A couple of years ago, the Antiplanner described a Portland program of accepting carbon-offset funds to do traffic signal coordination. While I support signal coordination, the claimed benefits seemed outlandish. When I found out that the money came from an organization called Climate Trust that was co-founded by the director of Portland’s Office of Sustainable Development, I smelled “scam.”

I didn’t pursue it any further, but it turns out I was right. According to this 2009 report from the Cascade Policy Institute, the Portland-based Climate Trust has been legally extorting money from energy companies for more than a decade and then failing to spend that money on activities that truly reduce greenhouse gas emissions.

What I didn’t know when I wrote about the traffic signal program was that a 1997 Oregon law required new electrical power plants to limit greenhouse gas emissions. If they can’t meet the emission standards, they can buy “voluntary” carbon offsets from Climate Trust, which was created in 1997 and (as of 2009) is the only organization qualified to accept such funds. But the emission standards are regularly reduced to 17 percent below the emissions from the cleanest power facilities in the country. Thus, the carbon offsets the companies buy are anything but voluntary. Once they pay their money to Climate Trust, however, they are not responsible for insuring that the money is truly used to reduce greenhouse gas emissions. Washington, Colorado, and other western states have similar laws leading electric companies in those states to “voluntarily” contribute to Climate Trust.

A genuine carbon-offset program must meet two tests. First, projects funded by the program must be “additional” to what would be done without the funding. In other words, you shouldn’t give money to a timber company for reforesting land that it would have reforested it anyway. Second, the carbon savings must be verified. The report shows that many Climate Trust projects violated one or both of these requirements. In the case of the traffic signal coordination, the report says Portland’s coordination program began two years before receiving any money from Climate Trust, and the benefits of the program were never verified. The report also notes that Climate Trust paid Portland nearly three times as much per ton of supposed carbon offset as the energy companies paid Climate Trust for offsets.

Under the Oregon law, 80 percent of the funds paid by the energy companies must be spent on offsets, while the other 20 percent is available for monitoring and administration. The 2006, 2007, and 2008 form 990s for Climate Trust are not clear on how much of the organization’s income comes from energy companies, but it is clear that the group spends far less than 80 percent of its funds on offsets.

In 2006, Climate Trust spent about two-thirds of its funds on carbon offsets, while most of the rest went for payroll and professional fees. In 2007, the share going to carbon offsets declined to 64 percent. By 2008, as near as I can tell, none of Climate Trust’s money went for carbon offsets. Instead, 73 percent of its $1.65 million budget went for salaries, fees, and other compensation. It also spent more than $120,000 on travel and conferences and $95,000 on rent and office expenses. In 2008, Climate Trust paid its executive director $154,000, not counting health insurance and other fringe benefits. At least one other staff member whose title was “director of offset programs” was paid more than $100,000 and a third one received $88,000. (If Climate Trust is all about offset programs, why isn’t the executive director the director of offset programs?)

Yes, this sounds like a scam, one financed in part by Oregon electricity users and taxpayers. If this is what cap-and-trade is all about, Americans are very lucky that Congress currently appears unlikely to pass a cap-and-trade bill this year.