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Global Carbon Exchange: “There are more holes in GCE’s sales pitch than in any Swiss cheese”

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Global Carbon Exchange sells carbon credits to individuals as an investment. Carbon credits, according to GCE, “have distinct attractions for investors who wish to benefit from the expected rises in carbon credit prices”.

On 29 June 2013, Tony Hetherington, a journalist with the Daily Mail, wrote about Global Carbon Exchange after one of his readers wrote to him asking about the company. Hetherington was not impressed. He picks up on a claim in the company’s brochure: “5 years ago the directors of Global Carbon Exchange (GCE) had a vision”. In fact, the company was registered in June 2011, and Stephen May is the only director. May told Hetherington that this was a typing error.

Global Carbon Exchange was one of the companies for which Carbon Neutral Investments provided “clearing and settlement services”. Global Carbon Exchange (and many other boiler room carbon credit companies) used the fact that Carbon Neutral Investments was registered with the Financial Services Authority to claim that “the financial side of the transaction is 100 per cent regulated and secure”. This is “simply false” as Hetherington points out.

After the Financial Services Authority issued a warning about Carbon Neutral Investments in March 2013, Gemmax Solutions took over this part of Carbon Neutral Investments’ operations. Global Carbon Exchange were initially listed as one of Gemmax Solutions’ clients, but the company is no longer included in the list.

“There are more holes in GCE’s sales pitch than in any Swiss cheese,” Hetherington commented.

The reality is that the Financial Services Authority, and the Financial Conduct Authority that replaced it in April 2013, do not regulate the trade in voluntary carbon credits. Hetherington points out that,

If the sale of rubbish carbon credits as investments was legally regulated by the FCA, the watchdog would already have come down like a ton of bricks on GCE and similar firms. As it is, it has no jurisdiction.

Hetherington asks whether this may be about to change and quotes a Treasury spokesperson as saying, “HM Treasury and the FCA are exploring what action can be taken to protect consumers from carbon credit fraud.”

Meanwhile, Global Carbon Exchange has the following notice on its website:

IMPORTANT NOTICE: Global Carbon Exchange is not regulated by the FSA (Financial Services Authority) and is not affiliated to CNI (Carbon Neutral Investments). Carbon Credits are not categorised as an “Investment Product” under the Financial Services and Markets Act 2000. They are therefore not a regulated product and any customers purchasing VCS VER Spot Carbon Credits for investment or corporate social responsibility purposes should be aware that neither the Financial Services Compensation Scheme (FSCS) or the Financial Ombudsman Scheme (FOS) apply to the transaction or to any monies paid to GCE or CNI for the purchase of VCS VER Spot Carbon Credits. VCS VER Spot Carbon Credits are not tradable on the London Stock Exchange and customers should be aware there is little or no liquidity and it may not be possible to sell the VCS VER Spot Carbon Credits immediatley after your purchase without suffering a loss of some or all of the capital invested.

Global Carbon Exchange’s risk warning includes the following statement:

There may be a big difference between the buying price and the selling price of Carbon Credits. If you have to sell them immediately, you may get back much less than you paid for them. You may have difficulty in selling Carbon Credits at the price you wish to achieve and, in some circumstances; it may be difficult to sell them at any price. It can be difficult to assess what would be a proper market price for these investments. You should not invest in Carbon Credits unless you have thought carefully about whether you can afford to do so and have taken appropriate independent advice.

Yet the company’s brochure describes two “spaces” in the global carbon credit market: the active market and the retirement market. “Put simply,” the brochure states, “the ‘Active Market’ is designed for you, the private investor, and allows you to enter this exciting, explosive market at a realistic entry price.” This is misleading. The carbon market was not designed for individual investors. Global Carbon Exchange “mainly deals with” voluntary carbon credits, and there is no secondary market in voluntary carbon credits. As GCE points out in its risk warning, “There may be a big difference between the buying price and the selling price of Carbon Credits,” and “it may be difficult to sell them at any price”.

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