Carbon Offsetting – Is It A Con?

Carbon Offsetting – Is It A Con?

LAST UPDATED: 4 January, 2015 @ 1:33 pm
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CARBON OFFSETTING: Is it a con?

CARBON OFFSETTING: Is it a con?

James Bryce advises on how to avoid the carbon cowboys

EVERY time we flick a light switch, turn on the TV or drive our cars we add to our own unique ‘carbon footprint’ – a permanent mark on the environment created as we pursue energy intensive lifestyles, heavily reliant on fossil fuels.

But as public awareness of global warming increases, so does the desire to find ways of counteracting the negative effect our lives have on the environment.

For those not yet ready to sacrifice the comforts of modern life, carbon offsetting appears to offer an ideal compromise.

Effectively a way of paying someone else to take responsibility for your pollution, carbon offsetting involves buying credits which are later used to ‘compensate’ for carbon emissions.

One credit bought is equivalent to one metric ton of carbon dioxide emitted, with the money raised often used to fund renewable energy projects such as wind farms and forestry schemes.

And it is big business.

Worth a staggering €107 billion last year, carbon trading is the fastest-growing commodity market in history.

It all started following the G8 Summit in 2009, when some of the world’s biggest polluters agreed they needed to drastically  reduce their greenhouse gas emissions.

A target was set to reduce emissions by 80 per cent by 2050 in order to prevent two degrees Celsius of global warming.

At the time, a worldwide average of 4.48 tons of CO2 was being emitted per person per year – a figure which needed to drop below one ton in order to meet the ambitious G8 target.

But while there is certainly no shortage of people looking to reduce their impact on the environment, how can the well-intentioned be sure where their money is going?

And what are the pitfalls of investing in a carbon trading scheme?

Well, broadly speaking there are two markets for carbon offsets, ‘compliance’ and ‘voluntary’, with the former relating to the corporate sector and governments, and the latter involving investments by individuals.

There are then two categories of carbon credits – voluntary emission reductions (VERs) and certified emission reductions (CERs), with individuals far more likely to be offered VERs.

While the Financial Services Authority (FSA) does not regulate the sale or trading of carbon credits, it warns consumers to be wary of VER schemes claiming to be ‘certified’.

It adds that VERs – typically used by firms based overseas – are no guarantee of authenticity and are not recognised by any UK financial compensation scheme.

The UK recently replaced a ‘quality assurance scheme’ with ‘approved carbon offsetting’ in an effort to regulate the industry, with firms required to meet strict criteria.

Outside the UK, the best way for consumers to check a scheme’s authenticity is to ensure it has verified carbon standard (VCS) accreditation, which ensures carbon credits are trustworthy and have real environmental benefits.

Despite these measures and the overall prevalence of legitimate firms, the industry is becoming an increasing target for dodgy traders looking to con well-meaning investors.

Indeed, the FSA reported a ten-fold increase in the number of complaints received about carbon trading schemes between July and September 2011 and lists them as one of the top scams to watch out for this year.

To give some perspective to the rise, more than 100 firms have been reported in the past 12 months compared to just six ever prior to June 2011.

In one case, blacklisted firm MC Expert Consulting tried to get one man to invest thousands of euros in carbon credits, promising returns of 40 per cent over eight months, and 600 per cent over five years.

Another company, CarbonTrace Solutions, persuaded an elderly lady to purchase €4,000 worth of carbon credits.

“We are concerned that an increasing number of firms are using dubious, high-pressure sales tactics and targeting vulnerable consumers,” warns Jonathan Phelan, head of the unauthorised business department at the FSA.

“We suspect many of these firms are essentially overseas boiler rooms simply selling a highly dubious new investment product and jumping upon the green/eco-friendly bandwagon.

“We strongly recommend that consumers seek advice from an FSA-authorised independent financial adviser before getting involved in the carbon credit trading market.”

Naturally, the best way to reduce your carbon emissions is to try to avoid creating them in the first place.

So next time you think about getting in the car for the five-minute drive to the shops, why not consider walking instead?

Questions for your carbon offsetter
1. Where will my money go exactly?
2. How much of my payment goes on administrative costs?
3. How much does it cost to offset per ton of carbon?
4. How can I be sure your company is legitimate?

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