built a legacy to be proud of."


For the Finance Minister's speech and more about details on Balanced
Budget 2008, visit www.gov.bc.ca/bcbudget online.

4 backgrounders attached.


BACKGROUNDER
Feb. 19, 2008
Ministry of Finance
INVESTING IN B.C.'S ECONOMIC COMPETITIVENESS

Balanced Budget 2008 delivers, over four years, $428 million in new investments and an additional $407 million in tax reductions to enrich our communities, improve British Columbia's competitiveness, and build on our economic strengths.

New tax reductions:
* $112 million to enhance the basic and regional film tax credits to support B.C.'s film industry;
* $220 million to phase out the existing capital tax on financial institutions and replace it with a minimum tax;
* $6 million for changes to the International Financial Activity Act to expand the types of patents and activities eligible for tax refunds;
* $60 million to reduce the school tax rate for major industrial properties to reflect the competitive pressures facing B.C.'s export sector; and
* $9 million for improvements stemming from the PST Review.

New funding:
* $12 million to Geoscience BC for oil and gas exploration and to further develop geoscience data to support mineral exploration in mountain pine beetle-affected regions;
* $30 million to enhance engagement with First Nations when Crown land and resource decisions affect asserted Aboriginal territories;
* $21 million to assist with environmental assessment and resource permitting demand;
* $6 million to staff and manage 125 new parks and protected areas;
* $60 million to support research and innovation through GenomeBC and to upgrade and expand Science World;
* $30 million to endow the Terry Fox Research Centre, to be headquartered in B.C., for translational research to help in the fight against cancer;
* $25 million for the Brain Research Centre at the University of British Columbia to support research and explore new treatments for illnesses and injuries affecting the brain;
* $15 million to the Li Ka Shing Foundation for cancer research and care;
* $10 million to advance musculo-skeletal research in areas such as hip health and osteoporosis;
* $2 million to expand research on preventing and treating childhood cancers;
* $40 million to strengthen and expand economic and cultural links between B.C. and Asia-Pacific nations;
* $7 million to expand the Provincial Nominee Program and attract more skilled workers and entrepreneurs to British Columbia;
* $5 million to enhance the Skills Connect for Immigrants and International Qualifications programs to connect skilled immigrants with employment opportunities;
* $30 million for the Build Canada Fund to help communities with drinking water, sewage treatment and other infrastructure projects;
* $9 million to enter into cost-sharing agreements for planning and procurement of wastewater treatment facilities in the Capital Regional District;
* $10 million for rural municipalities to restore roads damaged by increased logging truck traffic due to the intensified harvesting of trees infested by mountain pine beetle;
* $11 million to maintain inland and coastal ferries service standards;
* $24 million generated from the $150 million endowment for the BC150 Cultural Fund to support new arts and culture activities across the province;
* $9 million to restore and revitalize the Vancouver East Cultural Centre and establish an endowment for ongoing operational expenses;
* $3 million to explore opportunities for an Aboriginal art gallery and a World Women's History Museum; and
* $69 million to support other arts and culture initiatives, which will be announced before the end of the fiscal year.

In addition, $183 million in economic investments are being made as part of the $1 billion in new funding for climate action initiatives:
* $10 million to support innovation in the pulp and paper industry tofurther reduce its carbon footprint;
* $19 million to enhance the carbon storage potential of B.C. forests, develop new seed technologies, and reduce risks of wildfires to communities;
* $25 million to establish the Bioenergy Network to encourage research and investments in such areas as wood-waste co-generation, biofuels from wood, agricultural or waste biomass, and wood pellet production;
* $10 million to introduce a biodiesel production incentive;
* $95 million for climate change research through an endowment to the Pacific Institute for Climate Solutions and the Pacific Climate Impacts Consortium; and
* $24 million to establish the Pacific Carbon Trust to invest in greenhouse gas-reducing projects in B.C.


BACKGROUNDER
Feb. 19, 2008
Ministry of Finance
FISCAL PLAN 2008/09 - 2010/11
Economic Outlook

British Columbia's economy continues to show domestic strength with continued growth in housing starts, retail sales, and employment. Consumer confidence should remain strong, bolstered by healthy income growth and a low unemployment rate. However, deteriorating conditions in the U.S. economy, its housing sector and related effects on B.C.'s forest sector are expected to moderate the Province's economic growth.

Following estimated real gross domestic product growth of 3.0 per cent in 2007, the Ministry of Finance forecasts economic growth at 2.4 per cent in 2008, 2.8 per cent in 2009, and 2.9 per cent in 2010.

Revenue Outlook

Total government revenue is forecast at $39.4 billion in 2007/08, $38.5 billion in 2008/09, $39.9 billion in 2009/10, and $41.5 billion in 2010/11 - an average annual increase of 1.8 per cent over the next three years.

Expense Outlook

Total government expense is forecast at $37.3 billion in 2007/08, $37.7 billion in 2008/09, $39.1 billion in 2009/10, and $40.7 billion in 2010/11 - an average annual increase of 3.0 per cent over the next three years.

