Fraud Plagues European Carbon Market

The European carbon market has been thrown into turmoil after the scandal-hit scheme was suspended for a week over suspicions of fraud. The suspension follows allegations that 475,000 carbon credits worth 7 million euro ($9.5 million) were stolen in a hacking attack on the Czech carbon register. It appears that the intangible allowances were bounced between eastern European countries before disappearing without a trace, says the Telegraph (U.K.).

This is not the first challenge to the credibility of the 90 billion euro ($122.8 billion) annual market in carbon allowances.

Under the flagship scheme, companies need permits to emit carbon dioxide.

But it has been plagued by fraud, with Europol estimating that carbon trading criminals trying to play the system may have accounted for up to 90 per cent of all market activity in some European countries during 2009.

Fraudulent traders mainly from Britain, France, Spain, Denmark and Holland pocketed an estimated 5 billion euro ($6.8 billion).

Carbon allowances are particularly susceptible to fraud because they are high value, intangible and easily moved between different countries.

Source: Rowena Mason, European Carbon Market Suspended over Fraud Fears, Telegraph (U.K.), January 19, 2011.

For text: http://www.telegraph.co.uk/finance/newsbysector/energy/8269907/European-carbon-market-suspended-over-fraud-fears.html

For more on International Issues: http://www.ncpa.org/sub/dpd/index.php?Article_Category=26

First published by the National Center for Policy Analysis, United States

FMF Policy Bulletin/ 01 February 2011