INTERPOL report shows five criminal activities in carbon trading markets

INTERPOL report points out some of the inherent structural problems unique to carbon markets


Guest essay by Arkady Bukh, Esq

In 2009, Al Gore obfuscated and downplayed the role that CEOs played in crafting his Cap-and-Trade CO2 trading scheme and carbon swapping system. Gore failed to put a lid on his Congressional committee testimony about the global warming, carbon-tax debate — the derivatives bubble in the then emerging green-energy credit-swap.

Gore had good reason to be less than forthcoming. Despite his testimony, Enron’s Ken Lay played a large role in developing the plan.

Chris Horner, now a Senior Legal Fellow for the Energy and Environment Legal Institute, was Director of Federal Government Relations for Enron when Gore testified.

With Enron’s implosion two years later, any thought about the energy giant becoming involved in the carbon-tax market vaporized.

The fraud has since been pulled off to a greater degree by many of Kenneth Lay’s proteges.

Carousel Fraud

Early on a Friday morning in May, 2010, UK tax authorities raided homes and businesses believed to be involved in an organized gang suspected of Emissions Trading Scheme, ETS, carbon trade fraud worth about $35 million. As the authorities rounded up four men, piles of cash and a supply of weapons were uncovered. The EU Observer, an independent online newspaper from Brussels reported that the arrests, the men were between 29 and 53, were connected to raids that happened in August, 2009 when nine people were arrested. The ongoing operation is part of a complex, 15-month investigation.

The newspaper also talked about another raid centering on the same issue. In May, 2010, 25 arrests were made in the UK and German as authorities conducted a raid-blitz on hundreds of sites in the two countries. These raids, on Deutsche Bank and energy firm RWE, came as the result of an investigation into the theft of over $180 million in state revenues.

The raids focused on a particular type of white-collar crime that has become known as “carousel fraud,” according to The American Thinker. In a carousel fraud, white-collar criminals establish themselves in one European Union member state and open a trading account with the country’s national carbon credit registry. Then, buying carbon credits in a different country, the credits are re-sold to buyers in the original country. The scam happens when the fraudsters purchase carbon tax credits without a VAT (value added tax) and then resell, collect the VAT from the buyer and leave the country before the national tax authorities can target them. The VAT disappears with the criminals and never makes it into government treasuries.

In response, with mixed results, the UK government has reduced the VAT rate to zero when applied to emissions credits resulting in the credits being VAT-free. After all, criminals can’t steal revenue that the government has decided it won’t collect any longer.

Pay the Market

For over a decade, carbon trading, on an international scale, has been seen as an important weapon against climate change. Critics say the system is a failure with heavy emitters, and white-collar criminals, exploiting loopholes.

In 2004, the Suwung landfill outside Denpasar on Bali looked like any other dump in the third-world. Over 750 tons of solid waste were added daily and the dump was sliding into urban areas and destroying the mangroves that are featured on postcards sold to tourists. In late 2004, a new funding source allowed the people who had crawled over the waste looking for saleable scrap to be employed sorting organic waste. The organic waste, they sorted, was then tapped for methane and supplied local villages.

Financing came from the Clean Development Mechanism (CDM), the global scheme that allows developing countries to offset their carbon emissions by funding low-carbon projects. The CDM is one of the globe’s two largest carbon markets. The other large market, launched in the EU in 2005, is the Emissions Trading Scheme (ETS). When first reviewed, the ambitions of the schemes look noble: carbon trading sets a market price resulting in huge industrial polluters to include emissions projections into their plans. The planning makes the businesses more aware of the impact of pollution on their bottom line as well as the health of the planet.

That’s the way it was meant to work. Unfortunately, it hasn’t turned out that way. Trading in carbon emissions is complicated; bewildering regulations, unclear definitions of sustainable development and the weak prospects for carbon trading following the failed Copenhagen climate talks all have conspired to create loopholes for abuse.

“When ETS created a market, it created a commodity. But in terms of cutting back emissions, it isn’t working,” says Belen Balanya of Corporate Europe Observatory, a European environmental research group.

It’s this creation of a commodity that opens the door to white-collar criminals. But major businesses also benefit from the tax laws surrounding carbon markets.

Tax Avoidance

Most people would consider Apple, Coca-Cola, General Electric, Google and Nike responsible corporate citizens. At least that’s the way these corporations like to portray themselves. Apple and Nike deserve credit for their leadership in human rights; GE has done good work on climate change and Coca-Cola has embraced clean water as a cause.

However, when it comes to paying corporate taxes, they fall short.

A report on tax avoidance titled Offshore Shell Games, published in June 2014 by Citizens for Tax Justice cast the light on US firms that move their headquarters overseas, for tax purposes, in a game called “inversion.”

As people from across the globe clamor to get into America, why are some of America’s richest companies trying to leave?

Simple. They don’t want to pay US taxes.

By moving off-shore, corporations not only can avoid taxes on profits made outside of the US, but under United Nations protocols, they may, depending on the situation, qualify for a 2:1 return on their carbon-tax dollar: for every carbon-tax credit dollar they invest, they can receive two.

