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Don’t be fooled; voluntary carbon credits are not investments

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Over a dozen companies have been closed by the Insolvency Service in the last 15 months, after raking in nearly £24m from 1,500 individuals for carbon credits. The news should be a lesson to everyone: these are not investments and there is no market for retail investors to sell them on.

On Wednesday morning, we were met with the news that the amount of greenhouse gases in the Earth’s atmosphere had risen to a new global high. The World Meteorological Organisation (WMO) said that between 1990 and 2012, there had been a 32% increase in the warming effect on our climate known as radiative forcing, which can be directly related to the presence of greenhouse gases such as CO2.

Annual publications from the WMO have, in each of the last nine years, notched up record highs in levels of greenhouse gas. It is a grim situation, to say the least.

But in an effort to reverse this trend, the 1997 Kyoto Protocol set legally binding emissions reduction targets in 37 countries across the world. The targets were to reduce emissions by at least 5% on 1990 levels between 2008 and 2012.

Among the market mechanisms put in place to enable this transition the Clean Development Mechanism (CDM). Regulated by the UN, it created carbon credits called Certified Emission Reductions (CERs) that allowed countries or companies whose emissions are too high to use projects in the developing world to become less polluting. The CERs can be traded, in high volumes, on stock exchanges.

The CDM is a separate market entirely to voluntary carbon credits (VCCs). These unregulated products allow firms or individuals to offset the emissions they pump into the atmosphere. They in no way help meet a legal requirement to offset carbon (an oil firm under obligation to decarbonise, for example, cannot use VCCs to meet this target). They instead serve as a means of boosting reputation, peace of mind and social or environmental responsibility.

In recent years, though, the VCC market has been compromised by rogue traders. Often targeting elderly or vulnerable individuals, they use dubious sales techniques to pressure consumers to invest in VCCs. Internet messageboards are awash with angry or upset users lamenting about their experiences.

They problem is, the products are effectively worthless to the retail investor. They are not investments and there is no secondary market that allows you to sell them on.

Mark Hoskin of financial advisory firm Holden & Partners in London, has experienced first-hand the scale of the problem for investors. In a blog post for Blue & Green Investor (then Worldwise Investor) in March, Hoskin wrote, “Today I was called by a man who had invested £140,000 into voluntary carbon credits. He wanted to know how to sell these now. There is no way to sell these. They are not investments. He has lost £140,000!

One woman, who approached Hoskin in August this year, said she had bought 1,000 VCCs at £4.30 from a firm that subsequently went under. Her new broker said they would not take her on unless she bought more.

Speaking to Blue & Green Tomorrow of her motivation to buy the VCCs, she said, “I believed in the overall green investment and that they would be the sort of investment that individuals and companies will be buying more of in the future. I hoped a demand in the future would make me a decent return.”

She added, “Right now I would say [my experience with VCCs is] negative as I now hold stock that I’m not sure I can sell in 2016.”

The regulator the Financial Conduct Authority (FCA) is well aware of the scam. “Many investors have told us they are not able to sell or trade the carbon credits they have bought. None of these investors reported making a profit”, it says on its website.

The Serious Fraud Office (SFO) and the Insolvency Service also have their work cut out, identifying and closing down rogue traders. In April, Ian Macdonald and David Downes became the first people to be jailed over the issue, after targeting over 2,000 unsuspecting and vulnerable members of the public with a sophisticated, multi-million pound carbon credit scam.

Speaking on BBC Radio 4’s Today programme on Wednesday, Graham Horne, deputy chief executive of the Insolvency Service, said, “If it looks too good to be true, it probably is. If someone is promising returns of 40%, that should put you on notice. The other thing is legitimate companies don’t cold call you. Legitimate companies do not do the harassing techniques and say, ‘You must invest today, I’m going to come around and collect he cash.’ Be wary of those kinds of things.”

Because VCCs are not investments, companies selling them do not have to be regulated by the FCA.

[VCCs] are not investments, they are a financial solution to a social problem”, David Vincent of the Cochabamba Project, an industrial provident society that allows individuals and companies to buy shares in smallholder reforestation projects in Bolivia, told Blue & Green Tomorrow.

A firm doesn’t have to be regulated to sell petrol, which causes the emissions – so why would you need to be regulated to sell carbon credits to offset them?

Vincent added that too few VCC schemes focus on the social or environmental benefits – which in reality, is the very reason they should be bought.

We have an investment: it’s simply growing trees”, he said.

It stores carbon if that’s what people are interested in but the real value is as timber. But there are many risks involved in that which we try and make people totally aware of. We’re doing it for social and environmental reasons, not to make money.

If people want to make money out of growing trees, there are better ways to do it than investing with us. If they’re really interested in something that has a social and environmental impact, then they can achieve that with us. It’s not a money-making scheme.”

