Page 87 - Carbon Frauds and Corruption

Corruption of Bribery

Chapter 6 : Corruption in the “Carbon World”

that claims do not exceed the production capacity agreed in the PDD, which is usually based on a
plant’s output prior to December 2004.

Strangely the UNFCCC failed to define standards for validation and verification of CDM projects but in 2002‐2003
DNV, in conjunction with TUV, developed an 86 point manual which now functions, more or less, as a standard. It
is far from ideal and concentrates the DOE’s field of interest to the strict technical boundaries of the project
concerned. Verification does not dig into formal accounts or other sources of corroborative data: it is superficial
and to cut travel costs to distant projects often takes place over video and data links.

DOEs are under pressure to perform and fiercely compete to obtain new assignments: they are
not well paid. Any inspector who gains a reputation of being too diligent would quickly lose his or
her popularity with both project participants and his employer. Thus there is an ever present
temptation for DOE employees to close their eyes to problems, or to be excessively generous in
their interpretation of the rules. In some cases, personal rewards might be in the offing although
there is no record of even one DOE ever being suspected of corruption, which is remarkable given
the temptations.

12.2.3.2 Relationships Between Inspectors and Inspected
Many companies have powerful “Carbon” departments (sometimes at board level) to drive CDM
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and JI projects or to manage other aspects of sustainability . Some are accountable as profit
centres in their own right, with key performance drivers and personal incentives that, not
unnaturally, encourage claims maximisation. There can be a perverse incentive to step over the
line between shrewd claiming, fraud and corruption and for relationships to be fostered with
DOEs and other inspectors that go beyond normal commercial standards. There is also a pattern
of “revolving doors” in the “Carbon World” and an inspector one day may end up in a high‐
powered job in the inspected company the next.

Incentive schemes, that reward CER maximisation, are sometimes extended to manual workers
who operate plant and take measurements on which claims are based. This again, results in a
perverse incentive and an inducement for fraud and corruption.

The critical measurement in one industrial gas project was the concentration of a chemical input (say 80%): with
higher concentrations resulting in more credits. Evidence emerged, which was supposedly not discovered by the
DOE, that the local plant manager had substituted metering and concentration measuring devices whose default
lowest level (say 82%) was higher than the concentration actually used (say 70%). This resulted in substantial
over‐claims and increased personal bonuses.

PRINCIPLE
Some of the most damaging cases of corruption and fraud are committed by blue collar –
operational ‐ employees

105 This is a danger signal!!

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