FSA Warns Shady Schemes in the UK Promote Investing in Carbon Credits

by

Samantha Laker

The Insolvency Service has ordered Eco Global Markets to be put into provisional liquidation on public interest grounds . The petition was brought on behalf of Secretary of State for Business, Innovation and Skills (BIS) at Manchester Crown Court. The court has now appointed an administrator, who will help protect the company s assets, including third party funds and financial records on behalf of its creditors.

Investigators have been looking for some time at the activities of the firm and its offering of carbon credits as a lucrative investment product. Carbon credits are certificates given to business operators that allow them to release a certain amount of carbon dioxide into the atmosphere. Investing in carbon credits involves trading these certificates but many buyers are unaware that there are two types certified emission reductions (CERs) and voluntary emission reductions (VERs). UK investors are primarily offered VERs which are worthless on the open market because they are a voluntary standard and not officially recognised.

In the past couple of months the Financial Services Authority (FSA) has added 13 new firms to its list of companies suspected of mis-selling carbon credits.

Market for Carbon Credits Plunges

On Thursday last week the price of carbon credits dropped by 40 percent within a thirty-second trading period before regaining most of its losses. It hit a low of 2.81 per metric ton of carbon and rebounded back to 4 at the end of the day. The price remains far below the 20 to 30 price range that analysts believe is required to spur the type of clean investment needed by industry to reduce carbon emissions.

The European Trading System (ETS) that allows investing in carbon credits has become nearly irrelevant. A company that is ideologically opposed to the ETS scheme preferred to pay $1.4 million ( 892 million) more than it needed to meet its carbon obligations instead of engaging in carbon credits trading. The firm could have taken advantage of the $6 a tonne price per carbon credit on May 31, but instead it made the standard $25 payment per tonne to cover its dues for 73,575 tonnes of emission. According to sources of website Carbon News, the company is in the mining business and has implemented a firm policy of not taking part in the carbon market.

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FSA Warns Shady Schemes in the UK Promote Investing in Carbon Credits