Find out how carbon credit trading works, how to avoid scams and what to do if you are scammed.
A carbon credit is a certificate or permit representing the right to emit one tonne of carbon dioxide (CO2).
Carbon credits can be traded for money, however many investors have reported they can’t sell or trade their carbon credits and so can’t make any profit.
How carbon credit trading scams work
Investors are usually called out of the blue, 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 ‘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 scam may claim carbon credits are ‘the new big thing’ in commodity trading, that industries now have to off-set their emissions, that the government is focusing on green developments or that it’s a growing market.
But investors have reported they can’t sell or trade their carbon credits, and have lost any money they’ve invested.
How to protect yourself
Carbon credits are not currently regulated by the FCA.
Even if an FCA-authorised firm is involved in the sale of carbon credits (acting as a custodian or nominee, opening an account with a carbon credit registry to hold the credits on behalf of investors or the salesperson claims the credits are provided by a supplier authorised by us), you have no right to compensation if something goes wrong.
Projects generating carbon credits are usually based overseas so UK authorities have no way of controlling the quality or validity of the schemes.
Always be wary if you’re contacted out of the blue, pressured to invest quickly or promised returns that sound too good to be true.
We strongly advise you to get independent professional advice before making any investment.
If you have been scammed
Because carbon credits are not regulated by the FCA, your investment is not protected by the UK’s Financial Services Complaints and Compensation Scheme.
If you have already invested in a scam, fraudsters are likely to target you again or sell your details to other criminals.
The follow-up scam may be completely separate or related to the previous fraud, such as an offer to get your money back or to buy back the investment after you pay a fee.
If you have any concerns at all about a potential scam, contact us immediately.