Climate crime threatens billions in aid

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Billions of euros could be plundered unless climate change mechanisms are strengthened and made more transparent, according to Transparency International (TI). 

The Berlin-based international watchdog released a report on 30 April, called 'Global Corruption: Climate Change', based on contributions from more than 50 experts.

It found that stronger oversight was needed to counter the threat of embezzlement in the 20 countries most vulnerable to climate change.  

International grants and aid are steered towards these countries, but they are also among the most corrupt in the world, according to TI.

Afghanistan was most at risk of corruption, the Berlin-based group found.  

"Where huge amounts of money flow through new and untested financial markets and mechanisms, there is always a risk of corruption," the report said.

It is estimated that total global climate change investments will reach almost €471 billion by 2020.

Corruption risks are high because of the complexity, uncertainty and novelty around many climate issues.

Massive frauds have shaken carbon markets, the main financial tool for combating climate change, particularly in Europe.

The European Union's €90 billion Emissions Trading Scheme has been blighted by the re-sale of used carbon offsets, hacking, theft and continuing value-added tax fraud.

Equally, the integrity of the UN's Clean Development Mechanism, which encourages emissions cuts in poor nations, has been tarnished by accusations of commercial exploitation, opacity and ineffectiveness.

"It is imperative that these lessons be considered in establishing new markets, and used to improve and reform the existing mechanisms," the report said.

The forestry sector is especially vulnerable to corruption due to high international demand for timber, weak land ownership rights and marginalised indigenous communities.

The World Bank estimates that between €7 billion and €15 billion worth of timber is felled illegally or comes from suspicious origins each year. This needs to be tackled before a UN-backed forest preservation scheme, called REDD, can work, according to the report.

The REDD scheme is expected to be established as part of a broader global climate pact from 2013, from when it could generate around €19 billion a year of funds.

Better oversight of forestry is essential to ensure projects are verified properly and carbon credits are not double counted or fraudulently-traded.

"Creative accounting can lead to the double counting of emissions by companies of their own reported mitigation efforts," the report said, "thus nullifying the environmental integrity of the emissions reductions".

TI also pinpointed the threat of corruption in political decision-making and climate financing and through the mismanagement of public funds.

(EURACTIV with Reuters.)

In March 2001, the European Commission proposed a Directive establishing an EU-wide minimum standard to combat environmental crime. It obliged member states to ensure that serious breaches of EU rules on environment were treated as criminal offences.

In January 2003, the Council adopted a Framework Decision on the protection of the environment through criminal law, establishing cooperation mechanisms between member states to combat serious environmental crime. But the Commission contested it, and the European Court of Justice later annulled the decision, opening the way for a new proposal by the Commission.

With a turnover of some €90 billion last year, the EU's Emissions Trading Scheme posed a trickier problem to regulate. The world's largest carbon market, it encourages companies to invest in low-polluting technologies by allocating or selling them allowances to cover their annual emissions. The most efficient companies can then sell unused allowances or bank them.

After a series of VAT "carousel" and "phishing" frauds last year, the Commission proposed tighter security measures. But a number of member states declined to implement them because they said they could not afford to. In early January 2011, the biggest carbon theft in history netted up to €28 million from the EU's ETS exchanges in the Czech Republic, Greece, Romania Estonia, Poland and Austria.

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