x Abu Dhabi, UAESaturday 22 July 2017

UAE investors of carbon credits struggle to find buyers

Advanced Global Trading (AGT) claims it can resell carbon credits at more than three times the average market price but investors say they've been waiting for months to no avail.

DUBAI // Investors have been advised to be wary of dealing in carbon credits after a local company experienced difficulty reselling them.

The company touts carbon credits as a green investment and as a means of making a high profit. However, experts in the market say they can have little to no resale value.

Advanced Global Trading (AGT) claims it can resell carbon credits at more than three times the average market price.

But one AGT client, "Ahmed", has been unable to sell credits worth US$100,000 (Dh367,200) despite initial statements from the company that he could liquidate his investment in one week, he said. Instead, Ahmed - not his real name - has waited four months for AGT to find a buyer.

"The likelihood for him to sell them for any monetary worth is probably zero," said Andrew Ager, a carbon-markets consultant in the United Kingdom.

The same month Ahmed issued a sell order, another AGT client, Hany Shohdy, spent US$25,000 on credits. He tried to sell recently and was told that other investors had been waiting for six months, he said.

"I told them, if you already knew there were so many people trying to sell and they were not able, why did you call me three or four months ago and tell me there was a huge demand and prices were going to be so high?"

AGT chief executive Charles Stephenson said his company was experiencing delays in finding buyers because the rebounding Dubai property market had turned people away from alternative investments.

"We've seen the worst quarter [yet], which means we have a queue of people that are liquidating ... and the process is slowed down," he said.

AGT has a minimum investment of $25,000 and about 1,000 clients, Mr Stephenson said.

"With enough patience they will likely see the return they're expecting," said Farhad Bayati, the company's lawyer. AGT advertises returns of more than 30 per cent.

"If you were to ask me if I could achieve 30 per cent returns by investing in carbon credits, I would reply that carbon credits are not an investment tool for individuals," said Ivano Iannelli, chief executive of the Dubai Carbon Centre of Excellence.

A carbon credit represents a reduction in greenhouse-gas emissions. Some companies are required by law to "cap and trade" their emissions.

AGT is a broker in the unregulated "voluntary market", where companies and people buy credits for other reasons, such as corporate social responsibility.

"It's not a wide market, nor is it a deep market, nor is it a liquid market, nor is it very well understood," said Jonathan Shopley, a board member of the Climate Markets and Investment Association. "For all of those reasons, it doesn't offer a typical small investor opportunity."

Prices range from 1 US cent to more than $100, depending on what buyers are willing to pay. The average price for the type of credit AGT sells was about $4 in 2012, the most recent data available.

AGT clients pay about $15 per credit. Mr Bayati would not answer questions about pricing, saying it was proprietary information. As a broker, the company provides an online trading platform and connects buyers and sellers, earning 1.5 per cent in commission.

No client has ever lost money, according to Mr Stephenson.

"Our process is you buy on our platform and you sell on our platform," he said. "The price on our platform hasn't gone down."

AGT opened its office in Dubai in 2010. The company has a carbon-trading licence from the Dubai Department of Economic Development. AGT also advises companies on how to become "carbon neutral", Mr Bayati said.

Mr Stephenson said AGT represents "best practices" in a market with many unscrupulous brokers.

"We do things the right way," he said. "But it seems to me, again and again, we're kind of persecuted because we do have the occasional client that can't be happy."

Mr Bayati called AGT's minimum investment a model to follow.

"Someone that is buying at least $25,000 of carbon credits ... is not going to be someone that is easily duped," he said. "We don't want those type of clients."

However, the International Carbon Reduction and Offset Alliance cautions against selling credits to members of the public as investments, calling it a "distraction and risk to the industry".

Mr Shopley said: "Investment in the voluntary carbon market is not a bad thing in and of itself. Specifically, for investors who understand the risks and understand it's an illiquid market."

A third AGT client who has been trying to sell his credits since February said he regretted not asking more questions. "I think I was blinded by greed," he said.

Clients tired of waiting are welcome to find a buyer on their own, Mr Bayati said. "If you want to get rid of it quicker for four dollars, fine. Just tell AGT who you've sold it to and where to transfer it."

But Ahmed's credits are "worthless", Mr Ager said. The emissions reduction they represent came from a Chinese project that destroys a greenhouse gas called HFC23, a byproduct of making coolant. From the beginning of this month such credits were banned from the European Union Emission Trading Scheme, the largest regulated carbon market. An EU press release said that the credits created "a perverse incentive" to produce more coolant - also a greenhouse gas.

"Given the controversy surrounding these credits ... I cannot see why any private or public company would entertain the thought of using them to offset their carbon footprint," Mr Ager said.

AGT acknowledged the EU ban but said the company had not seen it affect pricing in the voluntary market.

Recently, an AGT representative phoned Ahmed saying he had found a potential buyer. But this buyer wanted 10,000 credits while Ahmed had only 7,000, he said. The representative encouraged Ahmed to buy more so AGT could sell the whole package. Ahmed declined.

 

vnereim@thenational.ae