Even when corporations maintain their headquarters on US soil, there is room for fraud.

Carbon Offset Fraud

The damage to confidence in the emissions permits and allowances within the carbon market has paralleled the market segment which deals with carbon offset projects. Three examples show what this looks like.

1. Nadine Ghourie chronicles the situation in India at Gujarat Flurochemicals, the firm that trades on the European Climate Exchange (ECS). In The Great Carbon Con, explores the firm as it trades on the ECS despite grave abuses and hypocrisy of the company that has been exposed by other investigative reporters. With one of the worst environmental and human rights records internationally, the firm is still being rewarded financially for perpetuating business as usual within the European Climate Exchange.

2. The Washington Post exposed the NoelKampffMercadoClimateActionProject in Bolivia. A forest carbon offsets projects involving utilities in the US colluding with NGOs and the Bolivian government. The project mandated the establishment of a forest preserve of over 5500 square miles designed to keep 50 million tons of CO2 out of the atmosphere. The project, which came under significant fire for abuse, has been lowered to one-tenth of its original target.

3. Anne Scholtz, a carbon trader, established a Ponzi scheme which utilized the California pollution trading program, which often made use of overseas programs, “Regional Clean Air Incentives Market.” Scholtz would pay off old investors by recruiting new investors and create a facade of huge returns. Scholtz was indicted in 2004 on six counts of wire fraud as investors filed claims for $80 million.


ArecentreportfromINTERPOL reviews the crimes that have already occurred in global carbon markets. The report’s introduction says, “The intangible nature of the global carbon trading markets puts them [the market] at risk for exploitation.”

Certainly, any market is susceptible to crime, but the INTERPOL report points out some of the inherent structural problems unique to carbon markets. Traditional commodities, which at some time in the marketplace, must be physically delivered to someone, carbon credits don’t represent a tangible commodity. Many sellers, buyers and traders do not clearly understand the carbon market and the lack of understanding makes carbon trading particularly vulnerable to fraud. Like other financial markets, carbon markets are at risk of exploitation due to the huge amount of money surrounding it, the immature regulation and lack of oversight.

According to the report, there are five categories of criminal activities in carbon markets:

Fraudulent Manipulation

Fraudulent manipulation of measurements to claim more credits from a project than were received.

Carbon Credit Sales

Sale of carbon credits that either do not exist, or if existing, belong to someone else.

False Claims

Misleading claims regarding the environmental and/or financial benefits of market investments.

Computer Hacking

Computer hacking and phishing to steal carbon credits and theft of personal information.

Had Enron not imploded and Ken Lay lived, he and Jeff Skilling might at this moment be getting creative on their accounting over climate change.

The history is different. Enron imploded in a glorious flame-out that lost billions for investors, Ken Lay is dead and Jeff Skilling is just about in the middle of his prison sentence.

As it is, there are plenty of people willing to fill the gap and plunder governments for as much cash as they can get. As long as the rules stay convoluted, complicated and twisted, there will be plenty of naive, unsophisticated buyers, sellers and traders that make an easy mark for white-collar crime.

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Margaret Smith
July 9, 2015 2:45 pm

The whole thing is criminal full stop!

Reply to  Margaret Smith
July 9, 2015 4:57 pm

….and that includes Interpol itself..,meaning that some of its members are corrupt or are susceptible to corruption…

July 9, 2015 3:00 pm

Only five ?

DD More
July 9, 2015 3:05 pm

What do you expect when selling / buying nothing of tangible worth. Only in the eyes of bureaucrats are these ‘credits’ worth anything.
With regards to the buying of forest lands in So.Am. , wasn’t there a story on how some NGO bought up a large strip of land and prevented the host country from putting in roads, thus separating the only route.

July 9, 2015 3:16 pm

Activity #5?

Ted G
July 9, 2015 3:35 pm

I’ve stated before, that the whole green industry is full of hucksters, liars and thieves. This is just one more aspect of the whole disgusting corrupt climate scam. Talking about a whole wack of crooks, they are having a major climate conference hosted by the crooked Ontario Liberal Government. with the crown prince of Hucksters Al Gore making a (were all gonna die) presentation today.
It’s beyond the pale!!!!

Crispin in Waterloo
Reply to  Ted G
July 10, 2015 7:34 pm

Don’t forget it is a secret meeting too. What were they plotting? Who were they plotting against? Whose money are they planning to use? How much will they earn from their collaboration?

July 9, 2015 3:40 pm

Wow!!! Why haven’t the networks picked up on this? Ok…don’t answer that, I already know. In light of the recent ‘computer glitches’ at the NYSE, the WSJ and UAL along with the massive data breach within the US Government, could these criminal organizations involved in the carbon trading scam have anything to do with it?

M Courtney
July 9, 2015 3:46 pm

All financial markets are corrupt. Not just the Green ones.
Think about it. Lot’s of money being used in complicated ways that only specialists can monitor.
All financial markets are corrupt.

