B2B Payments

Carbon-Credit Trading Scandal Unfolds In Italian Court

Italian taxpayers may have been cheated out of 8.5 billion kroner ($1.4 billion) in a cap and trade scandal that saw various European nation’s trading carbon emission credits with a fake company that seemed to exist merely to harvest money from the carbon trading market.  Even better, the fraudsters it seems were using the funds to finance international terrorism, among other things.  

Under investigation is an English citizen of Pakistani origin who is said to be the ringleader of the fraud, and Italian shell company – SF Energy Trading – and 37 others (a little under half of whom are still at large)  for apparently shelling the CO2 registry for billions.

SF Energy Trading reportedly used the Danish CO2 quota registry to “gain access to quotas.  Those quotas which were then traded among German, Dutch, British and other Italian companies. One of the quota dealers who traded with SF Energy Trading was registered to a fake address in Hvidovre,” according to the Copenhagen Post.

More disturbing, the scam seems to have been aimed at more than relieving the state of Value-Added Taxation funds. It may also have been a tool by which money was laundered to terrorist factions.

The link was indicated by documents turned up by a joint British and U.S. operation aimed at the Taliban in the border region between Afghanistan and Pakistan, according to the Italian newspaper Corriere dela Serra.

“The documents that were found in the cave indicate the money swindled in this case has been used to finance terrorism,” said Giuseppe Guastella, a journalist with Corriere dela Serra.

This practice is not entirely uncommon.

“The goal was not just to swindle the VAT from the state, but also to use the CO2 to transfer capital to extremist and terrorist activities,” Frunza told DR Nyheder.

The alleged quota trading scandal now being prosecuted in the Italian courts reportedly happened between 2009 and 2010.  The Danish registry has been open for business since 2008.  Similar misuses of the system were addressed in 2012 regulations that tightened the registration criteria and procedure.

The scandal comes as the Europe’s emissions trading scheme (ETS) is struggling.  The prices of emitting a metric ton of CO2 has plummeted from around 140 kroner to around 30 kroner, undermining the market and reducing the incentive to invest in renewable energy technology.  A new proposal seeks to stimulate the price by reducing demand and essentially removing 900 credits from the market.  The plan has had some trouble gaining traction in the EU, and will likely not be helped by the ETS’s association with funding terrorism instead of environmental responsibility.



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