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How much does a carbon credit cost? “There is no such thing as a generic price,” says ClimateCare’s Edward Hanrahan

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In November 2012, the BBC broadcast a programme about a company called Enviro Associates that is selling voluntary carbon credits as an investment. Enviro Associates was offering carbon credits for sale at a price of £5.50 each.

The BBC spoke to Edward Hanrahan of ClimateCare, an Oxford-based carbon offsets company. Hanrahan was quoted in the BBC programme as saying that “the credits should be sold at less than £1 per tonne”.

ClimateCare does not offer carbon credits for investment and in a statement on its website the company recommends that “unsophisticated investors” should not buy carbon credits as an investment. Instead ClimateCare sells voluntary carbon credits to “help individuals and businesses take responsibility for their carbon emissions by offsetting their carbon footprint”.

Last week, a commenter on REDD-Monitor pointed out that ClimateCare is selling carbon credits via its website for £7.50. ClimateCare’s website includes a “carbon calculator” which, for example, explains that a return flight from Heathrow to Jakarta would emit 3.53 tonnes of CO2. I could “offset” these emissions at a price of £7.50 per tonne, giving a total of £26.48 payable to ClimateCare:

ClimateCare

I asked Edward Hanrahan how his company justifies selling carbon credits at a price even higher than Enviro Associates’ price. “The very simple answer,” he replied, “is that there is no such thing as a generic ‘price per tonne’ for voluntary carbon credits.”

ClimateCare’s price of £7.50 a tonne, “is a blended portfolio price that represents an averaged cost of the credits in the portfolio”, Hanrahan explains.

Hanrahan points out that the price of carbon credits actually decreases over time. A carbon credit’s “vintage” refers to the year that the emissions reduction took place. Hanrahan explains that the cheapest carbon credits are from fuel switch projects or large hydropower projects from older vintages.

In November 2012, the UK High Court closed down a company called Foxstone Carr Limited. “The company fleeced the public with their bogus guarantees about investment opportunities and returns,” Company Investigations Supervisor Chris Mayhew said after the Court hearing. The judge said:

“[T]he missing information customers aren’t told is the considerable difficulty they face in disposing of the carbon credits. The usual cold calling methods are used to sell and to give the impression that the credits are likely to go up in value and can be traded easily. In fact this is not the case. Information has been obtained that the older the credit the less desirable they are and therefore the less valuable the credit becomes over time. This information is concealed from consumers.

Here is Hanrahan’s response by email to REDD-Monitor’s question about the price of carbon credits:

Here is the standard response to this question:
 
Carbon Credits are not a commodity like gold or oil and there is no such thing as a standard ‘price’ for a VER carbon credit – no two carbon reduction projects are the same and the costs associated with running them are very very different. They use different technologies and interventions, cost varying amounts to implement and produce different levels of carbon reduction. Their impact on the surrounding environment, economy and population is also unique. Each project therefore commands its own carbon credit price, determined by the cost of the project and market demand.
 
A small project, producing limited credits in a way that brings health, social and economic benefits to the local population, whilst protecting and enhancing the local environment, will command a much higher price than a large scale technology, where the sole benefit is carbon reduction.
 
In addition, credits are often issued from a project over a course of years. Buyers, having reduced carbon emissions as much as possible, take responsibility for their remaining carbon footprint by purchasing credits generated close to or in the same time period. This means that there is rarely demand for older credits and this reduces their price. It is therefore often older credits from large scale projects which are priced at the low end of the spectrum.
 
ClimateCare’s mixed portfolio of projects is designed to balance price and positive impact for people and the environment, so that our customers can be confident they are offsetting their carbon footprint with high quality projects that make a real difference on the ground. You can find details of our 2012 Mixed Portfolio here. It currently sells at £7.50 / tonne – a price that reflects the cost for us to make a reduction of one tonne of CO2 through these projects. Some larger businesses wish to get more involved in the selection of projects – perhaps in certain locations, or delivering specific benefits – and we also work with them on a bespoke basis, to select projects that best meet their needs.
 
Carbon markets have been created for the purpose of mitigating carbon emissions to support action on climate change. We recommend that carbon credits are bought for the purpose of offsetting carbon emissions, not as an investment opportunity.
 
Here is a bit more detail…
 
In the true Voluntary carbon market – i.e. where carbon credits are not sold to individuals for investment purposes, but projects are capitalised with professional capital and credits are sold, usually to large corporates, at a price which represents the actual cost of carrying out the project. As such credit prices generally have less to do with any ‘market price’ and more to do with how much it costs to run the supported projects, or subsidise them with carbon finance. The proportion of the actual running costs that carbon finance provides is different for every project type.
 
