A Canadian province brags about becoming North America’s first carbon neutral government in 2010. But its own Auditor General says this “is not accurate.”

British Columbia (BC) is a beautiful place – as anyone who has visited Vancouver or Whistler will attest. Unfortunately, it sometimes suffers from an exaggerated view of its own importance.

With a population of only 4.5 million (one seventh of Canada’s total, and one eighth the size of California), this province thinks that demonstrating global climate leadership should be one of its top priorities.

Presumably, the rest of the world has nothing better to do than monitor what’s happening in that particular part of our nation. Presumably, jurisdictions around the globe will be so inspired by BC’s actions they will copy them – and the climate change demon will be slain.

Hey, it’s a free country. If BC voters think their health care and educational systems are so marvelous that there’s lots of extra money for climate measures, that’s their business. But those voters have a right to expect truth in advertising. And an Auditor General’s report released last week says they aren’t getting it.

Titled An Audit of Carbon Neutral Government, the report examines the manner in which BC supposedly became “the first carbon neutral government in North America” back in 2010 (see p. 8). The short version is that while the government still insists this goal was met, its own Auditor General says that claim “is not accurate” (pp. 1 and 3).

$18.2 million was skimmed from the budgets of public entities that year. Since schools and hospitals can’t stop emitting CO2 without shutting themselves down, they’re now required to pay a financial penalty according to the size of their carbon footprint ($25 per tonne). The money is forwarded to a government body called the Pacific Carbon Trust.

The Trust is supposed to use this money to purchase carbon offsets. The idea is that other entities must be found to shoulder the emissions reduction burden and that they deserve to be financially compensated for performing this service to society.

But here’s the pivotal issue: carbon offset funds are supposed to be the tipping point, the incentive that encourages entities to behave in a manner that makes no economic sense otherwise. (Yes, you read that correctly. The BC government is now in the business of encouraging people to behave in an economically insane manner.)

If carbon offset funds are given to people who would have done exactly the same thing anyway (business as usual) they aren’t accomplishing their purpose. Because no new reduction in emissions has actually occurred, the money has been wasted – it has merely been siphoned from a hospital’s budget and handed over to a third party with absolutely nothing to show for it.

The Auditor General says this is exactly what happened in the case of 70% of the carbon offsets purchased by the Trust for the year 2010. Those funds went to two projects that were well underway before the offset money became available.

The offset funding was therefore neither an incentive nor a tipping point. It was merely gravy after the fact. In the words of the Auditor General:

The credibility of carbon offsets is the crux of the entire concept. [p. 3]

The credibility of offsets is imperative if the expected environmental benefits are to be realized. [p. 31]

Pacific Carbon Trust has not purchased credible offsets. [pp. 5, 6, 16, 19]

The report says the Trust paid well above market rates when it purchased the 2010 offsets – and that it agreed to conditions that, in the view of the Auditor General, “raises questions” about the Trust’s “ability to be objective” (pp. 6 and 30).

Instead of setting out clear rules, the report says the Trust developed “draft” guidance documents that no one is actually required to follow (p. 26).

Self-dealing and conflict-of-interest are also of immense concern. In the ordinary marketplace, buyer and seller counterbalance one another. Sellers want to receive a high price, buyers want to pay a low price. They meet somewhere in the middle, agreeing to a figure each can live with.

The carbon offset system, on the other hand, practically invites fraud. As the Auditor General explains, “both the buyer and seller benefit from maximizing the number of offsets a project generates” (p. 26).

If a seller exaggerates the total number of offsets associated with his project, the size of the cheque he cashes is bigger – there’s nothing complicated about it.

For its part, the Pacific Carbon Trust has no incentive to question any exaggeration because its sole purpose is meeting its own targets. It needs to buy large numbers of carbon offsets every single year.

By accepting inflated estimates, the Trust doesn’t have to participate in as many transactions. Paperwork is reduced and the bureaucrats get to leave work on time. What’s not to like?

Oh, and just to make this murky, nebulous business even more scandal-prone, there’s another twist.

The Auditor General points out that the Trust – which it says has already demonstrated a lack of “skepticism and common sense” – is currently acting both as “a regulator and a buyer in the [carbon offset] market place” (p. 27).

What could possibly go wrong?


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