Carbon Credit Watch

Another alleged scam unearthed in the carbon markets

Carbon markets are again facing allegations of a scam involving the trading of carbon credits. Reuters reports [PDF] the Australian company WesternField Holdings Inc. has been accused of defrauding investors down under of A$3.5 million ($3.2 million) through a telemarketing swindle. Although blacklisted by the country’s securities regulator, the firm continues to operate.

According to the Australian Competition and Consumer Commission (ACCC), WesternField allegedly cold-called potential investors and promised them large returns for short-term investments in carbon credits. Investors were told they could review their “investment certificates” at an independent website registered under the name CTR Limited (carbontrustregistry.com), supposedly based in Hong Kong.

But ACCC deputy chairman Peter Kell told Reuters investors had complained they were not able to obtain their certificates and that requests for refunds or to sell investments were ignored.

The Australian Securities and Investments Commission has now blacklisted WesternField, accusing it of investment fraud.

“It is increasingly clear this is a well-constructed scam using a fake website and claiming fake links to legitimate organisations or environmental standards and where the ultimate location is very difficult to determine,” said Mr. Kell.

WesternField’s website lists a number of emission reduction projects it claims to have established in Asia since 2001, an impressive line-up of managers and consultants and a prestigious environment award in 2004. However, the organization that gives out the honour only started doing so in 2006.

Reuters also discovered that WesternField’s “domain name was created in May 2009 and internet searches show no record of the company prior to 2009. The management office of the Tokyo tower listed as the firm’s address has no record of them.”

The story gets even stranger. Carbon Trust, the company in charge of holding Westingfield’s carbon certificates, claims on its website to be a registry for credits issued by the Voluntary Carbon Standard (VCS) Association, an industry-respected offset verifier.

But VCS says otherwise. Jerry Seager, a program manager for the association, says Carbon Trust is not an authorised VCS registry.

“We are aware of this website and are taking legal advice,” he said in an emailed response to questions from Reuters. He also added that he had never heard of WesternField and, to date, they are not listed as project proponents for any VCS projects.

WesternField Holdings would also have investors believe that the clean-energy and forestry projects it led across Asia over the past decade enjoyed the approval of both VCS and the Gold Standard Foundation, a non-profit organization that operates a certification scheme for carbon credits. Gold Standard also confirmed that it had never heard of WesternField.

The WesternField scandal does not represent an isolated snow job in the carbon credit market but merely the most recent example of deception. Last year, European authorities admitted that in some cases, as much as 90% of carbon trading was taken up by value-added tax fraud. And in December, the United Nations reviewed and rejected carbon credits intended for wind energy projects in China, citing concerns that the projects qualified for the credits unfairly.

Patrica Adams, Probe International’s executive director, describes carbon markets as “political constructs controlled by politically empowered regulators who will be gatekeepers to a multi-trillion dollar market. The regulators themselves would become too numerous to regulate.”

“This then becomes the tried and true recipe for good old fashioned and widespread corruption.”

The Wall Street Journal appears to agree. A recent op-ed concluded that a fresh scandal in the European carbon market could be read as a “cautionary tale in how quickly environmental policy engineering degrades into rent-seeking for the fortunate few.”

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