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Posts Tagged ‘ETS’

Cyber Attacks Force EU to Close Emission Trading System

In Financial Markets, Health and Environment, International Econnomic Politics, Law & Regulations, Natural science, Quantitative Finance, Technology, Trading software, Uncategorized, Views, commentaries and opinions on 22.01.11 at 03:15

A series of cyber-attacks on national registries, where carbon permits are stored, have forced the EU to close its emissions trading system (ETS) for at least a week. The European Commission posted the announcement on its website on Wednesday after Czech Republic-based firm Blackstone Global Ventures said about €6.8 million of carbon allowances appeared to have disappeared. Thefts on electronic registries in Austria, Greece, Poland and Estonia have also been reported over the last days.

“They will over time undermine the credibility of carbon trading as a policy measure.”

Kjersti Ulset


After discovering unauthorized trading on its account on Wednesday, Blackstone contacted the Czech registry OTE AS, which promptly closed all operations and began an investigation. The Paris-based BlueNext SA, operator of the world’s biggest spot exchange for permits, followed suit, as did registries in Poland and Estonia, before the EU finally imposed a region-wide shutdown.

It’s not the first time cyber criminal have been trading stolen permits at the international ETS market, but never has the activity been so comprehensive that the regulators have been forced to close the whole market.

“Incidents over the last weeks have underlined the urgent need for enhanced security measures,” the EU commission says in its announcement of the closure.

The bloc’s ETS system will be down, at least until 26 January.

Full statement

Q&A’s

A Criminals Market

According to The Guardian, European Authorities estimate that up to 90% of the whole market volume is plain fraudulent activities.

Belgian prosecutors highlighted the massive losses faced by EU governments from VAT fraud today after they charged three Britons and a Dutchman with money-laundering following an investigation into a multimillion-pound scam involving carbon emissions permits.

The three Britons, who were arrested last month in Belgium, were accused of failing to pay VAT worth €3m (£2.7m) on a series of carbon credit transactions.

European authorities believe the EU has lost at least €5bn to carbon-trading VAT fraud in the last 18 months.

Last month, the European police agency Europol reported that the European Union’s Emissions Trading Scheme had been victim of fraudulent trading activities over the past 18 months, worth €5 billion for several national tax revenues.

Europol, the EU’s law-­enforcement operation, fears the fraud will be used in other areas, especially gas and electricity trading markets, after criminals found VAT fraud was one of the most lucrative financial frauds.

The Most Lucrative Financial Fraud

Wednesday’s announcement and similar cyber-attacks have also damaged the EU initiative, together with reports of tax fraud and the recycling of used credits, the EUobserver.com reports.

“They will over time undermine the credibility of carbon trading as a policy measure,” says Kjersti Ulset, manager at Point Carbon, a company that reports on Europe’s emission trading, carried out in a network of registries across the union.

Despite its pioneering position, Europe’s ETS system has attracted criticism over its six years of operation, with some businesses saying it threatens the bloc’s competitiveness, while NGOs argue emission thresholds have been set too high.

By placing a price on carbon, Europe’s trading system is designed to lower company emissions and therefore protect the environment from global warming. Corporations received emission permits for free under the first phase (2005-2007) of the scheme. Some, however, are forced to pay for a portion of their permits.

The European emission trading system is the world’s largest, as the US plans for a similar cap-and-trade scheme was blocked by the US Senate last year.

Carbon permits are, however, traded as ordinary securities at the Chicago Carbon Exchange.

Brussels wants to see energy companies buy all their permits with their own money from 2013 and onwards, with other heavy industries gradually phased in by 2020.

China experts suggest pilot ETS projects could appear in Beijing’s next five-year plan, set to be approved in March.

Here at The Swapper we have been skeptical to the ETS all along.

It’s an artificial market, created on basis of nice thoughts, without a real supply/demand situation and is regulated in a way the is more similar to a pharmacy than a financial market.

But what is really worrisome, is the sharp increase in this kind of activity.

Just wait till you see the Chicago Board Option Exchange gets hacked!

Related by The Swapper:

Most Polluting Companies Makes Billions On Carbon Trade

In Financial Markets, Health and Environment, International Econnomic Politics, National Economic Politics, Views, commentaries and opinions on 01.06.10 at 16:38

I guess this is the final evidence that E.U.’s emission trading system is complete fiasco.  According to editor of Euro-correspondent.com Stephen Gardner the most polluting companies in Europe stand to make a profit of more than 13 billion euro by selling emissions permissions – ETS – they have been given for free, but won’t need.

