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    Carbon Credit Fraud | Investigations Re-opened by City of London Police

    Criminal Defence Solicitors | Vat & Tax SolicitorsNEWSCarbon Credit Fraud | Investigations Re-opened by City of London Police



    August 26 , 2016 | Posted by Kangs Solicitors |

    Carbon Credit Fraud | Investigations Re-opened by City of London Police

    Frances Murray of Kangs Solicitors provides an update on the issue of carbon credit fraud and details the steps the authorities are taking to combat such fraud.

    Following a number of Company Director Disqualifications of those who operated companies involved in the trade of Carbon Credits, it was thought that the criminal prosecutions of those individuals would not be pursued.

    However, the City of London Police have sought to reopen matters and resurrect the criminal investigation into those company directors, and employees, alleged to have Conspired to Defraud investors of millions of pounds by way of investment in Carbon Credits.

    What are Carbon Credits? | Carbon Credit Fraud Solicitors

    Carbon Credits fall into two categories:

    • compliance market credits; and
    • non-compliance [or voluntary] credits (‘VERs’).

    An explanation of the origins of Carbon Credits and the fundamental differences between the two categories can be found in the HM Revenue & Customs Supply and Consideration manual:

    Compliance Market Credits | Specialist Fraud and Tax Solicitors

    The Kyoto Protocol “requires developed countries, which have ratified the agreement, to limit their greenhouse gas (GHG) emissions over the period 2008 – 2012 (“the first period”).  It puts in place a “cap and trade” mechanism for GHG emissions.

    Kyoto imposes an emissions target on developed countries, expressed in tonnes of carbon dioxide emissions.  Each country receives Assigned Amount Units (AAUs) equivalent to their target emissions for the first period.  One AAU is equivalent to one tonne of carbon dioxide emissions.

    Under the Protocol, countries must have sufficient allowances to cover their actual GHG emissions or they will be subject to penalties”.

    In addition, a country “…which has less allowance units that its actual emissions, can purchase credits on the international carbon market to overcome its shortfall and thus comply with its Kyoto commitment.  A country which has more allowance units that it needs can sell its excess in the market”.

    The EU Emissions Trading System (“EUETS”) “…is a market-based, “cap and trade” scheme and is designed to provide incentives to polluting businesses to reduce their carbon emissions (and so contribute to the meeting of national GHG emissions targets).

    Under the EUETS specified “installations” (listed in Schedule 1 of the UK regulations and including energy, and iron and steel producers) are required to hold a GHG emissions permit.  Holders of permits are allocated EU Allowances (EUAs).

    At the end of each year installations must ensure that they have enough allowances to account for their installation’s actual emissions.  If they have exceeded their allocation, then they need to buy additional carbon allowances or face penalties for the shortfall.”

    VATSC64240: “Polluting businesses which are subject to the EUETS must hold, or obtain on the open market, and then “retire” sufficient emissions credits to cover their emissions.  If they do not, then they will suffer financial penalties”.   The credits are consumed to enable businesses “to engage in economic activity without penalty, and to meet their Kyoto commitments”. Kyoto and the EUETS “provide for exacting verification and regulatory processes, which allow both parties to a compliance market transaction to attribute a subjective value to the credit units.  The credits are widely traded on national and international markets.”

    VERs | The Secondary Market in Carbon Credits | VAT Solicitors

    VATSC64230: “The voluntary market has developed independently of government or national emissions reduction targets.  It provides a means for individuals and businesses to offset their carbon emissions outside the regulatory frameworks provided by the Kyoto Protocol and (EUETS).

    Voluntary offset retailers have developed their own standards to create credits, which use the generic term(VERs).

    VERs are generated by projects which certify they have, or will, reduce greenhouse gas emissions.  These projects cover a multitude of possible activities from alternative means of energy production (such as solar, wind, or hydroelectric power) through to carbon sequestration (for example tree planting)…

    VERs can never be used to meet greenhouse gas (GHG) emissions targets under Kyoto or EUETS”

    VATSC64240: “A VER is essentially a promise that carbon has been or may be reduced somewhere in the world.  There may be a general benefit to the reputation of a business (good PR, marketing and cooperate responsibility) in paying for a VER, but no particular service is rendered which can be identified as a cost component of the business”.

    The voluntary market is for individuals or companies who are not required to reduce emissions, but choose to do so.

    There is a huge variance in the price of VERs and this depends upon factors including the age of the credit, the type of credit and the project type.

    The older the VER the less desirable they are and therefore VERs become less valuable over time.  This is due to the fact that the tonne of carbon has been saved in the past and there is no real change in today’s carbon emissions.

    The Carbon Credit Fraud | VERs | Boiler Room Fraud Solicitors

    The authorities in the UK including the FCA, City of London Police and HMRC have received complaints from investors, claiming they were pressured into buying VERs or Certified Emission Reduction Units.

    The investors were sold the credits in units and told they would increase in price for sale on the secondary market.

    Many market experts are of the view that there is no secondary market for VERs and therefore they have no re-sale potential.

    Our Expertise in Defending Carbon Credit Fraud Allegations | Fraud Solicitors

    We at Kangs Solicitors specialise in the defence of complex fraud allegations.

    In particular, we have been instructed on numerous cases involving the sale of Carbon Credits.

    In 2012 we were instructed to defend the first criminal prosecution of its nature in the United Kingdom and achieved an acquittal for our client in a trial concerning a £38 million Conspiracy to Cheat the Public Revenue allegation by way of sale of Carbon Credits. The case was conducted by Hamraj Kang and Frances Murray of Kangs Solicitors.

    We have a long and proven track record in also defending subsequent cases of carbon credit fraud and we currently act for a number of clients who are the subject of such investigations and prosecutions.

    We are here to help | Contact Us

    It may be that you have been the subject of a dawn raid or the FCA, police or HMRC have invited you for a formal interview.

    We receive regular enquiries from clients who have become the subject of a criminal investigation and we have a 24 hour Rapid Response Team to assist all our clients.

    Our clients contact us knowing that they are entrusting their case to an expert team of defence litigation solicitors who have worked in the specialist sector of carbon credit fraud since its inception.

    Should you wish to discuss your case or require advice please contact one of our specialist solicitors below:

    Hamraj Kang
    07976 258 171 | 020 7936 6396

    John Veale
    0121 449 9888 | 020 7936 6396

    Frances Murray
    020 7936 6396

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