Climate Cheats 2

Who’s the Real Cheat Here? Climate Cheats II: The Dozen Dirty Businesses

Gareth MorganEnvironment15 Comments

Our first report Climate Cheats showed that NZ was the biggest user of fraudulent carbon credits from Ukraine and Russia

The Government responded saying that they didn’t purchase the credits, companies did. This is despite NZ being the only Emissions Trading Scheme in the world that allowed the use of these units from 2013-2015.

So we decided to look at which companies bought the most of these credits. The data isn’t perfect, but it gives some interesting results:

  1. NZ Steel made big profits from buying fraudulent foreign units and selling or banking the (more valuable) free units they got from Government; essentially profiting from polluting.
  2. The power and petrol companies, led by BP but including Z, Caltex and Genesis, were the biggest users of fraudulent units. They claim they did this to provide the best deal for their customers, but interestingly Mobil didn’t purchase any of these units and somehow remained competitive.
  3. Some forestry companies also bought the units. Some of these may have been engaging in a rort similar to NZ Steel, but it is hard to tell which companies did this.

We want these businesses to join our call for the Government to ‘dump the junk’. At the very least Government should not carry forward any surplus units past 2020; the only reason we have these surplus units is because we traded in fraudulent foreign units in the past.

Without the Government stepping in to right the wrong, any company wishing to clear themselves of being implicit in greenwashing faces a potentially large liability.

Download the report


Who’s the Real Cheat Here? Climate Cheats II: The Dozen Dirty Businesses was last modified: August 17th, 2016 by Gareth Morgan
About the Author
Gareth Morgan

Gareth Morgan

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Gareth Morgan is a New Zealand economist and commentator on public policy who in previous lives has been in business as an economic consultant, funds manager, and professional company director. He is also a motorcycle adventurer and philanthropist. Gareth and his wife Joanne have a charitable foundation, the Morgan Foundation, which has three main stands of philanthropic endeavour – public interest research, conservation and social investment.

  • Mike Ross

    I’ve seen so many similar reports from all over. The entire concept of emissions/carbon trading is flawed. It’s a rort from top to bottom; a pure money-go-round.

  • Neil

    It’s worked for tobacco. There’s no reason it shouldn’t work for carbon, if the govt actually wanted it to.

  • Earl Mardle

    BUT, if a government wanted to flip the bird to the whole issue of climate and our role in it, this would be the perfect way to do it, yes?

  • Answer is most probably no, Earl. Pollution trading is a fatally flawed psychology that sages have warned us against for millennia.

    In a sentence, it is a delusional rationale of the human ego designed to destroy sovereignty, equity and tewardship on scale. Our ETS is working exactly as it was designed to, as are schemes like KiwiSaver. Community funds are diverted from activities such as making homes self-sustaining and quality mass transit into shares into global psychopathic corporations based on waste and pollution.

    It is no coincidence that NZ is one of the most unsustainable institutions on the planet and also the world’s leading advocate of pollution trading. Civics resides in individuals acting as stewards and putting a true price on their waste and pollution. Hence a nation with a civic regime embraces direct pollution taxes and equal citizen dividend both locally and globally.

    The tobacco trade, like sugar, mineral oil, opium and other narcotics trades, is an interesting case Neil. Check out the debate at
    “As of 2000, smoking was practiced by around 1.22 billion people. At current rates of ‘smoker replacement’ and market growth, this may reach around 1.9 billion in 2025.[57]”

    It would be interesting to discover how many of the people who smoke have shares in the global tobacco corporations compared to non-smokers and what the relative income distribution is.

  • mark

    Is New Zealand doing anything towards climate change going to have any affect?

    From an economic point of view shouldnt we just be putting money into how we are going to cope with the change or do we have no idea what these changes will be.

    Surely for a country that makes it money from growing things global warming will have some positive benefits. I certainly found I was mowing my lawns a lot more this year. Higher soil and air temperatures should create a boom for our farmers?

    • Rick Bazeley

      OMG Mark…you have so missed the boat on climate change, knowing next to nothing about it. National voter by any chance?

  • Euan Mason

    The second Morgan Foundation report on climate cheats is an interesting response to the government’s claims that:

    1) The government did not know that the ETS was being rorted by the purchase of fraudulent credits until 2015; and
    2) The blame for the purchase of fraudulent credits lies with credit purchasers rather than with government.

    Companies who imported fraudulent credits were operating within the law, but they were not operating morally. They might respond that they have a moral imperative to maximise profits for their shareholders, but such an imperative is no defense when other, higher moral imperatives are weighed in the balance. There are many examples of companies refusing to profit from child labour, repression of workers, slavery, and environmental degradation even when such practices were legal. I can only express my admiration for Mobil’s example, refusing to purchase fraudulent credits, and I know of no shareholders of that company who lodged complaints as a consequence.

