Absolving our Carbon Sins: the Case of the Pacific Carbon Trust

Last week’s report from BC’s Auditor General dealt a huge blow to the credibility of carbon offsets and claims that BC had achieved a state of “carbon neutral government.” Coverage of the AG’s report was coloured by accusations from the Pacific Carbon Trust, the Crown corporation created to buy and sell BC offsets, and “experts” from the offset industry that the AG did not know what he was talking about. Letters from those vested interests were leaked to the media in a proactive attempt to discredit the AG, quash the report, or at least delay its release until after the election. This led to an actual delay in the release of the report, for a day, and it finally came out after the press gallery went ballistic about a cover-up in the making.

The report itself is a black eye on the idea that we can absolve our carbon sins through offsets, echoing concerns expressed about international offset schemes. And it validates concerns raised over the past two years by CCPA’s Ben Parfitt (for example, here and here), independent MLA Bob Simpson, and investigative pieces done by the Vancouver Sun and The Tyee. Those reports all noted that almost all of projects funded by the PCT would have happened anyway, and that most were already in progress with some even completed by the time they got PCT funds. In the industry jargon, these projects were not “additional” and were only justified by creative accounting frameworks.

The so-called “experts” — all of whom have skin in the game and stand to profit from a continuation of the PCT — claimed that the accounting is terribly complicated that the AG just was not qualified to pass judgment. Seriously, if this is really so complex a smart accountant cannot figure it then we are really in trouble. But really the problem is not accounting but the historical timeline of events. And science: it is worth recalling that the problem we are trying to solve here is climate change, which is largely caused by taking carbon from underground (fossil fuels) and putting it into the atmosphere. So the only true offset is take carbon out of the atmosphere and put it back underground. There have been some pilot projects of this, called carbon sequestration, or carbon capture and storage, but it is still early days for this as a technology.

While a real offset regime would require a high bar, in practice the bar has been significantly lowered in order for deals to be made and a market for offsets created. This has led to accounting fictions that imagine, for example, a hypothetical situation where a forest would have otherwise been clearcut. But it is not, so the value of that carbon is monetized and sold to companies or governments to claim carbon neutrality. This was the case with Darkwoods, a property purchased in 2008 by the Nature Conservancy of Canada, whose offsets made up 55% of the BC government’s carbon neutrality claim for 2010. Other projects have funded energy efficiency or fuel switching, but in these cases  it is hard to prove that these are not “free riders” — companies working the system to their advantage for projects already in the works. At its worst, the PCT has given offset money to oil and gas companies Encana and Spectra, whose business model is delivering the fossil fuels that are causing climate change in the first place.

What many observers have found most egregious about the PCT, however, is that is has amounted to a second carbon tax paid only by the public sector, the proceeds of which only go to the private sector. Money from cash-strapped schools and hospitals that disproportionately benefit the poor has gone to the likes of the Whistler Resort and Spa, and Sun Peaks, who cater to the affluent. Concerns have also been expressed that the PCT has bought its offsets at prices much lower than the $25 per tonne paid by the public sector. Not all the public sector is covered — BC Ferries is exempt as are bus fleets for school boards and public transit — but you get the point.

All of this means the public sector is facing a carbon price of $55 per tonne (including the $30 per tonne carbon tax). But the trick is that there has not been funding to retrofit buildings or convert to renewable energy for a couple years now ($75 million was allocated for such improvements in 2008, but that pool of funding was oversubscribed, and has not been renewed). So one obvious fix would be to use PCT money to fund emission reduction programs in the public sector.

Overall, I would rather see a uniform carbon tax applied to public and private sectors equally, including the 25% of emissions from upstream industrial sources that are not covered by the carbon tax (aluminum, concrete and natural gas leaks/venting). Keep increasing the carbon tax annually, which will improve incentives in the marketplace, and use the carbon tax proceeds to build the low-carbon infrastructure we need, such as public transit and building retrofits, and ensure funds that support forest conservation with carbon management in mind. The PCT experience has taught us a good lesson that effective climate policies should steer clear of offsets and focus on real GHG emission reductions across the economy.