Isra-Mart srl : Organised crime rorting risk test for green schemes

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Following a spate of overseas scams, Climate Change Minister Greg Combet recently called for an urgent briefing on the risks of carbon fraud in relation to the government's greenhouse registries and its planned Carbon Farming Initiative.

His department's response, obtained under Freedom of Information laws, reveals a high level of concern over the vulnerability of climate registries, which record carbon offset investments.

"Cyber attacks on the European Union emissions trading scheme highlight the potential threats to climate change registries in Australia and the need for effective security and anti-fraud measures to safeguard the integrity of the programs they support," the February advice says.

The advice emerged as Greens leader Bob Brown called for the $1 billion off-road diesel fuel rebate for miners to be scrapped and Mr Combet warned that a failure to pass a carbon price could have dire economic consequences for Australian industry if it fell behind the rest of the world in adapting to a low-carbon economy.

Mr Combet's comments came as Britain's Conservative-Liberal Democrat government announced it would cut emissions by 50 per cent below 1990 levels in the 2023-27 period.

The Climate Change Minister leapt on the announcement, saying that it showed other countries were acting to combat climate change and Australia was not out in front of the rest of the world.

The Climate Change Department advice to Mr Combet on international carbon fraud also warns of the possibility of GST fraud on carbon credit trades under so-called "carousel fraud". The scam, which has operated overseas, involves the skimming of GST on the sale of carbon credits bought tax-free overseas.

Several carbon registries are already operating in Australia, but the value of transactions will increase greatly when the Carbon Farming Initiative gets under way in July, if it passes through parliament.

The scheme will allow farmers to profit from the sale of carbon credits derived through activities such as tree planting and soil improvements.

The Department of Climate Change advice said: "As part of the CFI arrangements, the department will conduct a robust risk assessment, including examination of potential fraud activities, such as identity fraud, and will implement treatments as appropriate."

It is understood Mr Combet's cautious approach is informed by his experience in cleaning up after the government's widely rorted insulation scheme.

The government is acutely aware that similar problems with its climate change strategy would have dire electoral consequences.

As the February 22 advice notes, "breaches of climate change registries through electronic and other means can undermine public and stakeholder confidence and result in financial losses to businesses".

Separate briefings and diplomatic cables obtained by The Australian provide the Department of Climate Change with details of international greenhouse rorts. An April cable warns Australian bureaucrats that The Netherlands' emissions trading authority has been the target of "large-scale criminal activity, including fraud, money laundering and the financing of terrorism".

The Papua New Guinea "sky money" scam, involving the sale of worthless carbon credits, is also detailed in a spate of 2009 briefings.

The advice says one of the firms in the PNG offsets market, Carbon Planet, was certified as providing a carbon-neutral service under the government's "greenhouse friendly" program.

Mr Combet told The Australian the government was applying the highest standards of security to the carbon registries underpinning the Renewable Energy Target, Australia's international Kyoto Protocol obligations and the Carbon Farming Initiative.

He said Australia's Kyoto Protocol registry complied with IT security standards set by the Defence Signals Directorate. Penalties under recent emissions registry legislation include up to seven years' jail for making a false entry in the registry.

Anti-money laundering legislation will also apply to carbon farming initiative transactions.

Opposition climate action spokesman Greg Hunt said it was difficult to accept such assurances after the home-insulation debacle.

"The greatest potential for significant fraud, based on the level of scams and fraud under the European model, is under the carbon tax and the emissions trading scheme," Mr Hunt said.

Mr Combet also attacked comments by Mr Hunt that the Coalition would allow for an average cost of emissions of $15 a tonne for its direct action policy, which involves the government buying abatements at the lowest cost.

Mr Combet said the comments showed Tony Abbott had a secret plan for a carbon tax.

Mr Hunt said the Coalition "does not and will not support a carbon tax".