BC Business
James Tansey, UBC Sauder School of Business | BCBusinessUBC Sauder School of Business associate professor James Tansey.
The Great Bear Rainforest is a powerful brand, the setting of gruelling conservation battless and now recognized around the world as an almost mythical place of misty fjords, snow-topped mountains and islands roamed by wolves and Kermode bears. Now Coastal First Nations hope to leverage this brand to sell carbon credits, a result of land-use agreements signed in 2009 with the province that led to the creation of roughly 1.5 million hectares of new conservancies and reduced logging volumes by as much as 25 per cent elsewhere within the six-million-hectare region.
James Tansey, an associate professor at the UBC Sauder School of Business and founder of Offsetters Clean Technology Inc., predicts a huge payoff for First Nations and the environment.
“Outside the developing world this is the largest forest carbon project in the world,” Tansey says.
Offsetters, which in December 2012 merged with and now flies under the flag of ERA Carbon Offsets Ltd., has helped Coastal First Nations, an alliance representing central and north coast nations, work through the complex and rigorous process of certifying the Great Bear Rainforest Carbon Project. Tansey, now president and CEO of ERA, expects the project to eventually generate as many as one million tonnes of annual carbon offsets, which hit the market in mid January at a per tonne price of $25.
The science behind carbon hasn’t changed since high school biology. Trees absorb carbon dioxide from the atmosphere through the process of photosynthesis, storing carbon in roots, trunks, limbs, leaves and needles. Forest destruction is responsible for one-quarter of global greenhouse-gas or carbon emissions, greater than cars, boats, planes, trains and trucks combined. Therefore sequestration of carbon in forests is considered to be a huge factor in combating climate change. The underlying science is not in dispute, but the process of quantifying and monetizing forest carbon into credits is far from simple. To be considered eligible, a given project area must meet several tests. First, there must be an acceptable degree of permanence, in that the forest in question will remain standing for a given period of time. Then there’s the issue of leakage—being able to account for unforeseen forest destruction from wildfires or pest infestations, as well the possibility that forgone logging opportunities in the project area could lead to increased logging elsewhere. A project must also meet the test of additionality, in that more carbon will be stored than would have occurred if status quo land-use polices remained in place. Finally, carbon credits must be quantifiable and verifiable by independent third parties. Coastal First Nations is confident they have exceeded these criteria in a process that has been underway since 2009.
“We started talking about carbon credits as far back as 2004,” says Art Sterritt, executive director of Coastal First Nations, over the phone from his office in downtown Vancouver. “It was part of the discussion and was a key component of the reconciliation agreement we signed with government back in 2009.”
Sterritt says funds from the sale of offsets will be distributed to participating First Nations, such as the Heiltsuk and Gitga’at, and will leverage the building of what government and environmentalists are fond of calling a Great Bear conservation economy—eco-tourism, green energy development, parks and conservancy management and other employment-generating initiatives. This builds on the whopping $120 million—half from the provincial and federal governments and half from private foundations—that was dumped into the Coast Opportunity Funds in 2007 for similar purposes. [pagebreak]According to Sterritt, Coastal First Nations has so far spent more than $1 million on the carbon-offset certification process. Under the terms of an Atmospheric Benefit Sharing Agreement signed between First Nations and the provincial government in September 2011, natives retain ownership of 77 per cent of the carbon credits from 2009 and 2010, followed by 50 per cent in the ensuing years with the difference flowing to the province. The agreement underpins the Great Bear carbon-credit partnership.
Although the World Bank estimates the global carbon-credit market to be worth US$176 billion, carbon credit trading is still unproven in B.C. as it is elsewhere in emerging markets in Alberta, Quebec and California. Even before the enthusiastic press releases were written in January announcing Great Bear Rainforest carbon credits for sale, the project was getting a rough ride from critics. According to many observers, carbon offsetting is plagued with more holes than Swiss cheese. Bob Simpson, independent MLA for Cariboo North, calls the Great Bear carbon initiative “pure alchemy.”
“For any of this to be legitimate, carbon has to be the central focus,” Simpson says. “People didn’t blockade and get arrested in the Great Bear Rainforest for carbon, it was for biodiversity and old-growth forest.”
