February 4, 2011 1:02 pm

Traders shun reopened European carbon market

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Europe’s spot carbon trading market reopened after a three-week shutdown on Friday but investors shunned trading amid ongoing concerns that the full extent of alleged hacking attacks was still unknown.

The two major exchanges that resumed next-day trading of carbon emissions permits, Bluenext and EEX, recorded just a single trade between them in the first three hours of business.

Confidence in the €80bn market, the largest carbon trading scheme in the world, has been badly affected after the European Commission suspended national registries – the electronic warehouses where permits are kept – following allegations that emissions allowances worth up to €30m had been stolen.

This week the Commission gave permission for five national registries to reopen after they satisfied tighter security requirements but uncertainty in the market has meant only some exchanges have resumed the exchange of permits for cash, known as the spot market.

“Members are reluctant to trade because of the uncertainties caused by the stolen certificates and the registries,” said Toralf Michaelsen, head of trading at EEX, the German exchange.

Some exchanges operators remained unclear exactly how many allowances were allegedly stolen and did not know the unique serial numbers of the certificates.

Furthermore the industry acknowledged legal ownership of the stolen permits that have crossed national borders needed to be resolved. The EC as yet has no centralised procedure for the recovery of illegally-transferred allowances and has stressed it is a matter for national law enforcement authorities.

“We have the filter technology in place to isolate the serial numbers but we are of the opinion that we do not have a full overview of everything reported, said Hendrik Hasselknippe, managing director of global product development at GreenX, the exchange owned by CME Group, the US-based group. Trading in the daily carbon spot contract remains closed on GreenX.

Paris-based Bluenext, which announced it would reopen late on Thursday, said it received confirmation lists of the contract serial numbers that were in dispute.

“Our members can be absolutely confident that no known permit under question can be traded on our market,” said François-Xavier Saint-Macary, chief executive of Bluenext.

However ICE Futures Europe, GreenX and LCH.Clearnet, the clearing house, remained closed to spot carbon trading. Dealers said business remained firm in carbon emissions derivatives, which accounts for more than 90 per cent of trading on the market and has remained unaffected by hacking.

“There’s no need to rush things,” said Mr Hasselknippe. “The market can cope.”

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