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Statistical evidence of tax fraud on the carbon allowances market

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  • Marius-Cristian Frunza

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, Sagacarbon - Sagacarbon SA)

  • Dominique Guegan

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

  • Antonin Lassoudière

    (Sagacarbon - Sagacarbon SA)

Abstract

The aim of this paper is to show evidence and to quantify with forensic econometric methods the impact of the Value Added Tax fraud on European carbon allowances markets. This fraud mainly occurred at the beginning of between the end of 2008 and the beginning of 2009. In this paper, we explore the financial mechanisms of the fraud and the impact on the market behavior as well as the reflexion on its econometric features. In a previous work, we showed that the European carbon market is strongly influenced by fundamentals factors as oil, energy, gas, coal and equity prices. Therefore, we calibrated Arbitrage Pricing Theory-like models and showed that they have a good forecast capacity. Those models enabled us to quantify the impact of each factor on the market. In this study, we focused more precisely on the benchmark contract for European carbon emissions prices over 2008 and 2009. We observed that during the first semester of 2009, there is a significant drop in our model performances and robustness and that the part of market volatility explained by fundamentals reduced. Therefore, we identified the period where the market was driven by VAT fraud movements and we were able to measure the value of this fraud. Soon after governments passed a law that cut the possibility of fraud occurrence the performance of the model improved rapidly. We estimate the impact of the VAT extortion on the carbon market at 1.3 billion euros.

Suggested Citation

  • Marius-Cristian Frunza & Dominique Guegan & Antonin Lassoudière, 2010. "Statistical evidence of tax fraud on the carbon allowances market," Post-Print halshs-00523458, HAL.
    • Handle: RePEc:hal:journl:halshs-00523458
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00523458
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    References listed on IDEAS

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    1. Christophe Chorro & Dominique Guegan & Florian Ielpo, 2009. "Martingalized historical approach for option pricing," Documents de travail du Centre d'Economie de la Sorbonne 09021, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    2. Knittel, Christopher R. & Roberts, Michael R., 2005. "An empirical examination of restructured electricity prices," Energy Economics, Elsevier, vol. 27(5), pages 791-817, September.
    3. Chorro, C. & Guégan, D. & Ielpo, F., 2010. "Martingalized historical approach for option pricing," Finance Research Letters, Elsevier, vol. 7(1), pages 24-28, March.
    4. Marius-Cristian Frunza & Dominique Guegan, 2009. "An economic view of carbon allowances market," Post-Print halshs-00390676, HAL.
    5. Hamilton, James D, 1989. "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica, Econometric Society, vol. 57(2), pages 357-384, March.
    6. Marius-Cristian Frunza & Dominique Guegan, 2009. "An economic view of carbon allowances market," Documents de travail du Centre d'Economie de la Sorbonne 09038, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    7. Christophe Chorro & Dominique Guegan & Florian Ielpo, 2009. "Martingalized Historical approach for Option Pricing," Post-Print halshs-00376756, HAL.
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