ANNOUNCEMENTS
The global urgency to combat climate change has led to the emergence of carbon markets as a pivotal mechanism for reducing greenhouse gas (GHG) emissions. These markets, built on the principles of cap-and-trade and carbon offsetting, aim to incentivize emission reductions by assigning a monetary value to carbon. However, as these markets have expanded, so too have the opportunities for exploitation and fraud. This dissertation explores carbon market fraud as a form of green collar crime—a term that encapsulates environmentally harmful activities committed under the guise of sustainability. It critically examines the legal, regulatory, and enforcement challenges associated with detecting and prosecuting fraudulent practices in carbon trading systems, both internationally and within the Indian context.
The study begins by tracing the evolution of carbon markets, from the Kyoto Protocol’s introduction of market-based mechanisms such as the Clean Development Mechanism (CDM), to the more recent frameworks under the Paris Agreement and the European Union Emissions Trading System (EU ETS). These instruments have laid the foundation for a global carbon economy, yet their complexity and lack of uniform enforcement have created loopholes that are frequently exploited. Fraudulent activities in carbon markets include the manipulation of emissions data, the sale of non-existent or duplicated carbon credits, and the use of carbon trading as a vehicle for financial crimes such as money laundering and tax evasion.
Interpol and other international bodies have recognized carbon market fraud as a growing threat to environmental integrity and economic stability. Despite this recognition, enforcement remains fragmented. The transnational nature of carbon trading complicates jurisdictional authority, while the intangible nature of carbon credits makes verification and accountability difficult. This dissertation identifies these enforcement gaps and argues that current criminal law frameworks are ill-equipped to address the unique challenges posed by carbon market fraud.
Through a doctrinal research methodology, the study analyzes key international treaties, national statutes, and regulatory instruments. It evaluates the effectiveness of legal frameworks such as the UNFCCC, the EU ETS, and India’s Perform, Achieve, and Trade (PAT) scheme, as well as the recently introduced Carbon Credit Trading Scheme (CCTS) under the Energy Conservation (Amendment) Act, 2022. The research also considers the role of regulatory bodies like the Central Electricity Regulatory Commission (CERC), the Bureau of Energy Efficiency (BEE), and the Commodity Futures Trading Commission (CFTC) in the United States, which has recently issued guidelines to enhance transparency in voluntary carbon markets.
The dissertation further strengthens its analysis through case studies that illustrate the real- world implications of carbon market fraud. These include the CFTC v. Ikkurty case involving crypto-carbon investment fraud, the indictment of Kenneth Newcombe of C-Quest Capital for manipulating emissions data, and the large-scale REDD+ fraud in Brazil’s Amazon region. These cases highlight the diverse modalities of fraud and the systemic weaknesses that allow such crimes to persist. They also underscore the need for stronger international cooperation, standardized verification protocols, and the integration of emerging technologies such as blockchain to enhance transparency and traceability in carbon transactions.
In the Indian context, the study explores the country’s evolving approach to carbon market regulation. India’s commitment to the Paris Agreement and its ambitious climate targets have led to the development of a national carbon market framework. However, the transition from voluntary to compliance-based mechanisms presents both opportunities and challenges. The dissertation assesses India’s readiness to implement robust monitoring, reporting, and verification (MRV) systems and the legal reforms necessary to deter fraudulent practices.
Ultimately, this research contributes to the growing discourse on environmental crime by framing carbon market fraud as a distinct category of green collar crime. It calls for a rethinking of legal definitions, enforcement strategies, and institutional roles to ensure that carbon markets fulfil their intended purpose of mitigating climate change. The study concludes with strategic recommendations, including the harmonization of international standards, capacity-building for enforcement agencies, and the adoption of digital tools to enhance market integrity.
By shedding light on the intersection of environmental policy, criminal law, and market regulation, this dissertation aims to inform policymakers, legal practitioners, and environmental stakeholders about the urgent need to safeguard carbon markets from fraud. Only through transparent, accountable, and enforceable systems can carbon trading remain a credible tool in the global fight against climate change.