Significant Budget Decisions

Significant expenditure and tax reduction measures include:
* $1 billion in operating and capital expenditures over four years to support a comprehensive approach to reducing B.C.'s greenhouse gas emissions;
* An estimated $1.8 billion in personal and business tax reductions over three years to return revenue generated by the carbon tax;
* An additional $2.9 billion for enhancing health care - for a total funding increase of $4.9 billion or 19 per cent over three years. An additional $543 million in capital spending over four years is provided for major health facilities expansions;
* $144 million over three years for K-12 education funding and StrongStart Centres;
* $346 million over four years for new investments in the economy and communities;
* $787 million over four years for strengthening social services, reducing homelessness, and improving justice and public safety; and
* Additional tax reductions of $481 million over three years.

Budget Surplus Outlook

The budget and fiscal plan continues government's legislated commitment to balanced provincial budgets. The updated forecast for the current fiscal year (2007/08) surplus is $2 billion. The three year fiscal plan forecasts modest surpluses of $50 million in 2008/09 and $150 million in both 2009/10 and 2010/11.

Investing in Infrastructure

For infrastructure spending on transit, roads, schools, hospitals, and other capital assets, the budget plan provides for investments of $5.8 billion in 2008/09, $5.5 billion in 2009/10, and $5.4 billion in 2010/11.

The capital plan includes a five per cent contingency for taxpayer-supported projects to cover risks from higher than expected cost inflation and provide for new projects that may be identified and approved during the year.

Debt Remains Affordable

Debt continues to represent a significant source of financing for provincial infrastructure investments. In 2007/08, provincial debt is forecast to total $35.0 billion, $1.8 billion below budget. Over the three-year fiscal plan, total provincial
debt is forecast at $37.7 billion in 2008/09, $40.0 billion in 2009/10, and $42.5 billion in 2010/11, for a total increase of $7.5 billion from the 2007/08 forecast.

The taxpayer-supported debt to GDP ratio - a key measure of debt affordability - is forecast to decline from 14.1 per cent in 2007/08 to 14.0 per cent in 2008/09, 13.9 per cent in 2009/10, and 13.7 per cent in 2010/11. The government is committed to maintaining a downward trend in this ratio on a three-year moving average, consistent with the recommendations of the Economic Forecast Council.

Budget Remains Prudent

To help ensure surplus targets are met, the updated fiscal plan includes forecast allowances of $750 million in 2008/09 and $675 million in both 2009/10 and 2010/11. In addition, the budget includes contingencies of $375 million in 2008/09, $390 million in 2009/10, and $400 million in 2010/11, representing roughly one per cent of total spending. The budget includes a further $400 million in 2010/11 for the next round of compensation contract negotiations.

BACKGROUNDER
Feb. 19, 2008
Ministry of Finance
$1 BILLION FOR CLIMATE ACTION

Balanced Budget 2008 provides an additional $1 billion over four years for operating and capital expenditures and tax incentives to encourage environmentally responsible choices, implement new regulatory requirements, undertake cutting-edge research, and make needed low-carbon investments.

New climate action initiatives include:
* $98 million for the new LiveSmartBC: Efficiency Incentive Program and other initiatives to encourage individuals and communities to make more energy-efficient choices for their homes, businesses and vehicles;
* $370 million for capital and operating expenses to improve and expand public transportation in British Columbia;
* $33 million for transportation initiatives to reduce emissions from commercial truck and ship traffic at B.C.'s ports and in technology to reduce idling at truck-stop and weigh-scale locations;
* $130 million in capital and operating expenses for a carbon-neutral public sector by 2010, including energy-efficiency retrofits for public buildings, establishing the Pacific Carbon Trust, and the use of desktop video-conferencing technology and low-carbon procurement practices;
* $9 million for key commitments from the 2007 throne speech and the Energy Plan such as designing a Green Building Code, creating emissions standards for landfills and new motor vehicles, and developing a "cap and trade" system for large greenhouse gas emitters;
* $57 million for bioenergy and alternative energy solutions such as establishing a Bioenergy Network, introducing a biodiesel production incentive, expanding solar thermal energy systems, and supporting the Innovative Clean Energy Fund;
* $98 million for climate change research through an endowment to the Pacific Institute for Climate Solutions and the Pacific Climate Impacts Consortium, and to undertake a feasibility analysis on carbon capture and storage technology for natural gas production;
* $111 million - including $62 million for contingencies to develop additional climate action solutions - to undertake stakeholder consultations, establish and fund the Citizens' Conservation Council, assist the Climate Action Team, and support public outreach to promote greener choices;
* $31 million to support innovation in the pulp and paper industry to further reduce its carbon footprint and enhance the carbon storage potential of B.C. forests;
* $49 million to improve B.C.'s ability to adapt to climate change implications, including funds to enhance climate data collection systems and funding for flood protection and planning;
* $15 million over three years to increase the equity tax credit budget by $5 million per year and set a tax credit budget of $7.5 million for clean technology businesses;
* Expanding intellectual property to include green-related patents;
* $33 million to provide tax relief for the purchase of conventional fuel-efficient vehicles that meet the fuel efficiency criteria set out in the federal government's ecoAuto rebate program;
* Providing PST exemptions for:
o ENERGY STAR-qualified residential refrigerators, clothes washers and freezers,
o energy-efficient residential gas fired water heaters, insulation for hot water tanks, hot and cold water pipes, and ductwork,
o production machinery and equipment for local governments for power production and cogeneration,
o biodiesel fuel or portion of biodiesel fuel for heating, and
o aerodynamic devices for commercial tractor-trailer vehicles;
* Providing relief from passenger vehicle rental tax for rentals of eight hours or less;
* Expanding the PST exemption on bicycles to include electric-assisted two and three wheel cycles and non-motorized adult tricycles;
* Reducing the tax payable on electric motorcycles;
* Reducing PST payable on hydrogen fuel cell buses to match the tax reduction available for other alternative fuel buses;
* Repealing PST exemption on purchases of coal and coke, except for residential use; and
* Classifying biodiesel and ethanol as alternative motor fuels for all purposes.

