Press and News

Carbon Credits A Waste Of Money

The FCA launched an online poll to find out if anyone had made money investing in carbon credits in 2012 - you can read about it here.

No one investing in carbon credits has made any money. That’s the conclusion of a survey by the Financial Conduct Authority. “[M]any investors have told us they are not able to sell or trade the carbon credits they have bought,” FCA states on its website.

The FCA launched an online poll last year to find out whether anyone had profited from buying carbon credits as investments. A spokesperson for FCA told Point Carbon that of the 125 people who responded, none had made any money.

Point Carbon reported FCA’s survey (subscription needed) yesterday, under the headline “Carbon credit investors haven’t made a penny: FCA”:

A survey by Britain’s financial watchdog of people who have bought carbon credits found that not one has made money, leading the agency to repeat warnings about firms using “dubious, high-pressure tactics” to peddle illiquid or near-worthless offsets.

As well as a general warning about investing in carbon credits, FCA specifically warns against investments involving Carbon Neutral Investments or Gemmax Solutions, companies that have appeared several times on REDD-Monitor.

The FCA has put out public warnings about more than 40 of these companies, Point Carbon reports. Since 2011, FCA has opened enquiries into 183 firms accused of cold-calling and persuading people (particularly targeting vulnerable people) to buy carbon credits.

Last week, City of London Police arrested six people as part of an investigation into a suspected boiler room selling carbon credits as investments. In December 2012, the police arrested 11 people involved with fraudulent companies selling carbon credits.

The Insolvency Service has also investigated several of these companies, which have subsequently gone into liquidation.

On its website, FCA explains how the scam works:

Investors are usually called out of the blue by salespeople promoting carbon credits, but contact can also come by email, post, word of mouth or at a seminar or exhibition. You may be offered carbon credit certificates, voluntary emission reductions (VERs), certified emission reductions (CERs) or an opportunity to invest directly in a ’green‘ scheme or project that generates carbon credits as a return on investment. Carbon credits and VERs certificates are often labelled as ’certified‘, but this certification is voluntary and involves a wide range of bodies and different quality standards that are not recognised by any UK compensation scheme. The caller may claim carbon credits are ‘the new big thing’ in commodity trading, industries now have to off-set their emissions, the government is focusing on green developments or that it is a growing market. But we have seen that investors are not making any money as they cannot sell or trade their carbon credits.

FCA’s website also features advice on “What to do if you are scammed” in the form of seven steps:

  • Step 1: Stop sending money
  • Step 2: Report the scam to us
  • Step 3: Report it to the police
  • Step 4: Beware of ongoing scams
  • Step 5: Look out for money recovery scams
  • Step 6: Beware of fresh scams
  • Step 7: Avoid being scammed again

As anyone who has been scammed can tell you (and as revealed in many of the comments on REDD-Monitor), once you’ve lost money you will be targeted again. Here’s what the FCA says about “recovery room” scams that offer exit strategies:

You also might be told you can swap your investment for another deal, with a transfer fee involved, or asked to pay a capital gains tax bill before the large profit you were promised can be released to you, even if it does not exist. An offer to buy back the shares or investment that you have lost money on, might need an administration fee or insurance deposit to firstly be paid. But you are unlikely to ever receive the money from their supposed sale. These secondary or ongoing scams are run from what the fraudsters call ‘recovery rooms’ and are often carried out by the same group involved in the first scam, to take more money from victims.