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The Carbon Market’s Dirty Secret: Corruption and Anti-Climate Lobbying

How the Black Market in Pollution Permits Undermines the Paris Agreement and the Climate Action.

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Carbon credits are certificates that allow companies and countries to emit a certain amount of greenhouse gases, such as carbon dioxide, into the atmosphere. They are meant to be a market-based solution to climate change, by creating incentives for reducing emissions and investing in clean energy. However, the carbon market has also attracted fraudsters, hackers, and organized crime groups who see an opportunity to make millions by stealing, reselling, or faking carbon credits.

One of the most notorious cases of carbon credit fraud involved the Black Dragon, a hacker who was hired by a client named Jugga to break into the computer systems of national registries that store and trade carbon credits in Europe. The Black Dragon managed to steal over 500,000 carbon credits worth about $7 million from registries in Romania, Italy, and Germany in 2011. He then transferred them to Jugga’s accounts in Liechtenstein and Britain, where they were quickly sold to unsuspecting buyers. The Black Dragon was later arrested and sentenced to three years in prison.

Another example of a carbon credit scam is the forest mafia, a network of scammers who target indigenous communities in developing countries with promises of lucrative deals for preserving their forests. The scammers claim to be developers or NGOs who can help the communities set up projects under the United Nations’ REDD program (Reducing Emissions from Deforestation and Forest Degradation), which allows them to sell carbon credits generated by avoiding deforestation. However, the scammers often trick the communities into signing contracts that give them full control over their lands and resources or simply forge their signatures. They then sell the carbon credits to investors or corporations who are unaware of the fraud or do not care about the social and environmental impacts.

The carbon market is vulnerable to these kinds of scams because it is largely unregulated, complex, and opaque. The product is invisible, poorly understood, and hard to verify. The prices are volatile and influenced by political and economic factors. The transactions are cross-border and involve multiple intermediaries. The oversight is weak and fragmented among different countries and agencies. The enforcement is slow and ineffective against sophisticated criminals who can exploit loopholes and hide their tracks.

The victims of these scams are not only the legitimate buyers and sellers of carbon credits but also the environment and the people who depend on it. The scams undermine the credibility and integrity of the carbon market, which is supposed to be a key tool for fighting climate change. They also deprive the forest communities of their rights and livelihoods and expose them to violence and corruption.

To prevent these scams, experts recommend strengthening the governance and transparency of the carbon market, improving the verification and monitoring of carbon credits, enhancing cooperation and coordination among law enforcement agencies, raising awareness and education among stakeholders, and supporting the participation and empowerment of forest communities.

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