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Despite its relative infancy, the global carbon market is plagued with a virtual deluge of corrupt and illegal transactions. Over the past two years it appears as if the floodgates have been opened to a torrent of fraudsters, scam artists and fake businesses. It is suspected by international police authorities that this has been led by well-organized criminal elements. Such a rapid spread of corrupt practices now threaten to undermine confidence in the global carbon market, thereby constituting the third and final fundamental flaw confronting the search for market-based solutions to the global climate problem. I shall be addressing this in todays column.
Both segments of the market, the one dealing with trades in emissions allowances and permits and that dealing in carbon offsets (including forest-carbon) under the Clean Development Mechanism (CDM) and the Joint Implementation (JI) mechanism have been badly affected. In the former market segment, most of the occurrences discovered so far have been on the European Union (EU) climate exchanges, where trading in EU Emissions Allowances (EUAs) dominate. In the latter market segment, several disturbing revelations have been made about trades in the nascent forest carbon projects.
The overall situation has become so worrying that in December 2009 Europol, the European police agency, reported in a statement:
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