Carbon Trading Declines as EU Regulator Halts Spot Market on Hacking Probe

Futures trading in European Union carbon allowances fell and an investors group said it was “very concerned” after regulators disabled spot transactions in the world’s biggest emissions program because of alleged hacking.

Volumes shrank to about 305,000 metric tons in the first 90 minutes of trading, or a rate of 200,000 tons per hour, compared with yesterday’s 1.2 million. Prices for EU permits for December 2011 delivery rose 0.6 percent to 14.46 euros ($19.50) a metric ton as of 9:20 a.m. on the ICE Futures Europe exchange against yesterday’s close of 14.38 euros, the lowest level since Jan. 13.

The European Commission suspended most operations yesterday at all 30 of the region’s greenhouse-gas emissions registries after a Czech firm reported about 6.8 million euros of carbon allowances stolen in a hacking attack. The Nasdaq OMX Commodities exchange said today it’s suspending trading and clearing of prompt-delivery EU allowances, or EUAs, and United Nations-supervised Certified Emission Reductions “until further notice.”

“Trading in and clearing of EUA and CER forward, futures and options remains open,” Nasdaq said in an e-mailed statement. “However, the situation will be closely monitored to ensure that orderly trading and clearing can take place.”

The International Emissions Trading Association said it’s “very concerned” about disruption to business following the theft and expects “speedy” action from the bloc’s regulator.

The Geneva-based IETA is ready to help the European Commission with the “identification of issues and solutions” and expects that the EU regulator will be able quickly to provide a more detailed explanation and propose further steps.

Stolen Certificates

“At least in the longer term, centralized EU decisions need to be taken on the status of stolen certificates,” according to the IETA statement.
The halt of the registries, which track ownership of allowances, will last at least until Jan. 26, according to the commission. It said it will work with national authorities to determine what “minimum” security measures need to be put in place before the suspension of a registry can be lifted.

Blackstone Global Ventures, a trader based in Brno, Czech Republic, lost 470,000 allowances yesterday, according to Daniel Butler, the company’s broker at Wallich &; Matthes BV in Prague.

The reported theft followed at least two incidents in the past months in which permits, used by more than 11,000 European factories and power stations to lawfully emit carbon dioxide, were stolen from accounts in attempts to profit from resale.

Romania, Austria

In November, Romania’s registry was accessed without authorization, prompting a statement of regret from Jos Delbeke, director general for the commission’s climate department, which supervises the carbon market. Last week the Austrian registry blocked access to accounts after a hacker attack on January 10.

The European emissions trading system, the world’s biggest carbon market, includes the EU’s 27 member states as well as Norway, Iceland and Liechtenstein. It was set up in 2005 as a cornerstone of the bloc’s efforts to tackle the heat waves, storms and floods that scientists have linked to emissions of greenhouse gases.

Source: Bloomberg