Page 90 - Carbon Frauds and Corruption

Corruption of Bribery

Chapter 6 : Corruption in the “Carbon World”

 Participants may transfer credits to an associated company, associated broker or
“aggregator” at lower than the prevailing market price. This may shift profits from a
publicly listed company into a private venture

In March 2011, Estonia sold 10 million AAUs (that had been issued to it free of charge and were surplus to its
requirements) to Mistubishi Corporation for an undisclosed price. The transaction was conditional on Estonia
112
buying 507 Mitsubishi electric cars and a supporting infrastructure
Corus, the giant Indian steel conglomerate, took its allowances from its Redcar works, closed it down, and then
moved to India, with the loss of 1,700 British jobs. The net effect is that the company gained $1.2 billion in credits
with no reduction in worldwide emissions. This is euphemistically referred to by the UNFCCC and TI as “carbon
leakage”. Bless

The bottom line is that carbon markets are such as mess that they invite fraud and corruption. As
Larry Lohmann of The Corner House wrote in an excellent paper on offsets:

The abuses of power and wealth that constitute carbon market corruption do not derive mainly from the misdeeds
of individual Carbon consultants and profiteers, but inhere in market architecture itself……. the offset proposal
has birthed a monster”

13 TRADING AND INVESTMENT

13.1 Overview
Investing in the primary or secondary market associated with the “Carbon World” must be
assessed as high risk, involving potential breaches of the Bribery Act.

One offset provider’s website offers to fix its price of voluntary carbon credits at around £8 and to sell them to
anyone for resale. The idea is that airlines, travel firms and others will buy them to provide offsets for their
customers but it is a very tempting proposition for any crooked CSR manager. He can set up his wife or mistress in
business (or both if he is also a professional footballer): she buys the credits at £8 and sells them to her lover’s
employer for £20 plus VAT. He approves the purchase invoices; she pockets the profit and has a further option of
disappearing without paying the VAT.

The above case illustrates one of the control difficulties in the “Carbon World” . It arises because
it creates specialisms within companies which dishonest employees can exploit for their own
advantage, with excessive costs being explained away in the “noble cause”.

PRINCIPLE
Companies should be especially careful of “Carbon World” and CSR specialists who may exploit
the “noble cause” in a way that distorts commercial decisions for their own benefit

112 There is no allegation that this transaction was other than proper. It is discussed here to show how carbon credits are a
new form of currency.

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