Wednesday, December 16, 2009

Cap-and-Trade Model Appears Liable to Fraud

The cap-and-trade model has become under increasing pressure as it has surfaced, once again, that the model is open to fraud. It appears that the European Union's Emission Trading Scheme has been defrauded billions of dollars.

The fraud issue appears to be related to monies actually within the scheme, but to VAT payable on the transactions. Companies / traders were buying / selling across the various EU borders to avoid VAT, particularly in Denmark where VAT stands at 25% (compared to the EU average of 21%). The trades were occurring for the sole purpose of reclaiming VAT which invariably boosted ETS activity. It is known as carousel fraud and has happened in lots of different industries over the years across the EU. The ETS is the latest.

The carbon tax option is starting to look better and better...

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