September 11, 2013#

Danish film lifts lid on “crime of the century” CO2 trading scams

From Reuters Point Carbon. 

11 Sep 2013 18:18

LONDON, Sept 11 (Reuters Point Carbon) – Thefts, fraud and money laundering in Europe’s carbon market have cost European companies and taxpayers more than 15 billion euros ($19.9 billion) since its 2005 inception, according to a new documentary by Danish filmmaker Tom Heinemann.

In “Carbon Crooks”, a 57-minute film that aired on Danish television on Monday, Heinemann said he boiled down 80 hours of film and interviews to explore whether carbon trading has had any impact on rising global greenhouse gas emissions.

“I wanted to make a global film on global issues … but I turned my focus to the (carbon trading) system, and during my research it became clear to me that it has some serious problems, not only with the price of the credits but the ongoing fraud investigations,” Heinemann said.

The film focuses mainly on how the EU Emissions Trading Scheme (ETS), the world’s largest carbon market, was targeted by criminals between 2008 and 2011, events which some have called the “crime of the century”.

“The crime of the century? Well, I think it’s a good example of crime in the modern 21st century and how in particular the internet is used to exploit criminal opportunities,” said Rob Wainwright, director of Europol, in the film.

Carbon Crooks also features interviews with EU Climate Action Commissioner Connie Hedegaard, Danish Climate Minister Martin Lidegaard and former EU Environment Commissioner Ritt Bjerregaard.


The film claims Europe’s trading scheme was targeted by criminals with links to organized crime syndicates all over the world.

Heinemann shows how easy it was for criminals using false identities to open accounts at Denmark’s national emissions registry and commit international tax fraud, estimated by Europol to have cost European tax payers more than 5 billion euros.

The film alleges the Danish registry was mismanaged by Denmark’s Energy Agency, a claim supported by a March 2012 report by independent auditors Rigsrevisionen, which said the registry “attracted VAT (value-added tax) fraudsters and impacted the scope of VAT carousel fraud in other EU member states”.

Heinemann cites one example of an account at the registry opened under the name of a dead Indian poet Mirza Ghalib and registered to a housing estate north of Copenhagen.

“Including VAT fraud, money laundering and theft, it is around 15 billion euros, and more than 60 percent is due to VAT fraud,” said Marius Frunza, a carbon trading expert and lecturer at two French universities, estimating the cost of crimes related to the EU ETS.

Between 2010 and 2011, more than 50 million euros worth of carbon permits were stolen by hackers from a handful of national registries, using elaborate tactics such as triggering fire alarms in government buildings to create a diversion to give them access to accounts.

While all of the reported thefts related to accounts owned by companies, Heinemann reveals that in November 2010 an account impounded by Denmark’s state prosecutor for financial crime was hacked and 1,905 permits being held as evidence were stolen.


The film also examines criticisms of the voluntary carbon market and the Clean Development Mechanism, a carbon offset scheme designed under the 1997 Kyoto Protocol climate pact.

The CDM has come under fire by green groups for approving for climate finance potentially thousands of low-carbon projects that would have cut emissions regardless of whether they received proceeds from selling carbon credits.

The film claims Western countries and companies have bought U.N.-issued credits from Chinese wind farms that were not even connected to the grid, and from hydropower plants that had already been built.

“Looking back on a lot of the evaluations of the projects, it hasn’t worked. It’s been a lot of hot air with few concrete results … and that’s why we in Denmark have to make our green transition here,” said Danish Climate Minister Lidegaard in the film.


Heinemann also investigates a voluntary carbon offsetting scheme in Kenya, where 900,000 water purification devices – dubbed LifeStraws – were distributed by Swiss-headquartered disease control firm Vestergaard Frandsen to deter families from burning wood to boil their drinking water, thus cutting CO2 emissions.

The film argues that the credits, worth up to 67 million euros on the international carbon market, were handed out by carbon credit certifier The Gold Standard based on a survey showing that 79 percent of families would boil their water if they had the time and money, versus 25 percent that actually do.

But through interviews with locals, the film suggested LifeStraws were used by a tiny fraction of recipients, compared to a 92 percent usage rate measured by several studies carried out by three separate firms.

“Three large-scale, statistically relevant field studies of randomly selected households … showed 8 percent of circa 850,000 households do not use the LifeStraw. That is around 70,000 households, so it is unsurprising that Tom (Heinemann) was able to find households not using the filters,” a Gold Standard spokeswoman said.

She added that after assessing the surveys, The Gold Standard agreed to issue half the credits – some 1.3 million units – but would commission a further investigation before handing out the rest.

Carbon Crooks was part-funded by British non-profit film foundation BRITDOC, support that Heinemann hopes will lead to the documentary being aired on UK television.

By Michael Szabo – michael.szabo@thomsonreuters.com

Thomson Reuters Point Carbon is a world-leading provider of independent news, analysis and consulting services for European and global power, gas and carbon markets. Thomson Reuters Point Carbon’s comprehensive services provide professionals with market-moving information through monitoring fundamental information, key market players and business and policy developments.

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