We continue to receive many reports from people who have been approached by firms promoting carbon credits in the UK. Find out why you should be wary about investing in the carbon credit market.
Carbon credits can be sold and traded legitimately and there are many reputable firms operating in the sector.
However, we are concerned that an increasing number of firms are using dubious, high-pressure sales tactics and targeting vulnerable consumers.
A carbon credit is a certificate or permit which represents the right to emit one tonne of carbon dioxide (CO2) and they can be traded for money.
There are two categories of carbon credits: voluntary emission reductions (VERs) and certified emission reductions (CERs). We believe VERs certificates are increasingly being offered to UK investors.
You can find out more about the different types of carbon credits and how the market developed in information we published in 2011.
How it 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, or an opportunity to invest directly in a ’green‘ scheme or project that generates carbon credits as a return on your investment.
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 an ever growing market.
You could lose money on your investment by not being able to sell, or at least get a competitive rate, when trading a small volume of carbon credits.
How to protect yourself
We are concerned that many investors do not understand that trading on carbon credit markets requires skill and experience.
If you are considering buying carbon credits or investing in a related scheme you should make sure you fully understand how the sector works and the risks involved.
Beware that 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 financial compensation scheme.
Also keep in mind that the projects generating VERs are usually based overseas and the UK authorities have no way of controlling the quality or validity of the schemes.
As we do not regulate the sale or trading of carbon credits, a firm promoting or selling them does not necessarily have to be authorised by us and many firms involved in their sale are unlikely to be breaching our rules.
But if the company promoting or operating the scheme is not authorised by us, you will not have access to the Financial Ombudsman Service or Financial Services Compensation Scheme (FSCS) if things go wrong. This includes where you cannot sell or trade your carbon credits.
While many firms involved in the sale of carbon credits do not have to be authorised by us, we might be interested where carbon credits are sold as a collective investment scheme (CIS) or a futures contract. For this reason, please take note of the sales process if you are offered carbon credits or a similar investment.
There are more steps you can take to keep your savings safe – find out how to protect yourself from investment scams.
You can also found out more about what to consider before investing in carbon credits.
What to do if you have been scammed
If you are concerned about an investment in carbon credits you should stop sending money to the firm and individuals involved. If you have given them your bank account details, tell your bank immediately.
You should then contact our Consumer Helpline. Please provide as much information as you can about your investment and the company involved, including their contact details and ‘firm reference number’ (FRN) if they claim to be authorised by us.
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