No Finns implicated in European emission rights fraud

Poor European cooperation gives opportunity for malfeasance

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No Finns have been implicated in an extensive case of suspected fraud involving carbon dioxide emission trading in the European Union.
      According to the European police organisation Europol, a group of mainly British companies have evaded payment of VAT worth about EUR 5 billion in cross-border trade.
      Jarno Ilme, head of the emission trading group of the Finnish Energy Market Authority, says that he was informed by the European Commission of the case, but as far as he knows, Finland has not been used in the scheme, and there are no suspicions that an any Finns would have been involved.
      Ilme adds that the Energy Market Authority is not an enforcement body, and has no means to monitor compliance.
     
The purpose of the Energy Market Authority is to maintain a national emission registry where the emission rights granted by the state to industrial plants, and the unused emission rights are recorded.
      Once the emission rights have been distributed, companies can engage in trade with the emission rights. This can take place across national borders, but the trading, and the VAT that is paid in conjunction with the trading, is not something that the Energy Market Authority keeps tabs on.
      Ilme feels that the emissions trading system of the EU contains structural characteristics which open up possibilities for wrongdoing.
     
While the trading system encompasses the whole EU, it is partly national in the sense that each member state has its own emission registry, VAT needs to be paid to national tax authorities, and the system is monitored by national financial supervisors.
      However, there is very little actual cross-border cooperation, which opens up a big loophole for dishonest players.
     
“Emission trading fraud was used without hesitation at the Copenhagen Climate Conference against the idea of emission trading”, says Jussi Nykänen, chairman of the board of GreenStream Network, soon after returning from Copenhagen. GreenStream does consultant work and brokering in issues related to emission trading.
      “The countless organisations and other lobbyists in Copenhagen, have learned the image game. This, in addition to the furore over climate scientists' e-mails, is used without hesitation, if it fits the message”, Nykänen says.
     
He does not believe that the cases of fraud that have come to light primarily involve emission trading. He says that the problem focuses on the European VAT system, which has proven to be problematic in other cases of cross-border trade.
      Usually a buyer will pay a seller a price which includes VAT, and the seller is expected to pay the tax to the proper authorities.
      As the taxes need to be paid to the national tax authorities, it was possible to keep some of the paid taxes from the tax office.


Previously in HS International Edition:
  EU cuts Finnish emission quota (5.6.2007)
  COMMENTARY: Emissions trading for dummies (19.1.2009)
  New EU emissions trading period raises consumer price of electricity (3.1.2009)

Links:
  GreenStream Network

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