BACKGROUNDER
Feb. 19, 2008
Ministry of Finance
B.C.'S REVENUE-NEUTRAL CARBON TAX

On July 1, 2008, subject to approval by the legislature, British Columbia will begin to phase in a fully revenue-neutral carbon tax with built-in protection for lower income British Columbians.

The purpose of the carbon tax is to encourage individuals and businesses to make more environmentally responsible choices, reducing their use of fossil fuels and related emissions. The tax has the advantage of providing an incentive without favouring one way to reduce emissions over another. Business and individuals can choose to avoid it by reducing usage, increasing efficiency, changing fuels, adopting new technology or any combination of these approaches.

A higher price for higher-carbon choices also makes greener options more commercially viable, thereby encouraging businesses and entrepreneurs to develop innovative solutions that offer consumers and business affordable, lower or no-carbon emission alternatives.

British Columbia's carbon tax is based on the following principles:

Broad-based: The carbon tax will apply to virtually all fossil fuels
including gasoline, diesel, natural gas, coal, propane, and home heating fuel, making it among the broadest and most comprehensive in the world.

Phased in: The carbon tax will be phased in to give individuals, businesses, and industry time to adapt, innovate, and reduce the impact of the tax. The carbon tax starts at a rate based on $10 per tonne of associated carbon, or carbon-equivalent, emissions and will rise by $5 a year for the next four years - reaching $30 per tonne by 2012. This works out to 2.41 cents per litre for gasoline, rising gradually to 7.24
cents a litre by 2012. For diesel and home heating oil, it works out to 2.76 cents per litre, rising to 8.27 cents over the same five-year period.

Protection for lower-income households: To help offset the cost of the carbon tax, lower-income British Columbians will receive an annual Climate Action Credit of $100 per adult and $30 per child; the credit will be paid quarterly along with the federal Goods and Services Tax Credit.

Revenue-neutral: The carbon tax will be revenue neutral. Legislation will require a plan to be tabled in the legislature each year, showing how the revenue raised will be returned to taxpayers. All revenue generated by the carbon tax will be returned to individuals and businesses through reductions to other taxes. None of the carbon tax revenue will be used for expenditure programs.

Balanced Budget 2008 sets specific tax reductions for 2008 and 2009, with future rate cuts to be confirmed as the revenue-neutral plan is updated through the annual budget process. The carbon tax is forecast to generate an estimated $1,849 million over three years. This revenue will be returned through the following tax reductions:

* The bottom two personal income tax rates will be reduced for all British Columbians resulting in a tax cut of 2 per cent in 2008 and 5 per cent in 2009 on the first $70,000 in earnings - with further reductions expected in 2010 ($784 million over three years);
* Effective July 1, 2008, the general corporate income tax rate will be reduced to 11 per cent from 12 per cent - with further reductions planned to 10 per cent by 2011 ($415 million over three years);
* Effective July 1, 2008, the small business tax rate will be reduced to 3.5 per cent from 4.5 per cent - with further reductions planned to 2.5 per cent by 2011 ($255 million over three years); and
* Beginning July 1, 2008, the new Climate Action Credit will provide lower-income British Columbians a payment of $100 per adult and $30 per child per year - increasing by 5 per cent in 2009 and possibly more in future years ($395 million over three years).

Integrated Approach: The carbon tax is one of several key building blocks to help government reduce B.C.'s greenhouse gas emissions by 33 per cent below 2007 levels by 2020. The carbon tax and complementary measures such as the cap and trade system will be integrated to avoid unfairness or double taxation.

B.C.'S CLIMATE ACTION DIVIDEND

Separate from and in addition to the tax reductions made possible by the revenue-neutral carbon tax, every British Columbia resident will receive a one-time, $100 Climate Action Dividend to encourage the transition to a greener lifestyle.

It is the government's hope that British Columbians will apply the funds toward purchases that can help reduce their greenhouse gas emissions and, by doing so, also reduce the amount of carbon tax they would otherwise pay.