From the UK Telegraph:
Seven arrests in suspected £38m carbon credit fraud
Seven people have been arrested and 27 residence and office locations were raided by police over a suspected £38 million pounds (62.8 million dollars) fraud involving the trade of carbon credits to avoid paying the value-added tax (VAT) which is required in the UK.
excerpt:
By Rowena Mason
Published: 7:36PM BST 19 Aug 2009
Officers from HM Revenue & Customs searched both residential properties and offices in both Gravesend and London targeting an alleged network of organised crime.
Members are believed to have been trading large volumes of high-value carbon credits from overseas sources free of VAT.
Tax investigators believe these may then have been sold on to businesses in the UK charging VAT that is never paid to the authorities.
Read the complete article here
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Is anyone really surprised? a Duke University masters candidate Alan Abramson clearly identified the risk this spring, as have many others:
The [carbon offset] market requires validators and verifiers all over the world. The system is already short personnel with these skills. Then there is the question of who pays these people? Regulators need to keep in mind the failure of the credit rating agencies (Moody’s, S&P, etc.) in the recent credit crisis. Markets require trust. Respondents said the only reason certain investors purchased some MBS assets was the Triple-A rating.42 These same respondents say that a significant flaw in the system exists because the credit rating agencies are paid by the bond issuers. A disincentive exists for doing a thorough job. Currently, validators and verifiers are paid by project developers. If we are to learn from the failings of the financial markets, this is an aspect of the carbon offset markets ripe for misconduct.
See the PDF of his masters thesis here
VG (03:32:30) “OT I know Leif does not like being told he is wrong …”
Unfair comment. Untrue. Unwarranted.
Check his responses anywhere. Always taking criticism seriously and responding in a mature and useful way with wry humour entwined. Perhaps it is his obvious scholarship which gives him the confidence to treat us all with respect. He just ain’t threatened.
“Jack Simmons (03:22:44) :
Training film for carbon credit salesmen:”
Absolutely cracking!!! LOL….
But this was never about the science.
It was always about gold, man; and sacks of of it.
Gene Nemetz (00:13:40) :
So the Brits have a value-added tax. The idea of a value added-tax is being considered in America. WT#?! Didn’t America originally kick the Brits out over taxes? Now we’re taking on one of their ideas? The car America is shifted into reverse. She needs to put it back in drive.
Yup, and it’s been in force in Britain for decades now – surprised you missed that. It’s just tax, cast with a broader net, not something intrinsically evil. Well, no more so than other taxes which cannot be explained… oh, and it’ll adversely affect imports, etc., etc. But there’s no need to worry about it.
As for kicking the Brits out, yeah, but that story’s becoming a bit of an old saw, especially considering what a tax-happy nation this became.
Curiousgeorge (05:00:11) :
“The black comedy that some have posted on this is very entertaining, but let’s not forget that the reality of Cap&Tax and it’s relatives is to very seriously relieve you and I of our money and our freedoms.”
I agree, but comedy might just be the short circuit we need. Nobody likes being laughed at, especialy politicians.
When will they arrest Al Gore?
Once science catches up with reality Carbon Credit Trading will be abandoned.
http://www.vukcevic.talktalk.net/GeoMagField.gif
I like the no-nonsense answers on the FreeCarbonOffsets.com website FAQ:
Q: Is this really free?
A: Yes! Absolutely free, no strings attached. Zilch, Nada, Free.
Q: How can you do this for free?
A: We at FreeCarbonOffsets.com feel strongly that carbon offsets should be available to everyone, regardless of ability to pay. We will take the steps to see that the offsets that you acquire through us are properly channeled. We can do it because we care.
Q: What exactly will you do for my carbon offsets?
A: There are several steps we will take to do our part to help the environment, based on your level of participation:
* 1-100 offsets: We will try our hardest to turn off the water for an extra ten seconds while we brush our teeth.
* 101-1000 offsets: We will think about possibly using one less square of toilet paper every time we use the rest room. So you don’t have to!
* 1001-10000 offsets: At this level, we will think about not going out to lunch for one day. Gas savings, plus savings on one less burger made that day!
* 10000+ offsets: Premium offsets. We will consider not taking a shower for a whole week!
————
They also say:
“FreeCarbonOffsets.com was created with you in mind. We take the conservation steps so you don’t have to. After obtaining your certificate of Carbon Offsets from us, you can proudly display it for all to see, to show others that you care about our environment. You can continue on in your daily life worry and guilt free.”
