The Cold Calling of Carbon Credits

“I got a cold call from some Muppet trying to sell me carbon credits (CCs) from an African environmental scheme at £6.25 each. The idea is that because George Osborne (Chancellor of the Exchequer) has just announced a carbon floor price of £16 a tonne as from 2013, the profit potential is huge,” writes on an online carbon credit discussion board one consumer. “I too have been cold called by a company called the Carbon Advisory Council, they may well be genuine and they put forward a convincing case for me to invest,” shares another. A third one advises them: “When they phone again, offer to buy 1,000 of the credits and tell them you have £6,250 worth of Fair Trade Vouchers to pay for them. If you don’t have any Fair Trade Vouchers, I can let you have some in return for some organic air miles, provided they are certified as local produce.”

In the case of carbon credits, these “someones” are consumers, who are not educated enough about this new commodity and, when presented with lucrative promises, authoritatively-sounding institutional names and acronyms (and the carbon credit market has an abundance of all of these), are willing to jump at the opportunity for “sure” profit.

Ruthless companies and con artists are well aware of the vulnerability of the uneducated investor-wannabes and are taking full advantage of the volatility of cc on the still maturing voluntary market. They might be name-dropping J.P. Morgan, Barclays and Goldman Sachs, quoting you the Kyoto Protocol and the meeting notes from the latest UNFCCC Bangkok conference, but none of these are proof of competency. Therefore, carbon credits are not – and should never be – a matter of cold calling.

As a trade unit,cc’s have too many facets that need to be taken into consideration before they are given any monetary value — the different types of ccs, their origin, their lifespan as a commodity, their certification and ownership. It is absolutely naïve at best for one to be able to make an investment decision over the phone and seal a deal with a phantom caller from a third-world country, who promises nothing short of miraculously easy fortune. If the deal sounds too lucrative to be true, then it probably is.

Recognizing the expanding scope of carbon credit scams, the UK Financial Services Authority (FSA) issued recently its first warning to alert consumers on the dangers of these green schemes. Their action comes as a response to an unprecedented spike in consumer complaints in July 2011. While not all of these trading schemes are scams, the FSA warns that skilled trading of carbon credits is essential for profit and takes experience and competence. The authority further claims “you may lose money on your investment by not getting a competitive rate when trading a small volume of offsets or not being able to sell your credits at all.” The alert also acknowledges that since many of these schemes are based overseas, they do not fall under UK jurisdiction, so he UK government or any other domestic regulatory body have no way of verifying the quality of carbon credits and their respective source offset. For victims of carbon credit scams, the watchdog has released a hotline where consumers can report their complaints.

There are plenty of resources online to familiarize yourself with the basics of carbon credit investments. Government documentation, NGO surveys and financial forecasts by prominent research teams are available at the click of a button. There is absolutely no excuse to be investing blindly. Carbon offsets are a quickly growing commodity market and there may well be potentially good profits over the coming years, but as with any investment, you have to educate yourself before you can make any decision on whether it is right for you, and which company is right to work with.

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