Carbon market wide open to doubtful deals

Carbon market wide open to doubtful deals

Some small forestry investors have been hit by fly-by-night operators in the new carbon market, Carbon News reports today.

The Government might be moving to clean up the regulations around the financial markets, but investors in the emerging carbon market lack the same protections, according to Carbon News (http://www.carbonnews.co.nz/) the country's only specialist information service on the new market.

Carbon News says it has learnt that promises made to some small forestry investors promises haven’t come to fruition.

This week, the Government announced plans to set up a “super regulator” to bring together the regulatory powers of the Securities Commission, the Companies Office and the Stock Exchange.

The move follows criticism in the wake of the global recession and the collapse of local finance companies that a lack of co-ordination between regulatory authorities left investors without the protection they should have had.

But the protections do not extend to the carbon markets, and that’s got the fledgling industry worried.

Forest Owners' Association chief executive David Rhodes says that there should be some form of registration or regulation around people offering to sell carbon credits on behalf of owners.

While larger, professional forest owners are likely to be able to smell a rat if they come across one, he says, smaller owners are more vulnerable.

In one case, a landowner had destocked his farm in preparation for converting it to forest because he thought he had a deal for the carbon credits he would be eligible for. The fact that it didn’t go ahead as promised, despite a signed agreement, meant that he had lost farming income without gaining the income from the forestry credits.

“It’s not our job to be the regulator, and at this stage we’re advising owners to get some good-quality independent advice from a registered forestry consultant, but there really does need to be some form of protection in place,” Rhodes said.

Carbon consultant Simon Young says that the Government should consider including carbon credits on titles as a property right, in the same way that timber can be included.

“When you’ve got the situation of people actually knocking on the doors of the owners of small forestry blocks and promising them the earth, we need some way of giving these people some security,” he said.

“Recognising carbon credits as a property right would be one way of doing that.”

Carbon trader Nigel Brunel, of OMFinancial, says that trading in carbon lacks the protections of other markets.

“In other markets, we have to be very careful about the advice we give because we can be held legally accountable for it, but rules don’t apply to the carbon market,” he said.

“There are strict rules around the financial markets, and we need to have a look at this market to ensure we can head off any potential disasters.”

A spokesman for Commerce Minister Simon Power, who announced the decision to introduce the super regulator, told Carbon News that the carbon market was not an issue for his minister, and referred us to Energy Minister Gerry Brownlee.

But his spokesman said that it wasn’t an issue for his minister either, and referred us to Climate Change Issues Minister Nick Smith, where a spokesman told us that regulations were put in place by the previous government when it introduced carbon trading in 2008.

However, a spokesperson for the Ministry of Economic Development, which oversees the regulations involved in carbon trading, told Carbon News that there were no rules regulating who can broker sales of carbon units.

ENDS

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