Reply to  M Courtney
July 9, 2015 4:19 pm

And is it any wonder?
Money used to be something of positive value — a monetary metal of specific weight and fineness.
Now money is something of negative value — the irredeemable debt of default-happy governments.
Liabilities cannot be moved cavalierly to the asset column without causing the economic engine to run in reverse, such that healthy production is replaced by pernicious destruction.
The framers of the US Constitution were prescient when they wrote the Article 1 monetary clause mandating that only gold and silver coin are money.

Reply to  Max Photon
July 9, 2015 4:43 pm

moar koolaid!
it took the new us of a just a few years to bankrupt itself by inflation.
‘not worth a continental’ was the phrase .
the constitutional convention was intended to establish the means to force states to contribute to a new royalty seeking to light the path for the benighted.
article 1 section 10 is forbidding the states from issuing ‘script’ (exactly like the continental!) to pay the assessments of the new overlords.
the new lords and masters demanded gold and silver.
the constitution was not what the troo bleebers imagine.
it protects nothing but the centralized ruling class that it established.. it’s a cookbook.

Reply to  Max Photon
July 9, 2015 4:53 pm

Well that was puerile.
By definition money is the most marketable commodity. Gold and silver are demonstrably the most marketable commodities by several orders of magnitude, as measured by the least change in bid/asked spread as a function of volume brought to the market, and by their enormous stock-to-flow ratios as compared to other commodities.
The framers of the Constitution were cognizant of these simple facts, and worked with them, rather than against them.
Your comment is idiotic.

Reply to  Max Photon
July 9, 2015 6:35 pm

so, a little bit of ad hom, a soupcon of strawman, a dash of gish and a little bit moar magic ad hom.
“mandating that only gold and silver coin are money.” is not what article 1 section 10 says nor what it means, so maybe brush up on it by reading it word by word so you are clear on it.
your personal interpretation is of no interest..
before you even attempt to give a definition of ‘money’ you should review the definition of ‘definition’
and you just used up the time i allot for mucking with dummies this month- how special.

Reply to  Max Photon
July 10, 2015 4:10 am

if you had something intelligent to say, why didn’t you at least try.
Use real words and sentences and I’ll try and understand what ever it is.

Reply to  M Courtney
July 10, 2015 7:58 am

All govts are corrupt, the bigger they are, the more corrupt they are.
Regardless, if I read you correctly, you are proclaiming that if you aren’t able to understand something, then it must be corrupt. There must be a lot of corrupt things in your world.

July 9, 2015 4:05 pm

Watts Up With VAT

July 9, 2015 4:11 pm

What took them so long? The UN/IMF/IPCC Troica said so from the start and as published in between, as noted in

Lew Skannen
July 9, 2015 5:26 pm

I cannot even begin to describe how surprised I am.
(Actually the measure is zeroes all the way down)

July 9, 2015 5:59 pm
Reply to  Khwarizmi
July 10, 2015 4:31 pm

Wow, brilliant, you made the cut; the purer the Carbon, the higher the price. So, engagement rings show that the bearer is concerned about earthly relationships?

July 9, 2015 9:43 pm

@Arkady Bukh, Esq
Bravo I say, Bravo!
This is journalism.

July 10, 2015 1:45 am

According to the report, there are five categories of criminal activities in carbon markets
You have only listed four. What is the missing one?

July 10, 2015 2:57 am

Always remember,, and remind people, that money from ‘government’ really means money from taxpayers.

Richie D
July 10, 2015 4:23 am

This may not be the correct forum to pose the question —- but can someone explain to me what the hell “carbon trading” is? If carbon dioxide emissions are what is being traded, what does that have to do with carbon? If it were water rights, would they be referred to as “hydrogen rights”?
“Carbon market” sounds like a place anthracite coal would be traded. Referring to CO2 as carbon seems like the ploy of a propagandist who wishes to conflate carcinogenic soot with a life-giving gas.It can’t be that this is just a lazy headline writer’s shortcut since, obviously, CO2 is shorter than carbon…..

Just an engineer
Reply to  Richie D
July 10, 2015 6:04 am

per image above, see “diamond exchange”

Reply to  Richie D
July 10, 2015 2:54 pm

If it is like other exchanges. The govt declares that companies within the country can produce X tons of CO2 per year. They then sell to individual companies pieces of paper that give them the right to produce Y tons per year. If the company produces less CO2 than it thought, it can sell it’s excess rights to another company. If a company needs to produce more than it thought, it can buy from a company that managed to produce less.

Say What?
July 10, 2015 7:06 am

How convenient. A counter story to the one about Exxon being like the tobacco companies. It is a media war with marketing principles applied, IMO. Subliminal Seduction is a book from the 70’s. Look it up and compare today’s media techniques to those described in the book. That’s my take on this, anyway.

Say What?
Reply to  Say What?
July 10, 2015 7:10 am

Oops, I wrote that wrong. The Exxon story is the counter to this story but you get the gist of it: Obfuscation.

July 10, 2015 1:29 pm

Climate change, she has been good to me!

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