Carbon trading has the potential to be a fraudsters' paradise. It's a point raised by investigative journalist Mark Schapiro in a recent piece in Harpers where he describes the growing carbon market as "an elaborate shell game, a disappearing act that nicely serves the immediate interests of the world's governments but fails to meet the challenges of our looming environmental crisis".
When you think about it, that's hardly surprising. Carbon trading creates an asset market comprised of buying and selling non-physical, hard-to-measure goods. Of course, you are going to get con men.
We are already seeing that happening with The Times reporting about the carbon market's first rogue trader who made £1.8m ($US$2.8 million) selling invalid carbon permits to unwitting buyers in Europe.
At the same time, Spanish authorities are cracking down on so-called carousel fraud where traders are avoiding pay tax on their transactions. Nine people have been arrested so far.
We better get used to it. This is a new and evolving market. Fraudsters are moving in and the rules are still being created. It's going to make some people very rich. The problem is that public and government scepticism about carbon markets will continue to increase as more of these reports surface.
The other big danger of course is that will create a carbon bubble that will ultimately make the US housing market crash look like a picnic. It's a point I looked at in my column here.
What we badly need are more controls and a system that actually measures greenhouse gas emissions around the world accurately. something that allows for verification that local carbon offset programs are working as advertised. If we had that, it would make a market built on the buying and selling of tiny molecules in the air a solid and quantifiable asset class. And it might make it more difficult for fraudsters.
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