MH Carbon: Another boiler room scam?

MH Carbon claims to be “One of the UK’s fastest-growing participants in emissions spot trading within the voluntary carbon credit market.” It offers investors “the opportunity to participate in the new and exciting carbon credit markets,” while “safeguarding the environment for future generations”. But is the company actually little more than a boiler room scam?

MH Carbon was established in September 2010, by Jonathan Cocks and Gavin Manerowski. In October 2012, Jeffrey Razaq took over as director of the company. MH Carbon’s registered office is in the City of London.

The company’s website features several optimistic quotations about carbon markets:

“EU carbon price may triple by 2013 – Swiss bank UBS”
UBS prediction for EUA compiance market credits

“Clean energy, carbon investment rose 30% to $243 billion in 2010”
Sourced by Bloomberg

“Voluntary carbon market surges by 34% in 2010 in volume”
Sourced by Ecosystem Marketplace and Bloomberg New Energy Finance

“Voluntary carbon market doubles in size”
Sourced from Ecosystem Marketplace

“The UK’s Co-operative Group could buy around 1 million voluntary credits by the end of 2012”
Sourced by Point Carbon

It’s difficult to believe that this is the same carbon market that at the end of last year saw a series of arrests for fraud, prices at an all time low, a carbon trading exchange closing down and several companies closing their carbon trading desks.

Richard Clark is a senior consultant at MH Carbon, and has a tendency to wax lyrical about carbon markets: “No longer is social and environmental responsibility the domain of the nature-loving free spirit; now everyone must take heed, for the very fabric of capitalist mentality has been entangled into the web and those that would ride the tide can expect to reap the benefits.” In an article he wrote in March 2012 on the FT Adviser website, he acknowledges that the carbon market, like any other market, has inherent risks that should be explained to potential investors:

Investing in this sort of market is simply not for everyone but it is important that the investor gets the choice. Any suggestion that the market is risk free, or that there are absolute guarantees is pure nonsense and any broker waxing lyrical about such things should be disregarded.

But then he tells us that the demand for carbon credits “should remain” and “shows no sign of abating” as long as governments continue to cap greenhouse emissions and invest in carbon markets. Of course, he doesn’t mention the problems that the European Trading System is facing thanks to a huge glut of emissions permits in the scheme.

A company brochure titled, “An Introduction to Carbon Credits” includes a list of “Hotspots”. Uruguay is described as having a “high potential for a [sic] reforestation projects”. Of course, there is no mention of the fact that this “reforestation” consists of monoculture eucalyptus plantations to feed the pulp and paper industry. Neither is there any mention of the social and environmental impacts of industrial tree plantations in Uruguay or about the resistance to these plantations.

Costa Rica is another hotspot, according to MH Carbon’s brochure:

Project developers buy rainforest land from private owners in the country and then contract third parties to measure CO2 levels absorbed by replanting and avoiding deforestation. One company in particular is selling units worth 200 VERs per year for US$12,000. These VERs can then be sold through a management company which takes a 5% fee. This essentially means buyers are forward purchasing VERs for US$16 each. When the market develops, these are projected to sell for more.

If this sounds to good to be true, that’s probably because it is. In November 2012, Edward Hanrahan, from carbon trading company ClimateCare, told the BBC that carbon credits should be sold for less than £1 each. So, anyone paying US$16 for VERs (voluntary emissions reductions) is paying well over 10 times the current price.

MH Carbon’s Terms of Business explain the risks in investing in carbon credits:

[T]he market in VERs is illiquid and you may have difficulty in selling Carbon Credits at the price you wish to achieve and in some cases it may be difficult to sell them at any price. There is no guarantee that you will be able to sell your VERs. The purchase of VERs should be regarded as high risk and speculative in nature, It can be difficult to assess what the market price is for Carbon Credits. You may not get back the full amount originally paid for VERs and you may lose the whole amount paid.

In a discussion on lovemoney.com, an investor forum, several people said they had invested in carbon credits with MH Carbon, but were worried that they would not be able to sell them. Here are some of the comments:

• I have invested money with MH Carbon and I am now experiencing the non returned phonecalls and unanswered emails.

• I have bought carbon credits from MH Carbon too. I am experiencing just exactly the same problem as you. When it comes to selling carbon credits they wrap themselves in silence.

• Adam Capaldi has disappeared and I have had calls from a couple of different people there.

• I’ve . . . had a punt on MH Carbon – and have been completely underwhelmed. Think I’d underline all the above comments. They are quick to be on your case if they sniff money – but when you want to sell your ‘units’ you can go whistle dixie.

• I’m pretty sure MH Carbon is a scam, can’t believe how I fell for it, bought £12G worth of credits in two different outfits 18 month ago. Usual promises, safe markets, good growth, easy liquidation etc. Wanted to liquidate but “Broker” stopped returning calls, phoned last week, he’s left, new guy says hang in there, in 3-4 months we’ll all be as rich as Croesas [sic]. Maybe, but I’m not optimistic. I’ve lodged a complaint with FSA, again without much optimism.

• MH Carbon has been around for some time now and from the information I have, I am not so sure that it is a scam company, but I could be wrong, only time will tell.