Officials in five European countries say they are investigating an international carbon credit scam considered to be worth more than $1.5 billion. According to a recent report for the Guardian, the scam was started by gangs in Britain and Spain who bought and sold emissions allowances across borders in order to avoid paying Value Added Tax (VAT).

Scotland Yard detectives, Revenue and Customs officers and Europol—the European law enforcement agency—are all involved in the investigation. The scam is said to involve several countries, including Italy, Spain, Denmark and Sweden. According to the report, a source close to the investigation said the “inquiry has escalated.”

“This is a Europe-wide operation and we are finding it difficult to keep up," the source was quoted saying.

Fraud cases in the carbon credit market are not new. Over the summer, detectives in the UK began an investigation into an alleged $50-million carbon credit scam that involved VAT fraud. A total of nine people have been arrested and 27 properties searched as a result of the investigation.

And more recently, the United Nations was forced to suspend the British-based auditor of tradable carbon credits, SGS United Kingdom Ltd. The company was accused of irregularities in its review of projects that qualified for the carbon credits. The suspension of SGS came less than a year after the UN suspended the Norwegian certification company, DNV, for similar violations.

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