Alberta filed 1st ever criminal charges against a carbon offset firm. Here's why they may not be the last

For the first time ever, a Canadian province has filed criminal charges against a business for providing false information related to carbon offsets, a spokesperson for Alberta's Environment Ministry said, underscoring the sometimes murky activities of companies in a complicated, rapidly growing industry worth hundreds of millions of dollars annually. 

Carbon offsets are bought and sold under a trading system with governments putting a price on carbon dioxide emissions to compel companies to fight climate change. 

Since 2007, Alberta has run a mandatory carbon offset system for large emitters, such as oil and gas companies, landfills and food processing firms. If they produce more than their allotted levels of carbon dioxide, they must purchase credits to offset those emissions. The credits are generated by companies that reduce emissions by doing things like building wind farms or installing solar panels. To ensure accuracy, the credits are verified by third-party auditors. The Alberta litigation centres on the role of one of these third-party verifiers.

With Alberta and Canada betting big on carbon offsets as a tool to tackle global warming, the criminal case spotlights the difficulties in verifying whether emission reductions are legitimate.

"These are the first charges before the courts related to the Emissions Management and Climate Resilience Act," Tom McMillan, director of communications for Alberta Environment and Protected Areas, said of Alberta's carbon trading system, which he said is the longest running in North America.

In 2020 alone, large emitters in Alberta made $548 million in compliance payments under Alberta's offset rules, McMillan said.

He noted that the federal government and other provinces are basing their systems for carbon trading on Alberta's approach, meaning the legal action has ramifications far beyond the oil-rich province. 

There doesn't seem to be a lot of fraud or irregularities in Alberta's carbon offset trading system, said Janetta McKenzie, acting director of the oil and gas team at the Pembina Institute, a non-profit research group focused on clean energy.

"But it's crucial that those systems are producing good data, that we are tracking those offsets, and that they are additional and verifiable," she said.

With carbon markets being "very complex" and "kind of opaque," having transparent practices for verifying offsets is crucial to reduce climate change, said McKenzie, who broadly supports the strategy. 

Alberta's Ministry of Environment and Protected Areas filed 25 charges against Amberg Corp., an environmental services company, and Olga Kiiker for not following environmental legislation, according to a June 23 statement.

The charges, filed at the Alberta Court of Justice in Calgary, include providing false information, providing functions of a third-party assurance provider without the required qualifications and breaching other rules related to auditing and verifying carbon offsets, according to court records. 

The next court date is set for July 19, according to a statement from Alberta's Environment Ministry. None of the charges have been proven in court. 

Amberg didn't respond to phone calls seeking comment. The company's website no longer functions and emails to executives bounced back.