Economics for the Earth Blog

Carbon Fraud Guide Details Dangers of Carbon Markets Contaminated By Offsets

Posted May. 18, 2010 / Posted by: Nick Berning


For Immediate Release
May 18, 2010
Michelle Chan,, 415-544-0790 x214
Nick Berning,, 202-222-0748
Carbon Fraud Guide Details Dangers of Carbon Markets That Are Contaminated By Offsets
WASHINGTON, D.C.—A new “guide” for would-be carbon crooks and schemers released today by Friends of the Earth serves as a warning about the fraud, corruption and gaming abuses that are inherent to carbon trading systems contaminated with offset credits.
The “American Power Act” proposed by Senators John Kerry (D-Mass.) and Joe Lieberman (I-Conn.) last week would create just such a system.
The guide, Ten Ways to Game the Carbon Market, outlines ten different ways in which fraudsters can game carbon trading systems. Nine methods have already been successfully carried out. Some tricks are variations of classic scams such as Ponzi schemes, phishing and tax fraud. But other cons are more particular to carbon trading.
Michelle Chan, Friends of the Earth senior policy analyst and author of the report, said:
“Carbon offsets are especially prone to corruption and fraud. Every offset deal requires a story indicating that the emissions reduction would not have been possible without offset revenues, or that emissions would have been higher without the project. Because of this, the offsets market is inherently rife with opportunities for truth stretching—and outright lies.
“Also, much of the corruption that we have seen in the carbon markets involves bribes of consultants who are responsible for verifying emissions reductions from offset projects. Corruption risks are also high for the entities that grant carbon credits for offsets.
“The ‘American Power Act’ allows for some two billion tons of offsets to enter the U.S. market. Not only does this open the door for fraud, but it also allows the buildup of subprime carbon in the trading system. Subprime carbon is composed of carbon offset futures that, compared with regular emissions allowances, are at relatively high risk of collapsing in financial value because of failed promises to reduce emissions.
“To make matters worse, at the very moment the Senate is debating derivatives reform, the International Emissions Trading Association, a self-interested alliance of Wall Street traders and carbon polluters, is advocating that these carbon futures be traded in hard-to-regulate over-the-counter markets, rather than on more transparent exchanges. This proposal must be rejected.”
The full report can be viewed at
Friends of the Earth and our network of grassroots groups in 77 countries fight to create a more healthy, just world. Our current campaigns focus on clean energy and solutions to global warming, protecting people from toxic and new, potentially harmful technologies, and promoting smarter, low-pollution transportation alternatives.


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