Criminal gangs are believed to have used the European Emissions Trading Scheme as a tax evasion tool, to the tune of £1bn.

The scam was thought to have been set up in the UK and Spain but now detectives in Italy, Sweden and Denmark have also joined the hunt for the perpetrators.

At its core, the scam using cross-border carbon trading to avoid VAT.

This latest carbon trading scandal will further damage the reputation of the ETS and wider carbon trading, which has been badly bruised in recent weeks by a court ruling that its efforts to set carbon caps in Central European countries was illegal.

The UN has also been forced to suspend its accreditation of a number of companies dealing in carbon offsets as part of its own Kyoto protocol.

Sam Bond

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