UK Charges Group for Carbon Credit Fraud

In the wake of recent Interpol warnings that organized crime syndicates were taking notice of the potential lucrative fraud opportunities posed by carbon credit offset systems, nine people were arrested in the UK in a suspected $62.8 million carbon credit fraud as of August 20, 2009.

Officers believe that an alleged network of organized crime had been trading large volumes of high-value carbon credits from overseas sources free of value-added tax.

In May, Peter Younger, an Interpol Environmental Crimes Official, stated that "in the future, if you are running a factory and you desperately need credits to offset your emissions, there will be someone who can make that happen for you. Absolutely organized crime will be involved." The nine arrests, are a sure sign that Younger's predictions may be correct.

US Senator John Barrasso recently compelled Congress to take heed of Younger's warnings and realize that with the incorporation of a carbon credit industry, national security issues are certain to arise. "Organized crime will be the place to go to get carbon credits," warned Barasso.

The US, through its Environmental Protection Agency has joined forces with Interpol's Climate Change Crime and Corruption Working Group to explore legislative restraints and potential loopholes that may lead to the development of new crime with respect to climate change.

What does this mean for Canada? Canada is not immune from organized crime, and if Canada does not give serious consideration to the events which occurred in the UK, similar situations are likely to arise in our own nation. The final draft of Canada's voluntary carbon offset system is expected this fall and with such a heavy reliance on self-reporting, the above incidents in the UK are evidence that these systems are left vulnerable to tax fraud schemes.

The Minister of Environment Jim Prentice, has stated that "as Canada's economy is deeply integrated with that of the U.S., with which we share the same environmental space, the two countries must work toward the same climate change objectives." Canada will likely be keeping a close eye on U.S. policy relating to carbon offset systems going forward.