An Assessment of Carousel Value-Added Tax Fraud in The European Carbon Market

The literature on the European Union Emission Trading System (EU ETS) is by now very rich. Much is known about the efficiency, the effectiveness, and the environmental and distributional impacts of the EU ETS. Less, however, is known about the carousel value-added-tax (VAT) fraud phenomena in the European carbon market. This article evaluates the welfare effects of carousel VAT fraud in the EU ETS using a computable general equilibrium (CGE) analysis. According to our findings, if VAT fraud occurs in the EU ETS, the effects on welfare for the EU Member States are negative, with welfare loss significantly higher than the VAT fraud value. This article also discusses the reverse charge mechanism that EU Member States could adopt to reduce the VAT fraud phenomena in the European carbon market

Fraud on the European Union Emissions Trading Scheme: effects, vulnerabilities and regulatory reform

As the European Union Emissions Trading Scheme (EU ETS) has grown in size and value, it has become an increasingly attractive playground for fraudsters. The past two years have seen value-added-tax (VAT) fraud and emissions allowance thefts emerge as major threats to the EU ETS market. This study explores the effects that these forms of fraud have had on parts of the EU carbon market; uncovers vulnerabilities in the regulation of the registries (the ``banks'' of accounts in which emissions allowances are kept and from which they are traded) and the oversight of the EU ETS market; and analyses the adequacy and wider implications of the regulatory reforms recently proposed by the European Commission. A series of semi-structured interviews conducted for this study exposes a significant amount of discomfort amongst stakeholders regarding the proposed reforms to the regulation of the registries system, which is felt could still leave the system vulnerable to fraud and its effects. The potential extension of the EU financial markets oversight regulations has also led to fear that the future regulatory framework may be disproportionately burdensome for some market participants, potentially compromising the cost-efficiency of this emissions abatement tool. Moreover, the paper highlights the difficulties involved in the investigation and prosecution of fraud in the carbon markets and assesses the extent to which recent developments in EU criminal law, in particular since the ratification of the Lisbon Treaty in 2009, hold the potential to overcome some of the existing barriers to the effective criminal law cooperation between the Member States

Report on the legal implementation of the EU ETS at Member State level:Deliverable D2.4 ENTRACTE – Economic iNsTRuments to Achieve Climate Targets in Europe (EU/FP7)

The integrity of the European Union Emission Trading Scheme (EU ETS) relies upon consistent and uniform implementation and enforcement across all 31 participating states. The compliance cycle of the ETS - consisting of compliance assistance, inspection and enforcement - is a continuous dynamic, complex process. Although harmonisation of monitoring, verification and reporting (MRV) has improved, the functioning of the ETS compliance practice in the different Member States varies greatly. This is due to differences in underlying principles of enforcement strategies, institutional settings and in funding. While compliance rates are currently high, efforts should be afforded to ensuring more harmonized practice with a view to likely future price increases of allowances

The Carbon Market Challenge : Preventing Abuse Through Effective Governance

Carbon markets – both emission trading systems and baseline and credit systems – are an increasingly common policy instrument being introduced to address climate change mitigation. However, their design is crucial to ensure that they deliver cost-effective emission reductions while maintaining environmental integrity. This Element puts together a comprehensive, principle-based overview of the risks and abuses to environmental integrity and cost effectiveness that have emerged for carbon markets at all jurisdictional levels around the world, provides concrete examples, and offers effective policy and governance solutions to overcome such risks. This title is also available as Open Access on Cambridge Core

Emissions Trading: A Policy Option for Fighting Climate Change in Africa

This thesis shows how an emissions trading scheme can help African countries contribute to the goal of stabilizing the concentration of greenhouse gases in the atmosphere. This is done through an assessment of the gaps in Africa’s climate change mitigation policy architecture and the potential benefits of emissions trading as a policy instrument—including lessons learned from emissions trading schemes implemented in the US, the EU, New Zealand, and Chile. The thesis concludes that adopting an emissions trading scheme as a policy instrument in Africa could potentially close the gaps in its policy architecture

Governance of Emissions Trading Systems

Emissions trading continues to expand as a flexible policy response to climate change. Its implementation raises complex governance challenges, however, and calls for robust institutional, regulatory and procedural frameworks. Unlike aspects of technical design and implementation, the governance of emissions trading systems (ETSs) has found less extensive treatment in the available knowledge base. However, existing systems offer valuable insights into the successful governance of emissions trading from the initial establishment and routine operation of an ETS to the review of its performance and the management of change. This report draws on such experiences to provide guidance on the governance of an ETS across all stages of its evolution

A Brazilian Emissions Trading Scheme: modelling a legal framework to secure its environmental integrity and ensuring effective reduction of greenhouse gas emissions

