Denmark's ETS scam

Licence to scam

Any ETS is ripe for fraud and corruption. In December 2009, ACM reported that fraudsters had pocketed an eye-popping €5bn from the European ETS, so it’s little surprise when stories like this come to light. Connie Hedegaard, European Commissioner for “Climate Action”, wrote in The Australian on Monday that the Cancun “deal” put climate action “back on track”. Apart from the usual warmists’ trick of blaming individual weather events, such as the Moscow fires and Pakistani floods, on climate change when it suits them (despite huge swathes of the planet currently experiencing extreme cold), the article claims that the deal would restore public faith in the UN climate process. Stop laughing. And today, it is revealed that the Danish ETS, the inception of which was presided over by Hedegaard herself as climate and energy minister, was so lax in its background checks that rogue traders scammed 2% of Denmark’s entire GDP in lost taxes:

The Denmark CO2 permit registry was set up with extremely lax rules and regulations, possibly intentionally. In 2007, Hedegaard removed the requirement for identification and in a very short period of time traders figured out the loopholes and started to back up the proverbial truck. How? To put it simply: you could round robin CO2 credits, booking the VAT as a bonus each time.

What is painfully obvious is that more than 1100 of the 1256 (about 88 per cent) of the registered traders listed in their system were illegally set up for fraudulent activity. The traders have since been delisted as the scope of the crime becomes obvious.

The fake but registered traders used made up, unique addresses for their business: in one famous case, a trader was listed as trading out of a parking lot in London. In another, the trader took the name of a dead Pakistani national.

The fraud centred on the use of VAT [value added tax, European equivalent of GST – Ed] as a mechanism to generate real non-taxed cash flow. An international trader would buy VAT free credits from one nation, and then resell them to a VAT added customer in a second nation, pocketing as much as 25 per cent of the cost of the trade as a personal commission. The trader then kept the VAT difference in lieu sending in the VAT to the necessary tax system, effectively arbitraging the VAT system (See, e.g., Cap and Trade; Leaving Las Vegas, “The Hole You’re In”). This trade was coined a “carousel” as the traders would re-export the credits, claiming the VAT only to re-import the credits and reselling them again with a new VAT assigned. They could wash, rinse and repeat booking up to a 25 per cent VAT in the process each time. (source)

But this is par for the course in climate action – emissions trading schemes, solar rebates, wind farm subsidies, you name it. The politicians simply turn a blind eye when the ends justify the means, since “saving the planet” trumps any trifling concerns about fraud. Just more of the same green waste with which we have become so familiar, and with which we will become even more acquainted if a carbon trading scheme is ever established here.