I first heard about carbon trading at a conference more than 10 years ago. I got up and said ‘If I was the financial adviser to the Mafia, I would advise them to get into carbon trading.’ Nothing that has happened since then changes my opinion - rather the reverse.” (Bryan Leyland, 22 November 2007)

The EU’s emissions trading scheme (ETS) has been accused of systematic double counting of carbon allowances by a new report released last week.

The study from green business think-tank E3 International claimed that around 18m allowances had been double counted, making it impossible for independent observers to verify the environmental benefits of the scheme.

Under the ETS, 10,500 of Europe’s biggest polluting firms are assigned carbon allowances – each representing a tonne of carbon and boasting a unique serial number – totalling the level at which their emissions are capped. If their emissions exceed this cap they have to buy extra allowances to account for the extra pollution. Firms then have to surrender to national registries enough allowances to cover their annual emissions.

E3 International said it had analysed all the serial numbers of carbon allowances surrendered to date by participants in the scheme and displayed on the Community Independent Transaction Log (CITL) and found that nearly 18 million allowances had been surrendered by firms more than once.
http://www.businessgreen.com/business-green/news/2204331/emissions-trading-slammed

Carbon trading is an open invitation to fraud, in the opinion of Auckland energy consultant Bryan Leyland, who is chairman of the economic panel of the New Zealand Climate Science Coalition.

“I first heard about carbon trading at a conference more than 10 years ago. I got up and said ‘If I was the financial adviser to the Mafia, I would advise them to get into carbon trading.’ Nothing that has happened since then changes my opinion - rather the reverse,” said Mr Leyland.

“It is interesting to compare it with electricity trading. In an electricity market, the amount of electricity bought and sold is measured to an accuracy of +/- 0.2% every 30 minutes. On top of that, when you buy electricity, you get an amount of energy of high value that you can use directly for your benefit.

“With carbon trading, it is all different. The amount of greenhouse gas emissions from an industrial plant can be measured to an accuracy of, at best, +/-10%. If you are purchasing carbon credits from, for instance, a forest, the accuracy of measurement is probably something between +/-100%. If it is a tropical forest, it could be minus 150% because there is reasonable evidence that some tropical forests are net emitters of greenhouse gases,” Mr Leyland continued.

“But it gets worse. In between the buyer and seller is an ‘auditor’ who, in theory, can make an accurate judgement as to the quantity of greenhouse gases being traded. He is the direct equivalent of the old inspector of weights and measures or electricity meter reader. If the reading of an electricity meter is fiddled, one party wins and the other party loses. But if an auditor fraudulently states that a forest is absorbing say, 200 tons of carbon dioxide per annum when a more realistic figure might be 100 tons, both parties win. The forest owner wins because he sells more credits. The purchaser of the credits wins because he is out to buy a piece of paper certifying that he purchased carbon credits. If the volume is fiddled upwards, the chances are that the price per tonne will be reduced and, anyway, he probably needs to buy more credits than are available.

“So, to my knowledge, carbon trading is the only commodity trading where it is impossible to establish with reasonable accuracy how much is being bought and sold, where the commodity that is traded is invisible and can perform no useful purpose for the purchaser, and where both parties benefit if the quantities traded have been exaggerated.

“It is, therefore, an open invitation to fraud and that is exactly what is happening all over the world,” said Mr Leyland.
http://www.scoop.co.nz/stories/SC0711/S00060.htm