Brazil is one of the world’s largest emitters of CO2. However, given its unique emissions profile, which results from its high proportion of land-use related emissions together with the potential availability of renewable energy sources, Brazil possesses enormous potential to reduce its CO2 emissions and transit to a low-carbon economy. As part of its efforts to mitigate climate change, the Brazilian Government has developed an ambitious voluntary greenhouse gas emissions reduction target and a climate change policy, the Brazilian Climate Change Policy, which foresees that a future Brazilian Emission Reduction Market could be part of the country’s efforts to reduce emissions. However, to date, there has been no formal adoption of such a market or any governmental indication of how it should operate. This thesis examines the possible development and application of an emissions trading scheme (ETS) in the Brazilian context and analyses whether an ETS would be relevant to assist Brazil in reducing its greenhouse gas emissions. In particular, the thesis addresses the question of what is the most appropriate legal framework for securing environmental integrity in a future Brazilian ETS. To this end, the adoption or consideration of ETS as a climate change policy, both internationally and in relevant national jurisdictions, is examined and a critical analysis of emissions trading in the context of the Brazilian legal system and development dynamics is advanced. The key inherent and contingent features of emerging ETS in the EU, New Zealand and Australia are identified and analysed, and the potential benefits of an ETS, together with the optimal conditions for its application in the context of the Brazilian greenhouse gas emissions profile and corresponding climate change legal and policy framework are assessed and evaluated. The thesis concludes with an analysis of the conditions for optimal incorporation of an ETS into the Brazilian legal framework, identifying the structural and functional elements needed for a Brazilian ETS to effectively reduce greenhouse gas emissions. By doing so, this thesis models the potential role of ETS in filling a gap in the Brazilian regulatory framework devoted to climate change mitigation

Environmental Governance in the Carbon Economy: Regulating Greenhouse Gas Emissions in California\u27s Cap-and-Trade Program

Since 2006 California has been pursuing the most ambitious climate change policy in the United States, implementing a suite of greenhouse gas reduction measures ranging from automobile refrigerant disposal rules to clean energy standards for electric power utilities. The most significant of these measures is the creation of a cap‐and‐trade program. Through this program, regulators seek to create a knowable price‐signal to incentivize emissions reductions among polluters. Using a suite of ethnographic methods, this dissertation looks at the people, ideas, and institutions that have been mobilized in the creation of California’s cap‐and‐ trade program. Substantively, the dissertation engages with three key aspects of the program. First, the way that economic theory is deployed in the creation of the rules of exchange, and how that theory is made to take a compromised but still structuring role in light of the political pressures on regulators in writing the rules of exchange in financial representations of greenhouse gases. Second, the dissertation examines the diverse values, economic and non‐economic, in play during the creation of financial representations of greenhouse gases; and third, the environmental and social justice ramifications of structuring an emissions reduction program around the motivation of doing so at the lowest possible cost to polluters. Theoretically, this dissertation is informed by political ecology on the commodification of nature, commodity theory drawn from economic geography and political economy, and sociological theories of economic practice primarily originating from the social studies of finance. The conclusion of the dissertation is that the result of countless hours of work by regulators and their interlocutors is a suite of market‐like mechanisms that ultimately function more like the administrative tool that environmental markets’ early advocates envisioned rather than the full‐blown financialization of the atmosphere, though with potentially detrimental environmental impacts for vulnerable communities

Tax Reforms in EU Member States 2011: tax policy challenges for economic growth and fiscal sustainability

Fiscal sustainability and economic growth are key concerns at the current juncture. The focus of tax policy has now shifted away from stimulus measures towards a much needed consolidation of public finances, made even more necessary in light of the difficulties currently faced by some Member States in refinancing their sovereign debt. At the same time, tax policies may play an important role in enhancing the growth potential of the EU economy, which is a goal per se but also a condition for making public finance sustainable. A growth-friendly tax structure is particularly important to cope with today's policy challenges. As a background for the analysis, the 2011 issue of the report ‘Tax reforms in EU Member States’, subtitled this year as ‘Tax policy challenges for economic growth and fiscal sustainability’, provides an overview of recent trends in tax revenues and of tax measures adopted in Member States in 2010 and the first half of 2011. In addition to these descriptive chapters, this year's report provides an analytical focus on two topics of particular relevance at the current juncture. The first analytical chapter of the report addresses the multi-faceted concept of the quality of taxation – particularly relevant for any future tax reforms – with a particular focus on the tax structure. A ‘good’ tax system should design taxes so as to reduce distortions to the minimum possible and, where appropriate, correct market failures. Well-designed tax reforms promoting employment and growth can go hand in hand with social equity. To avoid adverse interaction between cross-country tax systems, tax policies should benefit from an efficient coordination at the EU level. The second analytical chapter discusses three types of potential challenges in the area of tax policy currently faced by EU Member States: (i) addressing severe fiscal consolidation challenges also on the revenue side, (ii) making the overall tax structure more growth friendly and (iii) improving the design of the tax system for individual types of taxes. Applying an indicator-based approach, the report identifies in which euro-area Member States higher tax revenues might potentially contribute to consolidation and which countries might benefit from a shift from labour taxes, in particular those bearing on vulnerable groups, to consumption and real estate taxes. Analysing more specific horizontal challenges related to the design of individual taxes, the report concludes that almost all euro-area Member States face at least one challenge.financial crisis, tax policy, taxation, fiscal consolidation