Carbon Credit Watch

Carbon Credit Watch: Carbon traders seek fraud compensation system

(February 4, 2011)  Carbon credit traders are pushing for a fraud compensation system in the wake of large scale carbon credit theft.  Read about this and other stories in our carbon market media roundup.

New York Times, January 31, 2011, “Europe’s carbon emissions trading — growing pains or wholesale theft”

Have criminals found a lucrative niche in carbon markets?

Previously, many bankers and traders said no, insisting that one-off incidents involving theft or cheating in Europe’s Emissions Trading System (ETS) were isolated events attributable mostly to the youth of the market. Advocates of a cap-and-trade approach to tackling climate change said that such growing pains are inevitable, but regulators and legitimate market participants would get better at warding off abuses.

But this month’s mass theft of E.U. allowances (EUAs) from some national registries has gotten the broader carbon trading community very much up in arms. Many are blasting some nation members of the European Commission for not taking the threat seriously, undermining their case for spreading carbon markets beyond Europe, especially to North America and parts of East Asia.

Read the full story here. [PDF here]

Bloomberg, January 31, 2011, “Barclays cuts buying in forward carbon markets”

Barclays Plc’s investment bank stopped buying carbon-permit forwards and some futures from certain customers after reported thefts roiled the market.

Barclays Capital advised customers to open accounts in the U.K. and keep all their emission allowances there, Louis Redshaw, head of environmental markets in London, said today in a phone and e-mail interview. Security there is better than in other European countries, he said.

“It is likely that you will get your European Union allowances back if they are stolen,” Redshaw said. Stolen permits need to be weeded out “before the market can be trusted again,” he said.

Read the full story here. [PDFver here]

Bloomberg, February 1, 2011, “Carbon traders seek fraud-compensation system, Norton Rose says”

Traders are seeking an agreement on compensation for buyers of carbon permits that may have been stolen in computer-hacking attacks, Norton Rose LLP said.

The disappearance of 2 million emission allowances led the European Union’s regulator on Jan. 19 to suspend the registries in 30 countries that track permits, triggering a 13-day halt on spot trading in the world’s largest greenhouse-gas market.

Prompt trading is about 12 percent of the total market, valued at about 80 billion euros ($110 billion) last year, according to Prospex Research Ltd. and Bloomberg New Energy Finance. Continued delays in spot trading may make the carbon market “untenable,” the European Federation of Energy Traders said yesterday, and Barclays Plc said it curtailed trading.

“Many players would like some sort of compensation mechanism set up so that if they unwittingly buy stolen allowances, there is a mechanism by which they can return these to the authorities in exchange for replacement allowances or financial compensation,” Andrew Hedges, a partner at law firm Norton Rose in London, said in an e-mail today. “This is a serious issue for the market.”

Read the full story here. [PDF here]


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