Latest scam to avoid: carbon credit tradingUk regulator warns of growing investment risk
06 May 2012
The City watchdog has issued a warning to consumers who may be targeted by disreputable firms selling carbon credits.
The Financial Services Authority (FSA) has expressed concerns about the way some companies are targeting vulnerable people, using high-pressure sales techniques to trade carbon credits.
What is carbon credit trading?
Carbon credit trading is a legitimate business, involving the sale of certificates or permits that would allow a company to emit one tonne of carbon dioxide (CO2) per credit. It is increasingly big business due to pressures companies are under to reduce their carbon footprint.
However, the FSA has discovered a growing trend for people to be contacted by companies selling carbon credits without any invitation from potential investors. Aside from cold-calls, emails and postal promotions, people are also being targeted at seminars and exhibitions.
Carbon credits: 'the next big thing'
Consumers are told about the great potential that investing in this green investment offers, but the risks are often played down. The FSA has published advice on how to proceed when considering carbon credit investments. Top tips include:
- Seek independent financial advice before investing in this complex form of trading.
- Check whether the company you are looking to invest with has the appropriate authorisation and is based in the UK.
- Verified carbon standard (VCS) accreditation is widely accepted and used by more than 600 providers. It ensures that every greenhouse gas emission generated is verified, permanent, unique and traceable.
- Note that holding a voluntary emissions reductions (VER) certificate is no indicator of quality, and that it is not recognised by any UK financial compensation scheme. Many projects with VERs are based overseas.
- UK firms operating in this sector do not have to be authorised by the FSA, although they opt to be. If you buy carbon credits from a firm that is not FSA authorised, you have no recourse to the Financial Ombudsman Service or the Financial Services Compensation Scheme.
What to do if you suspect a con
The FSA advises anyone who suspects that they have been scammed to stop sending money to the firm or person offering the carbon credit investment opportunity. Consumers can also contact the FSA and provide as much information as possible, including the firm reference number (FRN) if they claim to be authorised by the financial watchdog.