As such, in the Voluntary Market, there is no ‘price per tonne’ for ‘carbon credits’ generically, every project and vintage has a different pricing. African Stoves and Gold Standard credits generally fetch the highest pricing – up to $11 a tonne dependent upon the project size, its location, how much finance is put into the sustainable development outcomes etc… At the very lowest end would be mass/bulk fuel switch projects or large hydro from older vintages.
 
The specific project and vintage I was talking about (that which had been offered to the undercover reporter in the BBC programme) was at the very very lowest end of the spectrum. I know this for a fact as we had brokered a transaction for the same credits to a middle European utility earlier in the year for retirement purposes at under a euro per tonne. That is the market price for those specific credits – an older vintage from that specific project.
 
If you go to our Projects page you will see a selection of the type of projects that we supply to customers. We only supply extremely high quality projects, almost all of which will have real, measurable Development outcomes – the details of which can be tracked on the Gold Standard or, where applicable, VCS websites. For the avoidance of doubt, we do NOT sell these projects to individuals for ‘investment purposes’ – we retire the credits on behalf of clients. The money usually goes to pay for the next vintage of credits from the project itself, thus providing a continuing stream of carbon finance to projects that need that income to remain viable.
 
£7.50 a tonne is a blended portfolio price that represents an averaged cost of the credits in the portfolio. For many of these projects, we also have provided upfront finance, and/or taken the project through the Gold Standard or VCS process. For some, we wrote the initial methodologies, and were engaged in R+D in the technologies that allowed the calculation of emission reductions from the projects. As ClimateCare has grown, since 1997 when we were founded, we have been able to absorb greater amounts of cost, and thus the blended portfolio price we charge has not changed for over 7 years.
 
You may wish to compare our blended portfolio price of £7.50 per tonne with those of other similar organisations to ourselves:

 
We believe (in fact we know) that we have one of the lowest priced per tonne for a highest quality portfolio – and we are able to do this because of the scale we have developed since 1997. As part of this, as I mention above – we also are heavily engaged with the projects we work with.
 
There is simply no comparison with an old vintage carbon credit from a singular bulk project, bought at less than a euro and then offered as an ‘investment’ at £5.50 a tonne.
 
So the clarification is – no one has said ‘carbon credits (in general) should be bought at less than £1 a tonne’ – however we know that the market price for old vintage credits from that particular project are less than £1 a tonne.
 

 


PHOTO Credit: In August 2007, activists dressed up as red herrings and hung banners off ClimateCare’s office in Oxford (Indymedia).
 

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19 Comments

  1. 7.50?? pretty cheap compared to the credits in Dubai. advanced global trading are charging 14.97 USD per credit. hmmmm

  2. The cost of a carbon credit should be the cost of the emission reduction. Stopping global warming is a moral crisis and people working to create solutions and reduce emissions are providing a social service.

    The real question to Edward Hanrahan is what the profit margin is for his business and the businesses involved in his ‘carbon market’ trading. Every dollar and cent of profit above the cost of creating the emission reduction increases the costs to society of solving the climate crisis.

  3. @Observing REDD – Thanks for this, but you seem to be assuming that creating and selling carbon credits will somehow stop global warming. Unfortunately, that’s not the case.

    Even if we assume that creating a carbon credit means a reduction in emissions in one place (and that’s a very generous assumption!), selling carbon credits allows someone else to pollute somewhere else. Carbon offsets are a zero sum game.

  4. @Chris Lang

    I really appreciate your work to try and speak Truth in a mad world…on this issue the real devil is in the details.

    We need projects/activities that reduce greenhouse gas emissions currently in the atmosphere and that stop future greenhouse gas emissions. There are obviously serious issues because carbon credits/offsets allow for GHG emissions to continue somewhere else, negating the absolute reduction target.

    But some carbon credit project types do in and of themselves achieve absolute reductions in GHG emissions!! It’s only when they are used to justify emissions elsewhere that there is an issue.

    How can we stop economic activity which causes GHG emissions? How can we stop deforestation globally? How can we fund emission reductions? The crisis of climate change is hitting an apex!

    I’m observing the world’s attempts to achieve the above and looking for real answers and solutions. Help me and help us all. The theory of cap and trade is as sound as general economics is. Perfect in a vacuum model but inaccurate in the real world….is it the best strategy as it has played out so far? Clearly no.

  5. No mention here of the latest Carbon Credit Scam which are companies who will supposedly buy your wortless VCR’S at £5.50 a credit for a “small upfront fee”. The fee was £800 FOR ADMIN. Desperate people please be aware its only another Scam. Does anyone know if Rebus.co.uk can help?

