Aldyen Donnelly: Pacific Carbon Trust actually pays $50/TCO2e, or gets nothing for their $25, depending on how you look at it

The BC government’s Pacific Carbon Trust (PCT) pays private entities $25/TCO2e for greenhouse gas "credits" that are acquired to offset provincial government GHG emissions.

But neither the PCT nor Offsetters’ contracts oblige the venders of the "credits" to book balancing emission "debits" to their corporate GHG inventories on completion of a transfer. So when BC or the government of Canada finally regulates industrial GHG emissions, the PCT will continue to book reductions that have been realized at LaFarge to offset BC operations emissions, and LaFarge will also be booking those credits to it’s corporate GHG inventory. Or the PCT has to stop booking those credits that the taxpayer paid for, and Lafarge realizes the full return on the project that the taxpayers financed.

PCT/Offsetters contracts would only be sound if every time a corporate entity transfers a 1 TCO2e GHG "credit"–which reports to represent a 1 TCO2e reduction in a GHG inventory–to a buyer, that supplying corporate entity has to add 1 TCO2e to its reportable corporate GHG inventory.  Because LaFarge has no contractual obligation to add 1 TCO2e to its legally reportable GHG inventory when it transfers real title to 1 TCO2e worth of credits to Offsetters and then PCT,  PCT has either paid: (1) $25 for 1/2 TCO2e in reductions = $50/T, or (2) $25 for nothing (LaFarge retains the right to include the full reduction in its corporate GHG inventory report).

You can track Canadian large emitters’ corporate GHG inventory reports, which they are obliged to final annually (but with a 2-year lag) under existing federal law, here.

Because PCT/Offsetters does not include the discipline of double entry book-keeping in their contracting standards, the emerging carbon market is identical to the credit default swap market. A house that books only credits and no debits or contingent liabilities is a house that falls down. For this reason, there is little in the way of quality differential between the credits that PCT is buying and those that are trading over the Chicago Climate Exchange at this time.

I think this is worth talking about. If PCT introduces the discipline of double entry book-keeping into BC’s carbon market sooner rather than later, BC could be building the only real carbon market in the world. If we do not incorporate double entry book-keeping in these activities, we will just be one of the early and biggest losers in the next fake global derivative market.

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