    However, the government’s first premise, above, is false. The government clearly did know that fraudulent credits were being imported. I include a link, below, to my submission, sent to the Ministry for the Environment in November 2012, explaining in detail that they were fraudulent. My submission was a careful, referenced account, explaining unequivocally why importation of ERUs from Russia and the Ukraine “does nothing to address climate change, and so by allowing these imports and keeping NZU prices low, New Zealand is failing to address climate change in any meaningful way.” I also explained that such credits had been banned from the EU emissions trading scheme, and that our ETS was being undermined by them.

    Ultimately the responsibility for New Zealand’s shameful performance on climate change, brought about in no small part by the failure of our ETS, lies with government. Our government knew that imported credits were fraudulent. They knew that the domestic credit price had collapsed and exactly why it had collapsed. They knew that their policies allowed companies to act immorally and that many companies were acting immorally. Yet they failed to act.

    • Rick Bazeley

      I commend your work Euan highlighting the immorality of this National government’s shameful actions in knowingly exacerbating climate change. It is actually a crime against humanity, and just like war crimes, contributes towards death, destruction and economic calamity around the globe. Nice legacy….not.

  • Galeandra

    Thanks for the great work in identifying some the problems and the culprits in connection with the abuse of the ETS. I recognise it’s an imperfect vehicle for addressing the problems the future is rushing towards us but it’s all we have at moment and there is clearly stuff that can be done to improve its functioning.
    My response is one of anger inasmuch as i was suckered by the ‘green’ image BP projected through its sustainability rhetoric, though it was sorely tested throughout the Gulf Of Mexico disaster. Today, however, I wrote a letter to BP Customer Services notifying them that I was withdrawing my custom and why, with a link to this page, and intending to publish my letter with their response on Facebook.
    Clearly, as suggested above, the real fault lies with the cynicism of those who govern us which is a magnitude more serious than the cupidity of executives with their eyes on shareholder returns and management bonuses.
    Though we in NZ contribute only a tiny fraction of the pollution which is wrecking the climate we have an enlarged responsibility when you consider the magnitude of our individual consumption and environmental impacts when compared with those of the individuals who constitute the populations of the poorer nations.

  • Bob

    I’m a head in the sand person when it comes to climate change. Hell I see it changing every day. So calling the so call calamity climate change is as stupid a label as I’ve heard.

    Secondly no one has gone though a complete cycle of ice age to hot age. And as both ice and hot say, it’s a sine wave with wrinkles :-). The curve at the tops and bottoms aren’t perfect. Some years back we were supposed to be heading into an ice age. Which means we are topping out in the hot part of the sine wave, with wrinkles. 🙂 If we didn’t get record temperature highs, I’d be more inclined to worry and go out and buy some warm clothing. As it would mean we have finally topped out.

    Now some folk want me to think those with brains back then were in fact dumb buggers.

    No one seems to be worried about an ice age. But you should. It will mean Europe will become uninhabitable. All those folk will need a new home. Along with all those who invaded Europe recently from the middle east. Some of North America and Canada will also see some hardship. NZ won’t miss out either. The world will indeed become a very small place. But don’t worry folks. We’ll be dead. Long dead 🙂

    So anyone who tells me this is going to happen that is taking money to say this is going to happen has a vested interest in getting their message across. More so than telling the truth. I have a tendency to disbelieve them or see what they say as flawed.

    Carbon credits is just another trading mechanism(/government ripoff. So folk can make money out of the doom and gloom. And some items get more expensive with the loading.) Like trading currencies and floating dollars, it should be outlawed.

    A floating dollar just enables the reserve banks to make you poorer without you noticing. So your dollar isn’t the same value tomorrow that it was today.
    1 NZ dollar is worth (72.650 cents)0.72650 of a US dollar as I write this.
    (27.35 cents) 0.2735 cents lower or the things we buy are that much more expensive than they should be.Where once we had dollar for dollar. So next time your out shopping just think that item might have been close to a 3rd less. What could you do if your money was suddenly worth that much more?
    All courtesy of governments.

    As for getting the cheapest well our government buys train sets from China instead of building them here. And the general thought about governments is they are there for the people. So I see the government as the greater failure than companies that have the directive to make as much money as they can for their shareholders.

    Unlike the government who abuses shareholders and sells their shares on the open market. If a company did that heads would roll. Probably for quite a while.

    But the greatest villain, the government gets away with it without a murmur from us people.


    PS if you believe differently save your time trying to convert me. Pretty please. 🙂

    • Helen Jackson

      Good reading.

      • Bob

        Thanks Helen.

    • May Meyer

      How can you see anything when your head is in the sand?

      • Bob

        Special glasses 😉

  • May Meyer

    Thanks for the hard work in putting this together. It is of concern to me, and I have been left wondering whether a core belief in climate change denial has led to the National Party and ACT deciding that it was somehow ok to rort the system and potentially wreck the whole scheme.

    I would like to know who brokered the purchase of these fraudulent ‘carbon credits’ from the Ukraine and Russia.

    In particular, I am interested to know whether organised criminals from the Ukraine and Russia have