Some questions for David Martin, Managing Director of Carbon-Expert

Last week, REDD-Monitor wrote a post about a Marbella-based company called Carbon-Expert Ltd, which sells carbon credits to the public. The question, as with all such companies, is whether Carbon-Expert is another boiler room scam.

Certainly, as outlined in last week’s post, the company’s website includes some potentially misleading information about the possibilities for members of the public to invest in carbon credits and making a profit. And earlier today, a commenter on REDD-Monitor posted part of an email received last year from Carbon-Expert, offering carbon credits from a hydropower project in India at £4.90 per credit:

As a Hydro Electric project, this is a highly sought after credit. It meets key criteria set out in corporate & social responsibility policy, has strong ‘brochure appeal’ and we are confident that it will attract a minimum resale price of between GBP 7.50 and GBP 8.00 within 18-24 months. Indeed, with the introduction of Mandatory Carbon Reporting in April 2012 we are now extremely confident of exceeding this as many companies are now pre-empting the limited supply of quality projects and already coming to market and stockpiling them in anticipation for the future.

A few hours after the post about Carbon-Expert went up on REDD-Monitor, David Martin, the Managing Director of Carbon-Expert, sent me an email asking for my phone number so that we could “have a discussion”. I wrote back telling Martin that I would be happy to correct any factual errors that there might be in the article. And that I would be happy to post a response from him on REDD-Monitor as a separate post.

On 6 April 2013, he wrote again. “There is a whole host of factual errors on your post,” he wrote. However, instead of explaining what the errors are, Martin asked me to, “Please go to www.carbon-expert.com and you will notice a lot of what you have written is out of date.” Which, I’m afraid, doesn’t help much.

REDD-Monitor sent Martin a series of questions on 8 April 2013, since when I’ve not heard from him. The questions are posted below and REDD-Monitor looks forward to posting David Martin’s response to these questions. Oh, and there’s one more question: Is Carbon-Expert another boiler room scam?

From: Chris Lang
Date: 8 April 2013
Subject: Re: conversation
To: David Martin

Dear David,

Thanks for getting in touch. I do have several questions that I would like to ask you about Carbon-Expert’s sales of carbon credits to the public and what appear to be misleading claims by Carbon-Expert about the value of those carbon credits as an investment.

The questions are as follows:

1. In your email (dated 6 April 2013) you state that, “There is a whole host of factual errors on your post. Please go to www.carbon-expert.com and you will notice a lot of what you have written is out of date.” I would be very grateful if you could point out exactly what the factual errors are in order that I can correct them.

2. The minimum “investment” in carbon credits with Carbon-Expert is £5,000. How many carbon credits Carbon-Expert has sold to investors and for how much money in total? (I asked you this question on 5 April 2013. In your reply, dated 6 April 2013, you declined to answer.)

3. The Carbon-Expert website (on the “Carbon credits” page) includes the suggestion that investors can “Profit from carbon credits with high annual returns.” In a recent court case involving a company that was offering carbon credits as an investment the judge said that the company was selling “near worthless carbon credits” and that “The true position is that the credits were not a suitable investment at all as they were a wasting asset unlikely ever to be profitable.” How do you justify the claim that high annual returns are possible from buying carbon credits from Carbon-Expert?

4. “Carbon credit investments offer one of the best growth opportunities since the dot com boom,” states Carbon-Expert’s web page about selling carbon credits. This seems to me to be potentially misleading. The dot-com “boom” was a three-year speculative bubble that peaked in March 2000, followed by a collapse. Some companies failed completely, other lost a large percentage of their market value. Wouldn’t you agree that carbon credit investments are just like the dot-com boom, but without the boom?

5. Carbon-Expert’s presentation states that the company sources its carbon credits from the following projects:

• Sulige Natural Gas Power Plant (China);

• Barra Grande Hydroelectric Power Plant (Brazil);

• Hydropower project on the Manasi River (China);

• Gansu Huanghe Bingling Hydropower Project (China);

• Hindalco Hirakud Aluminium Smelter Waste Gas Destruction (India); and

• Himachal Pradesh Hydropower Project, (India).

Are there other projects that Carbon-Expert sells carbon credits from? What is the vintage of the carbon credits that Carbon-Expert sells?

6. In Carbon-Expert’s 2012 Investment Brochure (which incidentally you have so far declined to send me, although I requested a copy on 4 and 5 April 2013) is the statement that “Demand in the voluntary market is further intensified by those who can see the high potential returns provided by this relatively new commodity. Independent investors are now beginning to build vast portfolios of carbon credits in order to speculate on the projected future growth.” Could you please put me in touch with an independent investor, with a “vast portfolio” of carbon credits, in order that I can ask them some questions about the returns so far and the projected future growth.

7. The same Investment Brochure states that “VERs can be bought online from companies such as JP Morgan or Citola where you will pay between 7.50 and 14.00 GBP per credit. Alternatively, they can be purchased directly from Carbon-Expert at wholesale prices ranging from 4.70 to 5.33 GBP per credit.” Please provide some evidence that JP Morgan and Citola are selling carbon credits online for these prices. Could you also please explain how Carbon-Expert can afford to undercut JP Morgan and Citola by so much? What price does Carbon-Expert pay for its carbon credits?

8. The Investment Brochure includes “a simple guide to the investment process” on page 8. Colemans draws up the contract and holds the client’s money in escrow until the carbon credits are transferred to the client. Colemans then releases the money to Carbonex. Is that Carbon-ex S.à r.l., the Luxembourg-based company? Is Carbon-Expert acting as a broker for Carbon-ex S.à r.l.?

9. Another Carbon-Expert brochure describes the “7 steps of Carbon Trading”. Step 2 has Carbon-Expert negotiating directly with CDM project managers. But doesn’t Carbon-Expert sell VERs? Step 5 starts with, “2012 Legislation kicks in”. What legislation is this referring to? Step 6 talks about demand for offsets soaring, added liquidity, “increased demand which stimulates price pressure, forcing prices for Carbon offsets higher”. None of this has actually happened. Step 7 mentions Carbon-Expert’s “pre-defined exit strategies”. Could you please explain what these exit strategies are?

10. Carbon-Expert claims to be “The UK’s Leading Carbon Trading Company”. That’s pretty impressive for a company that was registered less than one year ago. What evidence to you have to back up this claim? Does Carbon-Expert sell more carbon credits than any other UK-based carbon trading company? Or employ more staff than any other UK-based carbon trading company?

11. How many people are employed at Carbon-Expert’s office in London? Is this a virtual office? (Incidentally, the photograph used in a Carbon-Expert brochure is a photograph of the building at 89 Worship Street London, instead of 50 Jermyn Street.) How many people are employed at Carbon-Expert’s offices in Marbella and Dubai?

Thanks for your time and I look forward to hearing from you. Please consider your answer to be on the record.

Regards, Chris Lang