Another firm, Emerald Knight Consultants, describes carbon offsets as “one of the most successful examples of [sustainable and responsible investment] and alternative investment”. However, when asked by Blue & Green Tomorrow whether they were in fact investments, its director James Howard said, “No, not essentially.”

He added, “Unfortunately with the carbon market – I use the word ‘market’ loosely of course – it really indicates that you’ve got a situation where there are many buying, but of course there’s no end user essentially, so of course finding someone to buy the unit back from you is of course where many are finding themselves unstuck.

If carbon credits were being offered in a way that a retail individual could offset their own emissions, then we understand completely the purpose of that. But obviously if the nature of somebody acquiring a carbon credit specifically for a profit, you would have to assume there would be some time implications with that, because of course with my understanding, certainly the experience when we were involved with the product a couple of years ago that went on deliver these results, was that a carbon credit has a lifetime.”

In an email exchange seen by Blue & Green Tomorrow, a carbon broker told a retail investor that selling on the VCCs would be “possible” as the firm grew. However, the fact remains that there is currently no secondary market for the products.

After hearing similar conversations between brokers and investors, Mark Hoskin said many “confuse half-truths with a lot of hope”. He described this as “very dangerous”, adding, “It may be that the broker himself may actually believe what he is saying, because he is unlikely to understand the market and its history himself.

The reason they say hold [the VCCs] for five years is that they are hoping someone will start buying voluntary carbon credits in the future. They don’t have any people themselves buying second hand VCCs and […] I have not heard of anyone who has sold a second hand voluntary carbon credit on a market ever.”

The message to retail investors is clear: you can buy carbon credits if you want to offset your emissions, but you should not invest in the hope of making money. Ask a financial adviser if you have any doubts.

Sophisticated investors are less likely to be harmed financially, as it does not take long to uncover some worrying signs. However, until the regulators put something in place to prevent rogue traders from opening up, many more vulnerable but well-meaning investors will continue to feel the full brunt of this dirty scam.

Further reading:

Elderly retail investors at risk of carbon credit scam

Criminals are targeting carbon trading schemes, says Interpol

Investors call for Emissions Trading Scheme fix

WWF initiative cuts 100 million tonnes of carbon

The Guide to Ethical & Sustainable Financial Advice 2013

Economy

Will Self-Driving Cars Be Better for the Environment?

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self-driving cars for green environment
Shutterstock Licensed Photo - By Zapp2Photo | https://www.shutterstock.com/g/zapp2photo

Technologists, engineers, lawmakers, and the general public have been excitedly debating about the merits of self-driving cars for the past several years, as companies like Waymo and Uber race to get the first fully autonomous vehicles on the market. Largely, the concerns have been about safety and ethics; is a self-driving car really capable of eliminating the human errors responsible for the majority of vehicular accidents? And if so, who’s responsible for programming life-or-death decisions, and who’s held liable in the event of an accident?

But while these questions continue being debated, protecting people on an individual level, it’s worth posing a different question: how will self-driving cars impact the environment?

The Big Picture

The Department of Energy attempted to answer this question in clear terms, using scientific research and existing data sets to project the short-term and long-term environmental impact that self-driving vehicles could have. Its findings? The emergence of self-driving vehicles could essentially go either way; it could reduce energy consumption in transportation by as much as 90 percent, or increase it by more than 200 percent.

That’s a margin of error so wide it might as well be a total guess, but there are too many unknown variables to form a solid conclusion. There are many ways autonomous vehicles could influence our energy consumption and environmental impact, and they could go well or poorly, depending on how they’re adopted.

Driver Reduction?

One of the big selling points of autonomous vehicles is their capacity to reduce the total number of vehicles—and human drivers—on the road. If you’re able to carpool to work in a self-driving vehicle, or rely on autonomous public transportation, you’ll spend far less time, money, and energy on your own car. The convenience and efficiency of autonomous vehicles would therefore reduce the total miles driven, and significantly reduce carbon emissions.

There’s a flip side to this argument, however. If autonomous vehicles are far more convenient and less expensive than previous means of travel, it could be an incentive for people to travel more frequently, or drive to more destinations they’d otherwise avoid. In this case, the total miles driven could actually increase with the rise of self-driving cars.

As an added consideration, the increase or decrease in drivers on the road could result in more or fewer vehicle collisions, respectively—especially in the early days of autonomous vehicle adoption, when so many human drivers are still on the road. Car accident injury cases, therefore, would become far more complicated, and the roads could be temporarily less safe.

Deadheading

Deadheading is a term used in trucking and ridesharing to refer to miles driven with an empty load. Assume for a moment that there’s a fleet of self-driving vehicles available to pick people up and carry them to their destinations. It’s a convenient service, but by necessity, these vehicles will spend at least some of their time driving without passengers, whether it’s spent waiting to pick someone up or en route to their location. The increase in miles from deadheading could nullify the potential benefits of people driving fewer total miles, or add to the damage done by their increased mileage.

