ENFORCING EMISSIONS TRADING LAWS

Four charged in Belgian carbon fraud probe
Antonia van de Velde (w/Nina Chestney and William Hardy), 11 January, 2010 (Reuters)

"Three Britons and a Dutchman have been charged by Belgian authorities with money laundering in an investigation into fraudulent trading in carbon emissions permits, Belgian prosecutors said…

"The fraud occurs when carbon credits are bought and imported tax-free from other EU countries, then sold to domestic buyers, charging them value-added tax (VAT). The sellers then disappear without paying the tax to governments."

How the scam works - until the authorities bust the scammers. (click to enlarge)

"The three Britons were arrested at the end of 2009 in the Belgian town of Tournai as part of an investigation into transactions worth some 3 million euros ($4.30 million)…A fourth suspect from the Netherlands was arrested on Sunday. Prosecutors would not disclose the names of those arrested.

"The three Britons set up a company in Tournai, in southwestern Belgium, which bought the credits in Britain and sold them on to banks via an intermediary, pocketing the 21 percent VAT charged in Belgium…The Dutchman lives in nearby Mouscron and works for a Belgian company which bought the credits and sold them on to the banks…The three British suspects have denied the charges. The Dutchman's position was not yet clear…"

Also, called The Missing Trader scam, it was used on cell phones before it was used on emissions allowances but nobody suggested abandoning cell phones because of it and it similarly is no reason to abandon emissions trading. (click to enlarge)

"Last December, European police agency Europol said fraudulent trading in EU carbon credits in the past 18 months has led to more than 5 billion euros in tax revenue losses for several EU nations…Last August, the British tax office arrested seven people in London in a suspected 38 million pounds value-added tax fraud in the carbon market. Several other EU states have raised concerns…

"A European Commission working group approved a proposal… to apply a "reverse charge" mechanism to carbon trading to prevent possible VAT fraud."