  6. ok so we have all been scammed. … so where is and who gets the money we have invested. surely there is a law gainst de-frauding people this way??? Or is the Uk only tough on particular types of crime like mugging and armed robbery, heaven forbib the corporate bankers or investment brokers should be accountable when they rob us in such a gentlemanly way! perhaps if it’s done by those with an economics busines degree it doesnt count??? …. At the very least these companies have lied & mis-sold these investment products. It is vastly different from investing in something and losing money when the stock market clearly falls this is premeditated, this seems to be a premeditated scam!

  7. @Savi (#5) – Thanks for this. Which company offered to sell carbon credits at £5.50 and asked for £800 for admin?

  8. Does anyone know of a reputable business that deals in these credits and is able to find a buyer for our nearly worthless (according to some of the blogs above) carbon investments?

  9. @Richard (#8) – The short answer to this is no, I’m afraid. There’s a discussion about “exit strategies” following this post.

    In particular, I think the comments from Derek are very useful: (#18); (#21); (#24); (#29); and (#33).

    If you believe you are a victim of fraud, please contact Action Fraud, either via their website or by ringing them up on 0300 123 2040.

    The more people that do this, the more likely it is that the police will take action against these carbon credit boiler room scams.

  10. Thanks Chris. Glad there is someone out there who is able to give some leadership in this Carbon shambles.

  11. leadership yeah down the garden path london green financial ltd
    cold called me before xmas bought 20 k doh ver’s called to sell them to company who had had had to buy them next week london green went into
    liquidation april 2 i have certificates help anyone
    this site best info so far

  12. @lynn (#11) – I’m very sorry to hear about this, but thanks for the comment.

    If you believe you are a victim of fraud, please contact Action Fraud, either via their website or by ringing them up on 0300 123 2040. (See comment (#9) above for links to discussions about “exit strategies”.)

  13. I nearly bought 3 grands worth did i do the right thing?. or would i have doubled my money by september, I got a call from some bloke out of the blue trying to sell me carbon credits, he really was trying to hard phoning me about 10 times in a week so it kinda come across as too desperate, to get me to buy a 1000 credits for just under 3 grand and i got told i had to be quick over 4 calls they kept getting cheaper, the later in the week i told him i couldnt afford it then a day later he said hed had a word with is boss and he was willing to put me the money in and said i could pay for them at the end of the month. And thats wen it put me off but i still dont know if i was being scammed or not. Can anyone tell me.email tonty2011@hotmail.co.uk

  14. @tony johnson (#13) – I’ve been looking into these boiler room carbon credit companies for a few months now. The posts about them on REDD-Monitor are collected here: bit.ly/Y2z7YX.

    Any company cold calling to sell you carbon credits is almost certainly a scam. As Andrew Ager, ex-head of Carbon and Emissions at Bache Commodities puts it,

    “No genuine company, none of the dozen or so companies that are involved in this market, would cold call individuals offering opportunities to invest in the voluntary market.”

  15. Has anybody heard of Carbon Bookers? It is a HYIP based in CostaRica (https://carbonbookers.com/carbon.php). They offer a daily return in the vicinity of 1-2% per day(!), with a very meager explanation on how they can possibly generate that income out of carbon credits. Please, advise.

  16. i’m afraid i’m another one bought them through capital offset solutions ltd which all of a sudden has disapeered off the seen. i then found which carbon on the internet who said if i paid £800 worth of credits they would be my brooker and help find my credits. so i did a month on they still can’t find them and which is enviroassociations. one lot of credits are held in carbon neutral which is now gemmax i new that before they started looking and told them about them.
    i have reported it all to the fraud, company’s house and have to say nobody is doing anything about it! it is really disheartening being law abiding citizen and when i need help there is nobody out there to help you.
    has anybody else had dealings with capital offset solutions?
    and how much are these credits really worth

  17. hi has anyone ever heard of a company called, VGF Wealth Management, they have contacted my father with a generous offer to buy his carbon credits!
    According to them the Chinese are looking to buy up as much as they can.

    is this a scam?

    please advise.

  18. @Mike (#18) – Yes it’s a scam. First, VGF Wealth Management contacted your father. How did the company get his address? While VGF Wealth Management probably explained that they got his details from a registry, the reality is that your father is on what the scammers call a sucker list. There’s more about sucker lists here:

    http://www.redd-monitor.org/2015/05/29/sucker-lists-recovery-room-scams-and-why-victims-of-scams-become-more-trusting-not-less/

    I’m sorry, I know this is bad news, but the reality is that your father’s carbon credits are worthless. You can read more about this here:

    Guest Post: The carbon credits sold to private individuals as investments are worthless

    A while ago I wrote a post about what you can do if you’ve been scammed into buying carbon credits as an investment:

    What to do if you’ve been scammed into buying carbon credits as an investment

    It’s worth working through that list. The final point is particularly important: “Do not hand over more money to companies who claim that they can sell your credits, no matter how convincing they sound.”