Make and Model of Car

Much will also depend on the types of cars equipped to be self-driving. For example, Waymo recently launched a wave of self-driving hybrid minivans, capable of getting far better mileage than a gas-only vehicle. If the majority of self-driving cars are electric or hybrids, the environmental impact will be much lower than if they’re converted from existing vehicles. Good emissions ratings are also important here.

On the other hand, the increased demand for autonomous vehicles could put more pressure on factory production, and make older cars obsolete. In that case, the gas mileage savings could be counteracted by the increased environmental impact of factory production.

The Bottom Line

Right now, there are too many unanswered questions to make a confident determination whether self-driving vehicles will help or harm the environment. Will we start driving more, or less? How will they handle dead time? What kind of models are going to be on the road?

Engineers and the general public are in complete control of how this develops in the near future. Hopefully, we’ll be able to see all the safety benefits of having autonomous vehicles on the road, but without any of the extra environmental impact to deal with.

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Economy

New Zealand to Switch to Fully Renewable Energy by 2035

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renewable energy policy
Shutterstock Licensed Photo - By Eviart / https://www.shutterstock.com/g/adrian825

New Zealand’s prime minister-elect Jacinda Ardern is already taking steps towards reducing the country’s carbon footprint. She signed a coalition deal with NZ First in October, aiming to generate 100% of the country’s energy from renewable sources by 2035.

New Zealand is already one of the greenest countries in the world, sourcing over 80% of its energy for its 4.7 million people from renewable resources like hydroelectric, geothermal and wind. The majority of its electricity comes from hydro-power, which generated 60% of the country’s energy in 2016. Last winter, renewable generation peaked at 93%.

Now, Ardern is taking on the challenge of eliminating New Zealand’s remaining use of fossil fuels. One of the biggest obstacles will be filling in the gap left by hydropower sources during dry conditions. When lake levels drop, the country relies on gas and coal to provide energy. Eliminating fossil fuels will require finding an alternative source to avoid spikes in energy costs during droughts.

Business NZ’s executive director John Carnegie told Bloomberg he believes Ardern needs to balance her goals with affordability, stating, “It’s completely appropriate to have a focus on reducing carbon emissions, but there needs to be an open and transparent public conversation about the policies and how they are delivered.”

The coalition deal outlined a few steps towards achieving this, including investing more in solar, which currently only provides 0.1% of the country’s energy. Ardern’s plans also include switching the electricity grid to renewable energy, investing more funds into rail transport, and switching all government vehicles to green fuel within a decade.

Zero net emissions by 2050

Beyond powering the country’s electricity grid with 100% green energy, Ardern also wants to reach zero net emissions by 2050. This ambitious goal is very much in line with her focus on climate change throughout the course of her campaign. Environmental issues were one of her top priorities from the start, which increased her appeal with young voters and helped her become one of the youngest world leaders at only 37.

Reaching zero net emissions would require overcoming challenging issues like eliminating fossil fuels in vehicles. Ardern hasn’t outlined a plan for reaching this goal, but has suggested creating an independent commission to aid in the transition to a lower carbon economy.

She also set a goal of doubling the number of trees the country plants per year to 100 million, a goal she says is “absolutely achievable” using land that is marginal for farming animals.

Greenpeace New Zealand climate and energy campaigner Amanda Larsson believes that phasing out fossil fuels should be a priority for the new prime minister. She says that in order to reach zero net emissions, Ardern “must prioritize closing down coal, putting a moratorium on new fossil fuel plants, building more wind infrastructure, and opening the playing field for household and community solar.”

A worldwide shift to renewable energy

Addressing climate change is becoming more of a priority around the world and many governments are assessing how they can reduce their reliance on fossil fuels and switch to environmentally-friendly energy sources. Sustainable energy is becoming an increasingly profitable industry, giving companies more of an incentive to invest.

Ardern isn’t alone in her climate concerns, as other prominent world leaders like Justin Trudeau and Emmanuel Macron have made renewable energy a focus of their campaigns. She isn’t the first to set ambitious goals, either. Sweden and Norway share New Zealand’s goal of net zero emissions by 2045 and 2030, respectively.

Scotland already sources more than half of its electricity from renewable sources and aims to fully transition by 2020, while France announced plans in September to stop fossil fuel production by 2040. This would make it the first country to do so, and the first to end the sale of gasoline and diesel vehicles.

Many parts of the world still rely heavily on coal, but if these countries are successful in phasing out fossil fuels and transitioning to renewable resources, it could serve as a turning point. As other world leaders see that switching to sustainable energy is possible – and profitable – it could be the start of a worldwide shift towards environmentally-friendly energy.

Sources: https://www.bloomberg.com/news/articles/2017-11-06/green-dream-risks-energy-security-as-kiwis-aim-for-zero-carbon

https://www.reuters.com/article/us-france-hydrocarbons/france-plans-to-end-oil-and-gas-production-by-2040-idUSKCN1BH1AQ

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