Scamming the carbon markets in ten easy steps

(July 2, 2010) Michelle Chan at the environmental group Friends of the Earth offers a quick and easy way to scam carbon markets.

The expanding carbon market is providing scammers and other financial fraudsters ample opportunity to turn a quick profit.  For a quick primer on how to scam the carbon markets, look no further than a report from Michelle Chan at the environmental group Friends of the Earth.

In her “Ten Ways to Game the Carbon Market” she provides ten simple, and proven, methods of scamming the carbon markets. The opportunities range from tweaking carbon baselines to receive windfall profits from excess carbon credits to selling fake credits to unsuspecting citizens in the developing world.

Take the excess carbon credits as an example. According to Ms. Chan, ten European companies were given 35 million tons of surplus emissions—allowing them to earn millions of dollars by selling these excess emissions on carbon markets. With the economic downturn, if they decide to bank their carbon credits and sell them later, researchers estimate that their value could rise to as much as $4.17-billion over the next five years.

Ms. Chan also says companies are “recycling” their carbon credits—meaning they take a carbon credit that has already been “spent” and then re-sell it to another investor. This means that the carbon offset is double counted—with two parties buying the same carbon offset at different times. This exact situation happened in March 2010 causing the continent’s leading carbon exchange to shut down for three days.

And these are just the tip of the iceberg—read Ms. Chan’s excellent report for other scams.

“Carbon trading systems are complex, and the more complex they are, the easier they are to manipulate,” she warns, likening the emerging carbon market to “a whole new Wall Street casino.”

Probe International, July 2, 2010

Further Reading:

• Carbon credit fraud makes its way to Liberia
• It’s official: global warming solutions will destroy the environment
• Power taken from the people: UN carbon scheme threatens to ‘recentralize’ forest governance, spelling doom for forest ecologies
• The Offsetters’ Paradox: Wind mills in China highlight incurable problem with international carbon credits
• Carbon may turn subprime
• Carbon offset companies: the new snake oil salesmen?
• Coming soon to a carbon market near you: regulation and corruption
• Gasping for air: Carbon markets stumble, again
• The great carbon con
• Carbon markets deflating in the wake of Copenhagen
• The state of affairs for carbon
• Breathe of fresh air: banks pull out of carbon market
• The next big scam: carbon dioxide
• Russian Roulette: Russia’s surplus of carbon credits too big of a gamble for some
• Group tracks carbon credit trading and issues warning
• Carbon credit scams add to the growing list of alleged fraud cases
• At what cost are carbon credits funding hydro projects in the developing world
• How Kyoto credit scams work
• Carbon Boondoggles