Mark Jaccard, an economist at SFU’s School of Resource and Environmental Management, says he’s suspicious about the project because offsetting is “an inevitably fishy business” and gauging the effectiveness of carbon offsets essentially requires a crystal ball to predict the future. In other words, it’s not an exact science.
In a 2011 paper entitled “B.C.’s Carbon Neutral Public Sector: Too Good to be True?” Jaccard and co-author Brad Griffin say that once the offset payment has occurred “the best we can do is to estimate (forecast) what would have occurred without the offset payment.”
Offsetting proponents like James Tansey say the tool can be used to stimulate investments in carbon emission-reducing technologies or decisions, as in the case of the Great Bear Rainforest, to protect land from logging. However, Jaccard counters that it’s a tricky and ambiguous business separating legitimate projects from the “free riders”—the organizations and firms that claim carbon credits for investments or land-use decisions they would have made with or without the ability to sell offsets. This uncertainty clouds the test of additionality, says Jaccard, who would support a cap-and-trade system for reducing a nation’s greenhouse-gas emissions if they were the only alternatives to offsetting (whereby major emitters buy permits from government to emit greenhouse gases and then trade them if they are able to reduce their emissions).
Ben Parfitt, a resource policy analyst with the Canadian Centre for Policy Alternatives, fears the Great Bear project has more to do with the province meeting its carbon-neutral goals than it does with genuine carbon offsetting and climate change.
“I think there are many questions to ask about this project,” Parfitt says. “What are they basing their carbon-credit claims against, what’s the baseline?”
Whether the market buys into Great Bear Rainforest carbon credits remains to be seen. According to Tansey, as of mid January, the Great Bear Carbon Credit Limited Partnership. According to Tansey, as of mid January, the Great Bear Carbon Credit Partnership had sold offsets to loyalty managementgiant Aimia, Vancity Credit Union, KPMG and the Pacific Carbon Trust (PCT,) the latter to the tune of 300,000 tonnes with a value of $2.7 million. PCT, a crown corporation established in 2008 during the depths of the last global economic crisis, is tasked with developing made-in-B.C. greenhouse-gas offsets to help the province meet its carbon-neutral target.
In a June 30, 2011 press release, the Ministry of Environment announced the province had achieved carbon neutrality, with public sector organizations spending $18.2 million in 2010 to acquire 730,000 tonnes of offsets. However in its 2011/12 annual report, PCT says it is at risk of “not being able to source enough quality offsets because of a delay in starting new projects and due to policy and slow economic recovery in North America.” And just as the Great Bear carbon project was being launched in January, B.C.’s auditor general was close to concluding an audit and investigation of the credibility of offsets purchased by PCT, currently the largest suppliers of offsets in B.C.
Parfitt thinks, for the most part, they’re not. Until he sees the paper trail behind the Great Bear certification process, he remains wary of a project that surfaced at a time when PCT is hungry for carbon credits to meet provincial carbon neutrality. He also believes forest carbon projects have a checkered track record, pointing to one conservation initiative in the West Kootenays called Darkwoods in which PCT paid public money to buy offsets.
In 2008, the Nature Conservancy of Canada purchased this 55,000-hectare tract of forest and was subsequently certified to sell offsets, according to recently publicized documents acquired through a Freedom of Information request. However, Parfitt questions the merit of giving carbon credits to the nature conservancy, an organization with a mandate to protect land, for forest land that he believes would have been preserved either way. Parfitt questions the legitimacy of the Great Bear Rainforest Carbon Project.
“There are some serious red flags in my opinion,” Parfitt says.
As for James Tansey, he stands resolutely by the Great Bear Rainforest Carbon Project. He says accounting and evaluation of carbon offsets has been held to global standards and has been verified and validated by professional third parties Stantec Consulting Ltd. and KPMG Performance Registrar Inc.
“The regulation and legislation behind this project is very strong. I think investors can have a high degree of assurance that they will be buying quality offsets that support a unique conservation model in the Great Bear.” Tansey adds, “And that’s a story that investors can share with their customers and shareholders.”