The Guardian reports that EU taxpayers are likely to have lost at least €5bn (£4.5bn)

to VAT fraud related to the EU’s carbon trading system (ETS) and there is a risk that the criminals will now shift their attention to Europe's electricity and gas markets, according to Europol – the EU’s policing agency. The article quotes Rob Wainwright, the Director of Europol, saying, “These criminal activities endanger the credibility of the European Union Emission Trading System and lead to the loss of significant tax revenue for governments.”

The fraud involves a criminal registering to be able to trade carbon permits in the ETS. The criminal then starts buying carbon permits in one EU country from another, free of VAT, then sells them on with the VAT added. But instead of passing the VAT on to the relevant tax authority, he disappears without trace.

Yesterday, Open Europe published research showing that, under the ETS, oil and gas companies’ operations in the UK were granted a surplus of carbon permits worth €28.6m in 2008. In addition, heavy industrial polluters such as Corus received €47m, while cement firms Hanson and Lafarge received €17.3m and €20.2m. The research also found that the increase in carbon trading is providing Europe’s leading carbon exchanges with revenues of €245,000 a day, in transaction fees alone.

Guardian Irish Times Open Europe press release

SOURCE: Open Europe