What is carbon credit fraud?
A carbon credit is a certificate representing an organisations right to emit one tonne of carbon dioxide (CO2) or the equivalent amount of a different greenhouse gas into the environment.
Each carbon credit has a value. They are sold and bought by companies to encourage the reduction in greenhouse emissions. Where a reduction in CO2 emissions occurs it creates ‘spare’ certificates which can be traded for profit. The fraud occurs during the sale of certificates at a tax level, specifically Value Added Tax, or VAT.
How does the fraud work?
There are a number of carbon credit frauds. An example is ‘Carbon Credit VAT Fraud’, often referred to as the ‘VAT Gap’. The VAT Gap is the difference between the amount the (for example) European Commission expects to ‘take in’ and what member states ‘actually bring in’. Fraud occurs where illegitimate companies reclaim VAT paid out on purchases of credits in the fraudulent chain.
How is the UK responding?
The UK Government announced in 2009 its decision to make carbon emission trading ‘zero-rated’ for VAT purposes, making it impossible to claim VAT on the sale of carbon credits in the UK. The 2019 UK VAT Gap is £10 billion (or 7% of net VAT income), with fraud and evasion largely responsible for the difference though an increasing amount of cases relate to carbon credit fraud.
What should you be wary of?
Carbon Credit Certificates, also frequently marketed as Voluntary Emission Reductions (VERs) or Certified Emission Reductions (CERs) are offered as an opportunity to invest directly in a platform that generates carbon credits as a return on investment.
Although certificates are often ‘certified’, the certification process is itself voluntary and involves a wide range of cross jurisdictional bodies maintaining different quality standards that are not recognised by the UK compensation scheme.
What should you do now?
If you would like to check whether an opportunity to invest in carbon credits is real or fake, call us or send a message using the form below. If you have already lost money to a scam the people behind the scam are likely to contact you again, potentially with a different scam. At the very least they may sell your personal details to other criminals. Put a stop to it now!
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