“The most polluting companies in Europe are lining up to receive a windfall that could be as much as €13.3 billion from the ill-conceived emissions trading system.”

Stephen Gardner


I’ve been skeptical towards this emission trading scheme all along, but after reading Mr. Gardner’s latest blog post at the EUobserver.com, I have no more doubt; the ETS market is a complete flop!

Here are a few examples:

In Belgium, in 2008, ArcelorMittal received for its various plants 11,183,005 allowances. But it only used up 7,109,899 of them — a surplus of more than 4 million.

Another metal-basher, Corus, received in 2008 across various plants 11,414,550 allowances, but only used 6,953,746 of them.

Massive German ironworks Hüttenwerke Krupp Mannesmann, meanwhile, got 8.6 million allowances but only used half of them.

Editor of Euro-correspondent.com, Stephen Gardner calls it a “scandal.”

I have no problem agreeing with him.

Here’s what he writes:

Look closely enough at yesterday’s European Commission communication on ‘moving beyond a 20 percent greenhouse gas reduction’ and you will spot a scandal. It’s on page 3 and it reads like this: ‘With many allowances unused during the crisis, companies will be able to carry over some 5-8% of their allowances from the 2008-2012 period into the third phase of the ETS.’

What this means is that during the 2008-2012 period of the EU emissions trading system, companies were given more carbon allowances — pollution permits — than they needed. Partly this is a consequence of unforeseen events. Because of the deep recession, big steel firms and the like drastically cut their production between 2008 and 2009, emitting much less CO2 than expected, and so ending up with piles of unused emission allowances.

Stephen Gardner is editor of Euro-correspondent.com, and Brussels freelance environment correspondent for the Bureau of National Affairs (US). He is also a contributor to other media such as the BBC and the UK magazines Ethical Corporation and Private Eye.

But partly, the allowance surpluses are down to bad planning, lobbying and the rewarding by governments of their favourite industries (ie those that threatened to relocate elsewhere if they did not get bumper carbon allowance handouts).

Because of the way the ETS was set up, the surpluses are held primarily by heavy industry, rather than by power plants. Here are a few examples. In Belgium, in 2008, ArcelorMittal received for its various plants 11,183,005 allowances. But it only used up 7,109,899 of them — a surplus of more than 4 million.

Another metal-basher, Corus, received in 2008 across various plants 11,414,550 allowances, but only used 6,953,746 of them. Massive German ironworks Hüttenwerke Krupp Mannesmann, meanwhile, got 8.6 million allowances but only used half of them.

These massive surpluses were: 1). given to these companies for free, and 2). can be carried over to the next phase of the ETS (2013-2020) and sold then. By my admittedly back-of-the-envelope calculations, the 5-8% cited in the Commission’s paper means between 520 million and 833 million surplus allowances EU-wide.

Here is the absolutely scandalous part: the companies holding these allowances can sell them for at least an estimated €16 each in the next phase. That means the most polluting companies in Europe are lining up to receive a windfall that could be as much as €13.3 billion from the ill-conceived emissions trading system.

And who precisely will deliver this windfall to billionaires like Lakshmi Mittal? Well, while EU governments were dishing out massive surpluses to their favourite manufacturers, they gave far smaller allocations to power plants. This was because power plants can’t flounce off to another country if they don’t get what they want. So the massive Drax power plant in northern England, for example, was given in 2008 9.5 million allowances, but had emissions equivalent to 22.3 million — a shortfall of 12.8 million.

But another reason power plants were given insufficient allowances was that they do not suffer any real negative effect from it — they simply pass on the cost to their customers in the form of higher electricity bills. So the ill-conceived ETS has resulted in households across Europe funnelling money into the pockets of some of the continent’s most polluting companies, who have no incentive to do anything in return, but just wait for the free money to roll in.

Increasing the EU’s 2020 emissions reduction target from 20 to 30 percent compared to 1990 levels would force a quicker burn through of the surplus but will not reduce the windfall. In fact, it might increase it, because the carbon price would likely rise. However, the Commission should scrap the rule that allows the 2008-2012 surplus to be carried forward to the next ETS phase. Of course in the face of the lobbying power of the steel industry and others, this is hardly likely to happen.

By Stephen Gardner

Original blog here.

Here’s a copy of the E.U. commissions emission report.

Related by the Econotwist:

Another Carbon Fraud Raid Reveals Firearms, Piles Of Cash

Hackers Steal CO2-emission Permits Worth $4bn

World May Not Be Warming, Scientists Says

As Climate War Intensifies, So Does Extreme Weather

Top Scientist: “UN Climate Panel Is Losing All Credibility”

Mother Earth On Crack

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