How fraudsters made 600,000 EUR a day trading EU carbon credits

In August, Le Monde made a splash with a story little-noted in the Anglophone media, setting out the details of what the paper dubbed the ‘scam of the century’. The EU was fleeced of 6 billion euros, of which the biggest part—1.6 billion euros—was stolen in France, according to data from Europol.

Like many scams against governmental organisations, it originated in a well-intentioned but poorly designed scheme with loopholes through which fraudsters were able to siphon off money. The story begins in 2008, when the EU set up a carbon emissions trading system called EU ETS. EU ETS gave businesses quotas for the amount of carbon they could emit.

There were no penalties for exceeding the quota; rather, companies were required to buy carbon pollution credits from other companies which had emitted less than they were allotted. Such schemes are generally seen as an innovative way of incentivising companies to reduce their carbon footprint, and have been adopted in California, Australia and New Zealand. The US has a similar nationwide emissions trading system designed to combat acid rain.

But in the case of EU ETS, a network of criminals soon saw that the scheme’s efforts to be compatible with the globalised operations of European businesses represented a money making opportunity. Carbon pollution credits could be sold outside of Europe—but, outside of the EU’s jurisdiction, they were not subject to the bloc’s 19.6% VAT.

Consequently, the fraudsters bought vast sums—no precise figure is known—of EU carbon credits overseas, only to sell them in Europe, where the tax applied, inflating the overall cost for buyers and pushing up the proceeds for the sellers.

The proceeds were laundered using a series of shell companies and offshore accounts. Members of the group started off as petty street crooks, only to revel in lavish lifestyles when outrageous sums of money started rolling in from the scheme. One fraudster, Cyril Astruc, told Le Monde that at the peak of the scheme he had been making more than 600,000 euros a day.

In 2016, there was a successful trial prosecuting the group. However, the gargantuan sums siphoned off a scheme set up to protect the planet from its greatest threat were never recovered.

Tom Wheeldon is a freelance journalist and political commentator at Radio France Internationale.