In a report issued last month the Auditor General of the province of British Columbia slammed the government for claiming carbon credits for projects that would have happened without funding from the provincial carbon fund. The audit examined two projects which accounted for nearly 70 percent of the offsets purchased by government to achieve their claim of carbon neutrality: the Darkwoods Forest Carbon project in southeastern B.C. and the Encana Underbalanced Drilling project near Fort Nelson.

Encana’s project was projected to be more financially beneficial to the company than its previous practices, regardless of offset revenue, while the Darkwoods property was acquired without offsets being a critical factor in the decision. In a press release the auditor is quoted as saying “In industry terms, these projects would be known as ‘free riders’. Together, they received $6 million in revenue for something that would have happened anyway.”

Since early in the development of the concept of carbon offsets, popularly known as carbon credits, it has been widely understood that credits are generated only when the activity which generates the credits is ‘additional’ to what would happen in the normal course, known as ‘business as usual’. The BC auditor general clearly believes that the two projects he has audited were part of ‘business as usual’ and would have happened whether or not financing from carbon credits was available. In other words, the people of BC are paying a carbon tax to have GHG emissions reduced but the money is going to projects that would have happened whether or not the carbon tax were in place.

Phoney carbon credits and GHG emission reductions that do not involve efforts that go above and beyond business as usual are becoming more comm0n in government and business marketing. Determination of ‘additionality’ is a complex blend of science and economics.  The blast sent by the BC Auditor General should serve as a warming to all governments and businesses that make GHG emission reduction claims to ensure that the claim properly meets all of the tests required for high quality carbon credits.

The BC Auditor General’s report is in part a quick primer in what can go wrong with carbon offset claims. You can find it at http://www.bcauditor.com/pubs/2013/report14/audit-carbon-neutral-government

A quick note to companies with operations in Ontario, Canada: the carbon content of electricity in Ontario is currently falling fast as a result of the Ontario Government’s decision to phase out coal-fired electricity. The credit for this activity belongs to Ontario Power Generation which is owned 100% by the Province of Ontario. Companies that claim to have reduced their carbon emissions because of the reduced carbon intensity of electricity purchased from the provincial grid will, in GallonDaily’s opinion, be making an improper environmental claim. Companies that purchase power from specified renewable sources will still be entitled to make a legitimate reduced GHG claim based on the difference between the GHG emissions from the renewable power and the grid power. The size of the legitimate reduced GHG claim, per unit of electricity consumed, will likely decrease as the amount of fossil generated electricity in the Ontario grid decreases. All electricity generation has environmental impacts: no consumer should view the reduced carbon intensity of Ontario electricity as environmental permission to use more electricity.