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Last updated: February 3, 2011 11:24 am
Europe’s physical carbon trading market is set to partially reopen on Friday after five national registries were cleared to resume operations following attacks by computer hackers.
The European Commission on Thursday confirmed that France, Germany, the Netherlands, Slovakia and the United Kingdom had “given reasonable assurances” they met the EC’s minimum requirements to restore confidence in the market after the attack.
“Therefore these national registries will resume normal operations on 4 February at 8am central European time. Co-operation with national authorities is constructive and the Commission expects several more reports to be submitted in the coming days,” it said in a statement.
Plans to reopen the market came amid growing pressure from traders to restore falling confidence by reopening a market that had been shut for two weeks. The physical market, also known as the “spot” market, has been closed in Europe since January 19, when the European Commission suspended the national registries for emissions permits after allegations of computer hacking. EEX, the German exchange, also confirmed it would reopen spot carbon trading operations on Friday.
Authorities estimate that as much as €30m has been stolen from the market, in which permits that put a price on industrial pollution are bought and sold. The Commission requested that each national regulator submit independent verification of security before allowing registries to reopen.
Yesterday Barclays Capital, the largest trader of European carbon allowances, warned that the market was “in danger of irreversible damage and a slide in disorder as confidence in the regulatory framework evaporates”.
The countries whose national registries have been given permission to resume business represent the largest carbon trading markets in the European Union. ICE Futures Europe, the region’s largest exchange, is due to remain closed until Monday .
Closure of the spot market is the latest in a series of issues that have beset the market in recent years. It has also faced phishing scams, theft from accounts and VAT fraud.
Louis Redshaw, head of emissions trading at Barclays Capital, said confidence could be restored to the market by restricting access to the registry accounts of companies with compliance obligations such as manufacturers, and firms regulated under Mifid, the EU’s financial services directive.
“Anyone wanting to engage in criminal activity can open up an account in a registry, take delivery of EU emission allowances, transfer them on and receive payment,” he said.
“Failure to restrict access will mean that participation in the market will wane and liquidity will reduce at the expense of the market,” he warned.
Industry insiders acknowledge that the issue of the legal ownership of the stolen permits that have crossed national borders needed to be resolved.
Launched in 2005, the EU’s emissions trading scheme is the largest carbon trading scheme in the world. It covers more than 10,000 industrial installations in the EU’s 27 member states, plus Norway, Iceland and Liechtenstein. However the permits are traded freely across the 30-country bloc and compensation for stolen permits varies from country to country.
“The more overarching solution is to bring financial regulation to bear on the spot market” Almost all of the criminal activity to date has occurred in the spot market,” Mr Redshaw said.
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