In a post last week, I described the carbon credits sold by boiler room scammers to retail investors as “near-worthless”. Following the post, “XYZ” left a comment. “Near-worthless implies not 100% worthless,” he wrote. “Are you saying there is some worth in my carbon credits and if so who will buy them?”
It’s a good question, so I passed it on to a few carbon market experts. I got a response from a commodities and financial market professional. It turns out I was wrong to describe the carbon credits as near-worthless. I apologise if I raised anyone’s hopes. The carbon credits that boiler rooms sold as investments are worthless.
This guest post author has nearly 30 years market experience including 10 years within the carbon market, he is also an Associate of The UK Economic Crime Directorate’s Training Academy for Economic Crime and Fraud and provides Expert Witness Evidence and training in relation to alleged fraud involving carbon credits.
The carbon credits sold to private individuals as investments are worthless
In my professional opinion the credits sold to private individuals in the boiler room cases I have reviewed are worthless, I am not aware of a single individual in my 10 year career within the carbon markets that has sold on, for any economic worth, the VERs purchased from “boiler rooms” as investments. Furthermore given the nature and mechanics of VER market I am unfortunately confident that any future outlook for these VERs will be negative and as such and paradoxically they become even more worthless as time moves on.
I have come across numerous companies offering investors the opportunity to “exit” their VERs. Sadly all these companies are part of the well structured boiler room model, they are “Recovery Boiler Rooms”. The tag line is typically, “buy some more VERs to lower your average price and increase the size of your portfolio as this will be attractive to a large corporate buyer we are working with”. In reality no such corporate buyer exists and this is just a well tried and tested method of extending hope for the original investor while, at the same time extracting further monies.
The voluntary carbon market has reported an over 100% rise in demand in VERs since 2008. It is now believed that the vast majority of this rise has been down to boiler rooms buying the cheapest available VERs and selling them on as “investments”. To put this in to context, it is believed that over 100 million tonnes of VERs are being held by private individuals as investments, nearly all these VERs were of negligible worth when purchased and with no prospect of re-sale.
The VER market has moved forward at a revolutionary pace as opposed to the standard evolutionary pace of business, this means that projects developed today are drawing upon greatly updated scientific data and project design.
A simple analogy would be that early VERs are like the first mobile phones which reached the market, the bulky Motorola for example, many of today’s projects are producing VERs which would be considered similar to the iPhone in terms of technology and qualitative value.
Companies would not, indeed never in my opinion, elect to buy VERs from private individuals when there is a ready supply, far exceeding current and predicted demand available directly from project developers. Furthermore national and international regulations such as the UK Bribery Act and The US Foreign and Corrupt Practices Act force companies to meet strict standards or face unlimited fines and possible criminal action. A company purchasing VERs would need to show they have complied with such acts and/or received such assurances from the seller.
A VER transaction in the genuine market, can take months and in my experience, some cases over a year to complete as the necessary legal work and due diligence are carried out. Boiler Rooms convey the image that VERs are bought and sold in the same fashion as shares on a Stock Market, they are not.
So it is with deep regret that I can state that VERs held by private individuals are worthless, there is no secondary market and even if there were, buyers would not entertain or indeed need to purchase from those held by private individuals.
Any company or individual offering the opportunity to exit a VER holding will be a Recovery Boiler Room, you will at some point, be asked to hand over more money to ensure and exit which will never happen.
Given the option of trying to find a VER exit strategy and searching for The Holy Grail I would see the latter having a slightly greater possibility of success.