Photo: Low-carbon solutions and offsets: Let's not throw the baby out with the bathwater

(Credit: hern42 via Foter)


The B.C. Auditor General's report on the province's carbon neutral policy raises important questions about the effectiveness of carbon offsets. The report concludes that two of the biggest offset projects were not as worthy of offsets as previously believed. This has led to many legitimate questions about the value of the offset regime and of rewarding private companies like oil and gas majors with public dollars, when some projects demonstrate questionable benefits to the environment.

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The justification for offsets is that they can offer a less-expensive way to reduce emissions by broadening emissions reductions to actors outside of the carbon neutral requirement and then allowing those actions (which are cheaper to achieve) to be used by the institutions covered by the requirement. Companies facing high costs to reduce their own emissions can invest in lower-cost initiatives elsewhere that achieve the same climate benefit. In practice, offset project developers can employ a new forestry practice or build a low-emission energy project and demonstrate that fewer emissions were emitted because of them. They should also be able to prove that the project would not have been economically viable without the sale of (and revenue it receives from) its carbon credits.

However, the Auditor General concluded that while it's a nice theory, it hasn't been the case in practice. Offset projects in the B.C. government's portfolio were not as leading-edge as they purported to be, and the offset payments were a layer of cream on top of viable business models. In short, the projects would have been undertaken anyway, so the payments were unnecessary. As a result, most offsets do not actually represent credible emission reductions. This is the problem with offsets: it's incredibly difficult to prove what type of action is really the result of the payment received.

The response, however, has been to paint the offset requirement as a boondoggle. Tit-for-tat shots have been launched between the offset administrator, Pacific Carbon Trust and the Office of the Auditor General, and between B.C.'s political parties. Many climate policy experts are weighing in as well, slamming the policy. Criticism has spread from the offset requirement to B.C.'s carbon policy in general. CTV even ran a ridiculously erroneous headline implying that the Auditor General was slamming the carbon tax. And many of the comments generated after the report came out cited how ineffective B.C.'s carbon policy was. Now the Liberals, days later, have announced that they plan to freeze the carbon tax. Talk about throwing the baby out with the bathwater.

What the report didn't describe was just how influential the offset requirement was in getting public institutions covered by the net-zero commitment to change their behaviour. Instead of paying $55 per tonne of carbon pollution (when combining the B.C. carbon tax and the $25 per tonne offset credits), many public institutions have decided to invest in modernizing their facilities in leading-edge energy-efficient technologies that reduce their emissions internally.

Take Vancouver Coastal Health. It operates 200 buildings, mostly clinics and hospitals in Metro Vancouver. These buildings emit 120,000 tonnes of greenhouse gases annually with their natural gas boilers and heating systems. On top of the $30 per tonne carbon tax they pay on natural gas (which adds 63 per cent to the cost of gas), VCH also pays an additional $25, making the carbon price effectively $55 per tonne. VCH's total carbon price incentive is $6.6 million a year and the offset requirement is $3 million per year. VCH has a real incentive to use systems that are less carbon intensive and is evaluating those opportunities. What the offset requirement did was strengthen the financial incentive for the public sector to lead on carbon solutions and energy-saving technologies. VCH's learning by doing — system integration, deployment and stakeholder relations and other best practices — can be disseminated to many businesses and organizations to help them lower their costs and reduce the challenges of implementation.

But it may not be fair to expose only public institutions to this higher price. If they have to do it, why not everyone? Ultimately, this gets into the murky world of politics and tradeoffs. Sometimes it's okay for government to lead, to set a higher standard than businesses or households. Government has more power and ability to do so. One powerful policy lever available to government is "procurement", or choosing what it purchases. The carbon-neutral requirement was a procurement policy in a way; it required the public sector to lead in the province.

Sometimes we need to walk before we run when it comes to big transitions to cleaner alternatives in our energy systems. For government to take the lead isn't preposterous or inequitable in the long run. In the end, we're concerned about effectively and efficiently reducing emissions. The offset requirement looks like it's a dead duck, but a stronger carbon price incentive for the public sector is working for all British Columbians. It helps modernize our public sector buildings, reduce carbon pollution and save on energy in the future.

April 8, 2013

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