Carbon heist derails emissions trading

The European Commission has partially shut down its carbon-trading market – the world’s largest – after carbon allowances worth up to €30 million were stolen from insecure accounts.

The thefts mean more negative press for the European Union’s emissions trading scheme (ETS), a key pillar of efforts to force industries to cut their carbon dioxide emissions.

The ETS, a market involving 27 member states in which companies trade allowances to emit carbon dioxide under a slowly-tightening overall cap, has been plagued by scandal since its inception in 2005. Most of the damage has been done by indirect cheating, such as tax fraud of up to €5 billion.

But the latest theft was embarrassingly direct, with what the Commission estimates as roughly 2 million allowances illegally transferred from accounts – each allowance worth around €14 at current prices. The credits were stolen from national registries in Austria, the Czech Republic, Estonia, Greece and Poland [AP].

Citing “recurring security breaches”, the Commission ordered trading suspended for a week from 19 January. (The cease-trade is only partial because trade in contracts based on the future price of carbon allowances is still allowed, and such bets make up over four-fifths of the ETS market).

The problem may lie in security flaws in the national registries overseen by each EU member state (though the Commission, currently investigating, is not ruling out sabotage by inside traders).

Beyond the speeding-up of moves to hold all accounts in a central European registry, and the tightening of security, there will be little fallout from the thefts, said carbon-trading analysts – except for embarrassment and further loss of credibility for the ETS. The New York Times notes that “ongoing instances of fraud and abuse” in the European system “make the case for bringing cap and trade stateside all the more difficult”.

Source: "The Great Beyond"