Well-designed offsets markets can play a small role in getting developing countries engaged in reducing emissions, the authors concluded. "However, in practice, much of the current CDM market does not reflect actual reductions in emissions, and that trend is poised to get worse."

Added Wara and Victor: "Our paper focuses on international offsets, but we caution that these problems are unlikely to be substantially different for a domestic offsets program...."

Their conclusions were reinforced by a recently leaked diplomatic cable that, according to Nature magazine, "reveals that most of the CDM projects in India should not have been certified because they did not reduce emissions beyond those that would have been achieved without foreign investment."

Similarly, a study of a project in Costa Rica that paid landowners to conserve forests found that the payments made a difference in less than one per cent of the forest lots that participated in the program.

Some offsets are 'excellent'

Other experts, though, argue that offsets can work. There are plenty of offsets out there that are "rubbish," said UBC's Dowlatabadi. But some, he insists, are "excellent."

Dowlatabadi said ground source heat pumps, which use one-third the energy of conventional home heating and cooling equipment, would make a good offset. Because those systems cost more -- an investment that takes longer to recover -- developers don't install them, he said.

If you can pay a developer enough to make installing ground source heat pumps worth his while, "Then what is wrong with that?" Dowlatabadi asked.

He stresses that he thinks the B.C. government is doing its best to make carbon-neutral government work. But he's not wild about some of the offsets that the PCT has sponsored.

In particular, he's skeptical about offsets that subsidize switching from fossil fuels to electricity. If BC Hydro drops its plans for clean energy self-sufficiency, Dowlatabadi said, some of the electricity that powers projects funded with offset money could end up coming from coal- or gas-fired plants in Alberta.

If that happens, the project "becomes a (carbon) liability, not an offset."

Then there are forestry offsets. Trees absorb carbon dioxide, so paying someone to not chop them down can qualify as an offset. Sixty per cent of the PCT's offsets in 2010 came from two forest projects: the Darkwoods project in the Nelson-Creston area and an improved forest management project on private land owned by TimberWest on Vancouver Island.

Both projects have been criticized in the media, notably by resource policy analyst Ben Parfitt and MLA Bob Simpson. Dowlatabadi has his own criticisms. The UBC academic co-founded Offsetters Clean Technology Inc., a company that invests in offset projects. He's no longer with the organization, but during his time with Offsetters, Dowlatabadi said, "We never accepted forestry offsets." He still wouldn't do them, he added.

The impact of climate change on forests is not known, Dowlatabadi said. A lot of the trees that the PCT assumes will act as carbon sinks may in fact die and return their carbon to the atmosphere because of a hotter climate, he said.

"I can pretty well guarantee you that we'll have much higher mortality rates," Dowlatabadi said.

A hotter climate could also mean more forest fires, he said. If the trees burn, they give up carbon instead of absorbing it.

Said Dowlatabadi: "I think it's premature to invest in carbon offsets using forestry."

There are some PCT offset projects that Dowlatabadi does like.

He calls a project at Interfor's Adams Lake sawmill that saw a switch from liquefied natural gas to wood waste "a good idea." Interfor uses wood left over from its milling operations to dry lumber and heat buildings at the mill.

He also likes the idea of installing insulating curtains at a number of Lower Mainland greenhouses. The curtains reduce heat loss and lower the greenhouses' natural gas bills.

Scrutiny

The Pacific Carbon Trust defends its portfolio of offsets by stressing the close scrutiny it gives to each project. The Crown corporation says it has developed rigorous protocols to make sure that its offsets represent real reductions.

Every project is reviewed by independent third parties drawn from a list of companies approved by the PCT. The companies must be accredited by the International Accreditation Forum. Each project is reviewed twice. There is a "validation" review that occurs before the project is approved and a "verification" review that happens once the project is operating.

"The independent opinion and professional expertise of the validator and verifier is central to the project development process," a PCT spokeswoman said in an email. (No one from the PCT was available to participate in a live interview.) "The validator and verifier are required to have specific expertise related to the project type and investigate all aspects of the project, including 'additionality' (the requirement that the project would not have happened without the sale of offsets)."

"The validation and verification audits provide the same level of assurance that is provided in a financial audit of a publicly traded corporation."

To qualify a project as an offset, the company or organization must "demonstrate financial, technological or other obstacles that are partially or fully overcome by revenues from offset sales."

As for Dowlatabadi's cautions about the effects of a change in Hydro policy on offsets, the spokeswoman replied in an email that if Hydro changes its policy, the PCT will make the necessary adjustments to its offset procedures.

Accounting for fire and bugs

Forest offsets also have their defenders. James Tansey, a UBC business professor and the president of Offsetters, agrees that there was a time when the company avoided forest offsets. But British Columbia has developed rigorous standards that overcome Dowlatabadi's objections, he said.

There is no doubt forests absorb carbon, Tansey said. The only question is whether offsets conform to the highest standards.

"I am now confident that we have an approach to forest carbon offsets development that's the strongest in the world," he said.

David Rokoss, director of business development for ERA Inc., which helped develop the Darkwoods offset project, said in an interview that B.C.'s forest offset projects have stringent safeguards built into them.

"There's so many assurance mechanisms built in that the likelihood of having a catastrophic reversal that is unaccounted for is practically zero.... The system has backup mechanism after backup mechanism after backup mechanism," he said.

Rokoss said a certain amount of carbon credit is deducted from the total absorbed by a forest project to cover things like fires, infestations and flood. On top of that, each forest project has a "buffer" -- "10, 20, 30 per cent or more of the total volume of carbon that's for sale" -- to cover the possibility of fire.

In other words, he said, a project that preserves forests and removes 100,000 tonnes of carbon a year could be paid for only 70,000 tonnes of offset credits.

"You can have hundreds, thousands of trees actually fall over, be damaged or release carbon over time," Rokoss said. "That is all accounted for."

Critics remain skeptical about the rigour of the PCT's approval process. But beyond the question of whether offsets are reducing emissions as much as advocates claim, the pursuit of a carbon-neutral government has produced other benefits: putting a price on public sector emissions has led to real reductions.

In our next instalment tomorrow, we'll look at some carbon-neutral government success stories.

[Tags: Environment, Labour and Industry, Science and Tech, Politics.]