Carbon credit fraud investigators.

What is carbon credit fraud?

A carbon credit is a certificate representing an organisations right to emit one tonne of carbon dioxide (CO2) or the equivalent amount of a different greenhouse gas into the environment.

Each carbon credit has a value. They are sold and bought by companies to encourage the reduction in greenhouse emissions. Where a reduction in CO2 emissions occurs it creates ‘spare’ certificates which can be traded for profit. The fraud occurs during the sale of certificates at a tax level, specifically Value Added Tax, or VAT.

Is selling carbon credits illegal?

The sale of carbon credits is not illegal however there is a complete absence in secondary market demand for carbon credit investments which has left thousands of people holding certificates that are worthless. In other words, credits have been sold at such an inflated rate that it is highly unlikely they can be sold on.

Carbon credits are not commodities. This means they can pass freely between jurisdictions electronically, and instantly and those operating carbon credit fraud are often based overseas where UK authorities have no jurisdictional control over the validity of the credits.

This is a fast evolving industry in which prosecuting authorities are struggling to understand the continually changing structures and mechanisms behind the fraudulent schemes.

How does the fraud work?

There are a number of carbon credit frauds. An example is ‘Carbon Credit VAT Fraud’, often referred to as the ‘VAT Gap’. The VAT Gap is the difference between the amount the (for example) European Commission expects to ‘take in’ and what member states ‘actually bring in’. Fraud occurs where illegitimate companies reclaim VAT paid out on purchases of credits in the fraudulent chain.

How is the UK responding?

The UK Government announced in 2009 its decision to make carbon emission trading ‘zero-rated’ for VAT purposes, making it impossible to claim VAT on the sale of carbon credits in the UK. The 2019 UK VAT Gap is £10 billion (or 7% of net VAT income), with fraud and evasion largely responsible for the difference though an increasing amount of cases relate to carbon credit fraud.

What should you be wary of?

Carbon Credit Certificates, also frequently marketed as Voluntary Emission Reductions (VERs) or Certified Emission Reductions (CERs) are offered as an opportunity to invest directly in a platform that generates carbon credits as a return on investment.

Although certificates are often ‘certified’, the certification process is itself voluntary and involves a wide range of cross jurisdictional bodies maintaining different quality standards that are not recognised by the UK compensation scheme.

How might a carbon credit scam occur?

Scams may include you being approached by an organisation suggesting that certain industries need to off-set their emissions. With so much government emphasis being placed upon ‘green’ initiatives there is logic in their approach. Scammers frequently cold call investors. They are so advanced in their approach that they will have researched your trading history and will be fully aware of your financial status. Scammers also use conferences and exhibitions to portray legitimate foundations.

What about the Financial Conduct Authority?

The Financial Conduct Authority (FCA) does NOT regulate carbon credits. This means that if you have been subjected to carbon credit fraud you will not have access to the Financial Ombudsman Service or The Financial Services Compensation Scheme (FSCS). To put it bluntly, you have no right to compensation if something goes wrong even if the perpetrator involved in the sale is an FCA-authorised firm. Because carbon credits are a legitimate transaction it can lead to a profitable investment, but it makes sense to do your homework first.

What should you do now?

If you would like to check whether an opportunity to invest in carbon credits is real or fake, call us or send a message using the form below. If you have already lost money to a scam the people behind the scam are likely to contact you again, potentially with a different scam. At the very least they may sell your personal details to other criminals. Put a stop to it now!

Speak to our carbon credit fraud team

What ever your question regarding investment scams please contact us using the form below.

Any preliminary investigations that we undertake will not be charged.

Alternatively call

+44(0)1423 313 005

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