The Campaign To Discredit Auditor General’s Report On Carbon Neutrality

By Ben Parfitt

For months, vested interests in government and the private sector have known that a damning report was in the offing by BC’s outgoing Auditor General, John Doyle.

Doyle’s office has been looking into the provincial government’s claims of having achieved “carbon neutrality” for the better part of two years and was inching closer to releasing the report.

As word circulated that the report would cast into doubt that the provincial government had in fact made any serious headway in its carbon neutral commitments, an orchestrated campaign began to discredit what was in the report before it ever saw the light of day.

It is now evident that the organization that spearheaded that campaign was none other than Pacific Carbon Trust, a Crown corporation set up by the provincial government for the express purpose of buying “carbon offsets,” or emission reductions achieved by third parties.

The offsets, sold by the likes of Canadian natural gas industry giant Encana Corporation, turned out to have been purchased at inflated markups by PCT using $18.2 million in funds provided to the PCT by cash-strapped schools, hospitals and the like in order to meet the provincial government’s commitments of a “carbon neutral” public sector.

Doyle says that he has personally never witnessed anything like it.

“Of all the reports I have issued, never has one been targeted in such an overt manner by vested interests, nor has an audited organization ever broken my confidence, as did the senior managers at PCT by disclosing confidential information to carbon market developers and brokers,” Doyle wrote in the preamble to the report – a report that PCT and others did their level best behind the scenes to discredit.

We now know a lot better why they sought to do so.

Doyle’s office examined two major purchases of carbon offsets sold in 2010, the year in which the BC government announced with fanfare that it had become the first North American jurisdiction to have a “carbon neutral” public sector. The two projects were a “forest conservation” project in the Kootenay region involving the purchase of a massive tract of private forestlands known as Darkwoods by the Nature Conservancy of Canada, and a project that resulted in reduced flaring of natural gas at wells operated by Encana.

The two projects together accounted for 70 per cent of all allegedly “offset” public sector greenhouse gas emissions in 2010.

The trouble is, Doyle’s office concluded that no public money should have been spent because the projects would have happened anyway: the Nature Conservancy had already purchased the forestland in question; Encana actually had a financial interest in spending the money to stop gas flaring because it could actually make more money by channeling that gas into its pipelines for sale.

“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,” Doyle’s office concluded. “In industry terms, they would be known as ‘free riders’ – receiving revenue ($6 million between the two) for something that would have happened anyway.”

The Auditor General also found evidence that both the Nature Conservancy and Encana overstated the climatic benefits of their carbon offset projects by presenting “flawed” baseline information that suggested that in the absence of their projects things would have been far worse than they were. In fact, there was no evidence that this was the case.

The Auditor General also found evidence that PCT paid Encana and the Nature Conservancy more for their offsets than would have been paid on the open market. In other words, the public did not get fair value for the money.

Lastly, Doyle’s office found evidence that independent contractors advised PCT that both the Encana and Nature Conservancy projects had problems. Yet PCT made the purchases anyway.

All of these troubling findings were made available to the provincial government and to PCT by Doyle’s office in advance of his report being released, as was customary practice so that the government could prepare a response. The report was to have been publicly released yesterday morning. But at the 11th hour, its official release was indefinitely delayed by Legislative speaker Bill Barisoff on the spurious grounds that there had been a “premature disclosure” of what was in the report.

For now, the campaign to suppress the report appears to have won the day. The campaign included letters sent to select media outlets by a public relations firm and included letters by James Tansey, CEO of Offsetters, a private company that was paid by PCT to purchase offsets on its behalf; a letter to Tansey from BC Attorney General Shirley Bond; and a letter from Washington DC-based Verified Carbon Standard, a company that independently verifies carbon offset projects.

But something tells me when Doyle’s report finally sees daylight the PCT and its supporters will have some difficult questions to answer. Hardball tactics like this have a way of backfiring.

Ben Parfitt is a resource policy analyst with the BC office of the Canadian Centre for Policy Alternatives, and has been raising questions about the Pacific Carbon Trust since 2011: http://bit.ly/dkwoods.