UPDATE 1-Canadian province plans comprehensive carbon tax

(Adds details, reaction)

By Allan Dowd

VICTORIA, British Columbia, Feb 19 (Reuters) - Canada's westernmost province said on Tuesday it plans to impose a comprehensive carbon tax, dismissing fears voiced by the federal government as well as some business and labor leaders that the fees to fight climate change will hurt the economy.

British Columbia said the tax on fossil fuels used by businesses and individuals will raise C$1.85 billion ($1.82 billion) over the next three years, but officials were quick to describe the plan as "revenue neutral" because it will be offset by tax cuts and a one-time C$100 payment to each provincial resident this year.

Last year, Quebec became the first Canadian province to enact a limited carbon tax, but British Columbia said its plan will be among the world's most comprehensive, and was needed to meet the B.C. Liberal government's promise to cut emissions of greenhouse gases linked to global warming by 33 percent by 2020.

The province's plan also delivered a slap to the federal Conservative government, which is cool to the idea of a nationwide carbon tax and complained it does not want the provinces going it alone.

"It is our decision as a province that we must start now to take action on climate change and we can't wait until we get a consensus," Finance Minister Carole Taylor told reporters, saying it could be "a turning point" for Canada.

The tax, which will be implemented this year if passed by the legislature, was introduced as part of the government's C$37.7 billion budget for the 2008-2009 fiscal year.

Environmentalists say carbon taxes provide an economic incentive to reduce pollution, because people and companies can save money as their emissions drop.