360 Invest Group and Alternative Markets: Exit strategy of converting near worthless VERs to a CER market that is “walking on one leg”

This is Andy. He’s 66 and he worked all his life as a mechanic. He hasn’t got a pension fund, but he saved up £37,000. Until, that is, a company called 360 Invest Group persuaded him to “invest” the money in carbon credits. 360 Invest Group promised him a minimum 10% return in the first year. Unfortunately, it didn’t work out like that.

360 Invest Group sold Andy 7,000 carbon credits, at a little over £5 each. 360 Invest Group bought the credits from a company called Carbon-ex S.à r.l. in Luxembourg. (I wrote about Carbon-ex in March 2013.) Colemans solicitors were involved too. The carbon credits came from a renewable energy project in India. After a year, 360 Invest Group told Andy that the price had rocketed. Andy was due to exit at the end of 2012.

But then 360 Invest Group disappeared. A company called Alternative Markets got in touch with Andy. Alternative Markets told him that because he’d bought voluntary carbon credits he could not sell them. If he “converted” his carbon credits to compliance credits (CERs), Alternative Markets told him, he could exit with £75,000 in September. Guaranteed. The catch? Alternative Markets wanted another £17,000 from Andy to convert his carbon credits.

Andy’s story was reported in the Scottish Sun last week. His story is similar to those of people commenting on REDD-Monitor (here, here, here, and here). More stories about 360 Invest Group are here and here.

Apart from the problem that Alternative Markets wants cash up front to “convert” voluntary carbon credits to compliance carbon credits, there’s the fact that CERs are currently changing hands for around €0.57. Unlike the voluntary carbon market, trade in CERs is regulated, CERs are traded on exchanges such as the IntercontinentalExchange (ICE), and the price of CERs is readily available, for example on ICE’s monthly reports – this is from the June 2013 report:

Of course, the price of CERs could recover. But a quick look at the maths shows the risks involved for Andy, if he were to follow Alternative Markets’ advice. He has 7,000 almost worthless voluntary carbon credits (VERs). The current price of 7,000 CERs is less than £4,000. Yet Alternative Markets is suggesting he should pay £17,000. And that’s on top of the £37,000 he handed over for his VERs.

The Sun spoke to Jason Roberts of Alternative Markets, who described the company “business model” succinctly: “My advice would be to wait and hope the credits become more valuable or pay to convert them into CERS.”

Alternative Markets’ website was registered in January 2011. On its website, the company doesn’t give any office address, but a company brochure gives an addresses in Zurich and London (the London address is the same as Merrill Lynch International). I couldn’t find the registration details for a company called Alternative Markets on Open Corporates.

At the bottom of Alternative Markets’ website is a link to the LinkedIn page of “John Lewis, Director at Alternative Markets”. That’s his photograph, above. It’s reassuring to see who is behind this company. Except that it’s not. The photograph is available for sale from photography agency Shuttershock under the title, “Happy handsome businessman”.

On its website, in addition to the offers of investments in films, self storage companies, and rare earth minerals, Alternative Markets explains that it doesn’t sell voluntary carbon credits, and adds,

However, as a company we are acutely aware that the current market has made it difficult for investors to achieve their own expectations. In some cases (based on industry figures), it may be the case that you as an individual investor may now be in a situation whereby your original investment is now in a “negative” position.

In its brochure, Alternative Markets tells us that the EU planned to ban all CERs from HFC 23 (a by-product of refrigerant gas manufacture). As a result, “in excess of 90% of existing CERs in Europe will be banned and withdrawn from the compliance offset sector” and as a result demand will increase. But the HFC 23 credits were banned in April 2013. As Alessandro Vitelli at Bloomberg points out, this amounted to 7% of the annual emissions cap in Europe. Over the past couple of months, the price of CERs has increased slightly – but from all time record lows. For two days in July 2013 the trade in CERs in Europe stopped entirely and the volume of carbon permits and credits traded in the month of July fell by more than 40% compared to June. Bloomberg reports that,

The collapse shows factories, power stations and airlines in the European Union have already bought most of the 1.7 billion tons of UN credits they can use to offset domestic emissions through 2020.

One analyst describes the CER market as “walking on one leg”.

Converting VERs to CERs may sound an attractive exit strategy for people who are the victims of fraudulent sales of voluntary carbon credits. But when companies are asking for money to “convert” VERs to CERs and providing misleading information about the market for compliance carbon credits, it’s just another scam.

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