|dc.description.abstract||The Kyoto Protocol uses financial incentives to reach the environmental goal of reducing
greenhouse gas emissions. This environmental context facilitates certain frauds, namely
scams, bribery and corruption and fraud through structural flaws.
This thesis investigates the vulnerabilities of fraud of the European Emission Trading
System (EU ETS) and Clean Development Mechanism (CDM). In particular, the purpose is
to examine current literature and cases to understand the effect of the environmental context
on fraud. Fraud is the outcome of deceitful intentions (Collins Dictionary of Law, 2006).
Based on the fraud cases and literature I found that the main factors facilitating fraud are the
complexity of measuring atmospheric gases, their intangibility and alienability, the flawed
assumption of perfect interchangeability of credits, the conflicting incentives in a financial
market with an environmental goal and the legal vagueness and information asymmetries
caused by the structure’s uncertainty.
Through the analysis of market players, I found that the incentives of numerous stakeholders
make regulating the market difficult. The problem is that good incentives may lead to
environmentally undesirable outcomes, while fraudulent incentives may not do so.
Through analysing the cases, the environment is found to be a central victim in scams,
bribery and corruption and fraud through structural weaknesses. This means that distant,
defenceless or unaware victims cannot sufficiently protect themselves against fraud due to
the environment’s non-excludability.
Through my findings, I found that most fraud cases that negatively affect the environmental
objectives are associated with the CDM, while the other cases were largely associated with
the EU ETS. This supports the idea of limiting the trade between the markets to limit fraud.
Instead of replacing the system, I recommend that the know-how should be used to improve
the current system, for example by excluding projects with questionable environmental
benefits like carbon sinks (Martin & Walters, 2013).
A limitation is that malicious fraudulent behaviour and good intentions with unexpected
results were not always possible to distinguish.||nb_NO