These folks, they really care about us!
Well, I for one am not going to stand around and let the scammers of the scammers get away with all the goodies. I hereby announce the grand opening of the Carbon Credit Derivatives exchange. For a (rather large) fee, we will provide you with a sequence of symbols that will display on your computer screen verifying that you be the proud owner of the right to buy or sell your own Carbon Credits at a specified price, known as the strike price.
RexAlan (05:29:03) :
Curiousgeorge (05:00:11) :
“The black comedy that some have posted on this is very entertaining, but let’s not forget that the reality of Cap&Tax and it’s relatives is to very seriously relieve you and I of our money and our freedoms.”
I agree, but comedy might just be the short circuit we need. Nobody likes being laughed at, especialy polititions.
————————————————————–
In-so-far as it relieves the tension among skeptics and provides some psychological benefit it’s a good thing.
But somehow I doubt that the people I mentioned pay any attention whatsoever to Anthony’s great web site, or other skeptic sites . Unless major celebs or news outlets are pointing and laughing they are oblivious to it. Their staff makes sure of that. If they are aware, and it pisses them off sufficiently, they will find ways to retaliate that are not be in the least bit funny. When one decides to poke a tiger with stick, one best ensure the cage door is closed and locked.
vukcevic (05:45:58) :
“Once science catches up with reality Carbon Credit Trading will be abandoned.”
Can you think of any failed program that the government abandoned?
Is Al Gore one of them….
It’s Rollerball people……we will soon have a one world currency and complete one world order. CO2 cap and tax, united world health care, one UN army, one world food bank.
And it’s all going to fail, big time.
RE: Phil. (00:04:13) :
Everyone here appears to have missed the point, the scandal is not related to the value or nature of the bonds but that the companies trading them failed to pay tax on them (VAT). That happens with all manner of commodities.
*****
We have not missed the point. All this is related. As another poster said, we are setting ourselves up for another Enron or the loan and mortage scandal which caused the US feds to print monopoly money. Cap and trade is not based on anything solid (real assets). Therefore the higher we go the bigger the crash will be. The lucky ones will be the ones who sell out early. I know someone who cashed in all his stocks a year ago (against his broker’s advice) just before the drop. He is laughing all the way to the bank (that did not go under).
Dan, Phil and other party-poopers,
There is, on a daily basis, a steady stream of posts declaring the whole carbon trading business a fraud. This is just a dollop of icing on the cake.
Insisting that we not gloat until the fraud is intrinsically unique to carbon trading is unreasonable.
Gene Nemetz and John Laidlaw:
Yes, we have Value Added Tax in Britain. We have to have it – it’s mandatory in the European Union, so we introduced it when we joined in 1973. Only the EU (the record holder for the biggest con trick in history until AGW came along) could dream up such a wonderful scheme. The tax is levied at every stage of production and deducted at every next stage of production and yet this vast amount of administration doesn’t cost the taxman a penny – the businesses have to do all the accountancy and tax collection themselves! If they get it wrong they’re taken to the cleaners. Why wouldn’t you want a tax like that?
I just want to wear a ribbon!
“DaveF (06:47:56) :
Gene Nemetz and John Laidlaw:
Yes, we have Value Added Tax in Britain. We have to have it – it’s mandatory in the European Union, so we introduced it when we joined in 1973. Only the EU (the record holder for the biggest con trick in history until AGW came along) could dream up such a wonderful scheme. The tax is levied at every stage of production and deducted at every next stage of production and yet this vast amount of administration doesn’t cost the taxman a penny – the businesses have to do all the accountancy and tax collection themselves! If they get it wrong they’re taken to the cleaners. Why wouldn’t you want a tax like that?”
Just like GST in NZ, applied to everything. IRD are “silent” collectors of the GST, as DaveF says, everyone else collects it for them.
The carbon credit program is poorly regulated and ripe for fraud. So it isn’t about not paying the value added tax on it. It is about using a poorly designed and under-regulated program in whatever way it can be used to make a buck under the table. But here is the thing: if it were to become properly regulated so that fraud is minimized, the government would have to raise the tax on it to pay for the new department of government created to regulate the program.
There’s a joke somewhere in here about taxing “value added” to carbon credits.
