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Allowance theft halts carbon trading

The future of carbon trading has been thrown into question following the three-week closure of Europe’s emissions trading scheme after widespread fraud was discovered.

In January, all trading on the European carbon market was suspended after a number of European governments fell victim to a series of cyber attacks which led to the loss of two million European Union carbon allowances worth about £25m. The market reopened in early February.

Under changes to the incoming Carbon Reduction Commitment Energy Efficiency Scheme (CRC) announced as part of the government’s Comprehensive Spending Review, some of the largest companies in the UK will now have to pay for energy-related emissions.

However, companies will also be able to trade carbon credits with one another in the future, under the European Carbon Trading scheme (ETS).

For finance directors looking to trade carbon credits to offset the emissions of their businesses, the uncertainty gripping traders has cast doubt on the viability of the market. Some traders remain concerned that stolen permits are still in circulation and unclear rules on ownership liability mean that in unknowingly buying these, firms risk a loss of their full face value.

“You would have to be brave to trade that stuff,” Trevor Sikorski, carbon analyst at Barclays Capital, told Reuters. “There is a high probability there are [more] stolen European Union Allowances. If you were to lose full face value on 100,000 tonnes, it would take a long time to get that back in trading revenue.”

 

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