?update/Hacking Theft Forces EU to Suspend Spot Carbon Trade

yest...more comments our way please...are people standing back from the futures market too?...275,000 tons only of dec 11 in one hour and a quarter...will week of fixes solve the security problem? which registries are slackest? who has had allowances stolen? have you seen the blackstone GV missing allowances? ...cheers

Mathew Carr, emissions markets, energy reporter. London Bloomberg News ph +44 207 073 3531 yahoo ID carr_mathew


Hacking Theft Forces EU to Suspend Carbon Registries (Update1)
2011-01-19 19:41:59.780 GMT

(Adds analyst comments from the third paragraph.)

By Mathew Carr and Ewa Krukowska
Jan. 19 (Bloomberg) -- The European Union suspended
operations at all 30 of the region's greenhouse-gas emissions
registries after a Czech firm reported about 6.8 million euros
($9.2 million) of carbon allowances stolen in a hacking attack.
The halt, which started today at 7 p.m. Brussels time, will
last at least until Jan. 26, the European Commission, the bloc's
regulatory arm, said in a statement on its website. Carbon
prices in the world's largest emissions market dropped to the
lowest in six days on the ICE Futures Europe exchange in London.
"This is certainly a good decision toward preventing the
problem from spreading," said Emmanuel Fages, the Paris-based
head of carbon research at Orbeo, the emissions-trading venture
of Societe Generale SA and Rhodia SA. "This means that we will
have no trading or delivery of spot permits. You can still trade
forwards or futures."
The reported theft follows at least two incidents in which
allowances, 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. 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 EU market, intended to be a model for a future global
carbon program, had trading volume of 80 billion euros last
year, according Bloomberg New Energy Finance.

Credibility Gap

"If the EU emissions trading system wants some
credibility, they need to beef up their infrastructure," said
Chris Allison, an operations manager at CF Partners (U.K.) LLP,
the London environmental adviser. "There also needs to be more
communication and openness from the registries as to when there
are problems and what they are doing to solve the problems."
Blackstone, which isn't affiliated with the New York-based
asset manager of that name, contacted Czech registry OTE AS
yesterday after noticing an unauthorized trade on its account,
Butler said. The registry closed operations and began an
investigation, said Miroslav Rehor, an OTE representative. He
didn't say when it will open.
Paris-based BlueNext SA, operator of the world's biggest
spot exchange for permits, halted all trading after earlier
limiting transactions at about 10 a.m. London time. Registries,
which track ownership of allowances, closed in Poland, the Czech
Republic and Estonia before the EU imposed a region-wide halt.
The EU regulator said in a statement on its website that the
"transitional measure" will affect all transactions except for
allocation and surrender of allowances.

'Minimum Security Measures'

"The commission will proceed to determine together with
national authorities what minimum security measures need to be
put in place before the suspension of a registry can be
lifted," it said.
Yesterday's attack follows a theft last January in Germany
and a case in November in which 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. He also asked
companies to ensure they have adequate internal safeguards.
Even so, questions were raised last week about security of
transactions after the Austrian registry blocked access to
accounts because of a hacker attack on January 10.
"Following a first such security breach in early 2010, the
commission has worked closely with national authorities
responsible for registries to ensure that adequate security
measures are put in place in all registries," the EU said in
today's statement. "The incidents over the last weeks have
underlined the urgent need for all registries to ensure that
these measures are speedily implemented."

Biggest Carbon Market

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.
EU carbon prices closed 1.6 percent lower today at 14.38
euros a ton on the ICE exchange, the lowest since Jan. 13. The
commission said it plans to make further announcements "early
next week" and will work to ensure that the suspension can be
lifted "swiftly" for all registries with adequate security
Registries can boost security by requiring passwords that
change every three months or less, improving know-you-customer
rules and requiring physical security device like the ones banks
use for their online portals to verify individuals, CF Partners'
Allison said today by e-mail.
"If my bank does it for the millions of its depositors,
why don't the registries do it for commodities worth millions?"
he said.

For Related News and Information:
Emission market news NI ECREDITS <GO>
Today's top energy stories ETOP <GO>
European power-markets home page EPWR <GO>
Sustainability, environmental indexes SEI <GO>

--With assistance from Catherine Airlie in London and Ladka
Bauerova in Prague. Editors: Mike Anderson, John Buckley.

To contact the reporter on this story:
Mathew Carr in London at +44-20-7073-3531 or
Ewa Krukowska in Brussels +32-2-237-4331 or

To contact the editor responsible for this story:
Stephen Voss at +44-20-7073-3520 or sev@bloomberg.net