Comments are hilarious:
Just remember,,the best thing about a tree is what you can make out of it. Well time to run off 100 blank copies on the company copier then shred them.
I was feeling cold yesterday so I went to light a fire, but I was worried about my carbon emissions! After finding your website and alleviating my conscience, I poured a whole drum of gasoline on my driveway and lit it on fire. I sure was warm! Thank you Free Carbon Offsets!
Thanks you guys so much for the free Carbon Offsets. Now I can fill up my Chevy Tahoe and not feel ashamed. I’ll make sure all the Prius drivers know I’m Green by taping my offsets to the back window. God Bless you all!
Thanks to Free Carbon Offsets, I can keep my backyard tire and crude oil fire burning and still sleep at night! You have given me the peace of mind that money just can’t buy.
Etcetera….
Steve M. (06:05:40) :
Can you think of any failed program that the government abandoned?
Many, but you have to vote them out first, unless you can convince them of foolishness of their ways. I am doing, and will do my little contribution in both respects.
http://www.vukcevic.talktalk.net/GeoMagField.gif
sub-Prime carbon credits market comes to mind.
Isn’t it odd that ‘trading’ is a big part of the USA’s cap and tax? Payback to who do you think.
Re Patrick Davis (21:40:38) :
What a surprise, didn’t take long did it! Mind you, the VAT man from the Inland Revenue department has more power than the police. Be afraid, be very afraid
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Or don’t be afraid, take your chances with an easily fraudable, virtual ‘commodity’.
Whilst our Revenue folks do have a lot of powers, thanks to UK government ‘efficiency’ savings, we’ve laid off thousands of staff from that department. Including a lot of tax inspectors. So our tax receipts have been falling, tax minimisation and avoidance (see MP expenses) is rampant.
Not long ago, the French found they had the same missing trader VAT problem. Quelle suprise! They zero rated their virtual currency bonds. At that time, UK announced no signs of any problems. Then quickly reversed that position, presumably as-
a) It should have been obvious it would happen on an intangible, easily transportable instrument like carbon junk bonds.
b) This investigation was probably already under way.
But none the less, the scammers managed to raise quite a lot of money from a relatively quiet market. Think of the potential for fraud as trading increases.
So the UK government loses out on some VAT. It’ll still get a slice of the profits from trades, wont it?
Pamela Gray (07:06:38) :
The carbon credit program is poorly regulated and ripe for fraud. So it isn’t about not paying the value added tax on it. It is about using a poorly designed and under-regulated program in whatever way it can be used to make a buck under the table.
Wrong Pamela, the scam that the original article is entirely based on the avoidance of VAT it has nothing to do with with the merits or otherwise of Carbon trading. The scam is exactly the same as the ones perpetrated with chips and cell phones.
REPLY: Wrong Phil., not exactly the same. Chips and cell phones are tangible assets, carbon credits are not. They are intangible in the real world except to a few who recognize them. And it is true that they aren’t well regulated. They are indeed ripe for exploitation, and this won’t be the last such story. I predict we’ll soon see bogus certificates printed and bought by “unsuspecting dupes”. At issue, in the thesis I cited, is verification. – Anthony
REPLY: Wrong Phil., not exactly the same. Chips and cell phones are tangible assets, carbon credits are not. They are intangible in the real world except to a few who recognize them. And it is true that they aren’t well regulated. They are indeed ripe for exploitation, and this won’t be the last such story. I predict we’ll soon see bogus certificates printed and bought by “unsuspecting dupes”. At issue, in the thesis I cited, is verification. – Anthony
No the scam is exactly the same, it does not depend in any way on the tangibility or otherwise of the asset, it’s a VAT fraud pure and simple. Any paper assets have potential for fraud, mortgages and stocks come to mind but that’s not what happened here. This is nothing to do with verification it’s to do with the administration of VAT on transfers between states. Presenting it as if it is (especially to an audience not familiar with VAT) is not accurate. For the US audience think about how state sales tax data is passed from state to state, that works well doesn’t it?
REPLY: Still wrong Phil. You said it was EXACTLY the same, and I said there was a difference in tangibles. VAT fraud is there sure, but you also ignore the fact that carbon credits, by their nature, are a scam themselves. I know you think otherwise, but from my viewpoint, and by the viewpoint of others, they are scams. I predict carbon credits will crash and burn, and they’ll end up being propped up by the government, at a cost to taxpayers, making it an even bigger scam. – A