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The west wing of the B.C. Legislature on Feb. 18, 2013.

Chad Hipolito/The Globe and Mail

A scathing report by B.C.'s Auditor-General concludes that the provincial government has failed in its efforts to achieve a carbon-neutral public sector.

B.C. has long bragged it was the first government in North America to become carbon neutral by requiring schools, hospitals and other government institutions to spend millions buying carbon offsets to make up for their greenhouse-gas emissions.

Those purchases all had to be made through the Pacific Carbon Trust, a Crown agency set up by the government to drive its carbon-neutral program.

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But Auditor-General John Doyle – whose report was withheld from release Tuesday by the Speaker of the legislature – says that the Pacific Carbon Trust has been paying too much, often double the free- market price, and that the offsets do little to reduce B.C.'s greenhouse-gas emissions.

The Globe and Mail obtained a copy of the report from other sources.

One project examined involved a forest that was not going to be cut because it had been purchased by the Nature Conservancy of Canada.

Another was a gas project in which the company pursued an energy-saving program it intended to implement anyway.

Instead of releasing the document as scheduled Tuesday, Speaker Bill Barisoff issued a brief statement saying it is being withheld.

"Since a breach of Parliament may have occurred, the report will not be distributed until the Speaker has concluded his discussions with the Auditor-General," stated Mr. Barisoff.

Mr. Doyle said his office had shared draft copies of the report "with the relevant ministries," but that was standard practice.

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"What we've done this time is what we've done time after time again," he said of his office's policy of providing advance drafts to the affected ministry and to MLAs who have been involved in the issue under scrutiny.

Bob Simpson, an independent MLA who has long been a critic of the government's carbon program, said he got an advance draft of the document and he felt that had sparked Mr. Barisoff's reaction.

"The Speaker intimated [to me] he's got questions about how far the report was distributed," said Mr. Simpson. "But nothing's happened here that wasn't standard practice."

He said it is unfortunate the report is tangled up in a procedural issue, because it is an important document that should be shared with all MLA's and the public.

Mr. Simpson declined to discuss the contents of the report until it has been publicly released.

In the document, Mr. Doyle states that his office examined two projects that accounted for nearly 70 per cent of the offsets purchased by the government in its attempt to achieve carbon neutrality.

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One was the Darkwoods Forest Carbon project, which set aside forest land in southern B.C., and the other was the Encana Underbalanced Drilling project near Fort Nelson, which reduced flaring.

Mr. Doyle writes that the government's claim of achieving carbon neutrality using those two projects "is not accurate, as neither project provided credible offsets," and that both projects would have happened in the absence of the government's carbon financing.

"In industry terms, they would be known as 'free riders' – receiving revenue ($6-million between the two) for something that would have happened anyway," says Mr. Doyle.

He also complained the Pacific Carbon Trust leaked information about his audit while it was under way, which resulted in an "orchestrated letter-writing campaign" to government by supporters of the carbon program.

"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," he stated.

Ben Parfitt, of the Canadian Centre for Policy Alternatives, has long been a critic of the government's carbon program.

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"It's a damning indictment of the province's whole carbon neutral policy," he said when asked to comment on Mr. Doyle's findings. "It sounds like the Auditor-General has found the vast majority of the offsets sold by the Pacific Carbon Trust turn out to be bogus credits … it's shocking."

Mr. Parfitt called on the government to release the Auditor-General's report immediately.

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