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.