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Is a carbon credit scheme a safe investment?

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A carbon credit is a certificate or permit representing the right to emit one tonne of carbon dioxide. Many investors put their money into carbon credit schemes. But the rate of return has been questioned by the authorities.

They can be traded for money. However, the Financial Conduct Authority (FCA) has reported that investors cannot sell or trade their carbon credits and are therefore not making any profit.

The FCA put out a survey asking people if anyone had actually made any returns on their carbon credits investment. Out of the 125 people who responded to the survey, none had made any money. This is because the small amount of credits they purchased were rendered worthless when trying to compete on the market. Here, large companies were trading them by the millions.

Is a carbon credit scheme a scam?

Since 2011, the FCA has opened enquiries into 183 firms accused of cold-calling and persuading people to buy carbon credits. They have reportedly put out public warnings about more than 40 of these companies.

There have been several scams involving suspected boiler rooms selling carbon credits as investments, and several arrests made of people involved with fraudulent companies selling carbon credits. In these cases, investors have been scammed out of millions of pounds.

How do I know if I’m being scammed?

The FCA reports that investors are usually cold-called, but can also be contacted via email, post or word of mouth.

You are likely to be offered carbon credit certificates, certified emission reductions (CERs) or voluntary emission reductions (VERs). You may be given an option to invest into a ‘green’ scheme or project that supposedly generates carbon credits as a return.

The caller may claim that a carbon credit scheme is the ‘next big thing’ in trading. Or say that the government is focusing on green developments or that industries now have to offset their emissions.

Despite this claim, investors have reported making no profit due to being unable to sell or trade their carbon credits.

What happens if I invest and something goes wrong?

Since carbon credits are not regulated by the FCA, if something goes wrong, you will not have access to the Financial Ombudsman Service (FOS) or Financial Services Compensation Scheme (FSCS).

Even if an FCA-approved firm is involved in the selling of carbon credits, you have no right to compensation if things go wrong.

Be wary if you’re contacted out of nowhere. Also, be wary if the project is based overseas, as UK authorities have no way of controlling the quality, or validity, of said project.

If you’ve invested in carbon credits through your SIPP you may be eligible for compensation. Contact our expert legal team today for advice and guidance.