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Impact of hackers stealing €45m of carbon credits

Since the start of the year, the EU carbon market has been disrupted, as registries have been closed as a result of hacker attacks. In total over three million carbon credits were stolen from governments and firms participating in the EU Emission Trading Scheme (EU ETS). 

Problems started on 10th January, when the Austrian emissions registry closed due to a cyber-attack. It was later discovered that 488,000 credits had been stolen from an Austrian government account.

On 18th January, hackers targeted the national registries of Romania, Greece and the Czech-Republic. One million credits were stolen from cement firm Holcim’s account in Romania, and 300,000 credits disappeared from the Greek account of cement firm Halyps. 

The office of OTE, the Czech registry operator, was evacuated due to a bomb scare, and the ensuing confusion gave hackers the opportunity to steal 1.3m further credits. This brought the total of stolen credits across Europe to 3.1m, valued by Point Carbon at €45 million. 

The following day, the EC suspended national registries, and hence spot trading (buying credits for immediate delivery), across the whole EU ETS. 

The scale, coordination and sophistication of the attacks indicate that a highly efficient criminal gang is responsible. 

Europe’s top climate official, Jos Delbeke, laid blame with governments, stating, “I am speechless about the negligence some member states have been showing. We have been hammering on the door of a number of member states alerting them to this issue, seemingly half of them have not taken our message seriously.”

The message was taken after extreme measures implemented by the EC.  All national registries were closed until the EC was happy with their security measures. The UK registry, widely thought of as being one the most secure in Europe, was be among the first to reopen. 

Countries that experienced the attacks had to keep registries closed for longer. The Austrian registry only reopened at the start of March; the Czech-Republic registry is still closed.

The implications for the EU market were minimal, as only the spot market was affected. Spot trades are transactions where the allowances are delivered immediately, and these trades only represent about 10% of transactions in the carbon market. The majority of trades are ‘futures’, where deals are made for delivery in December. Here it has been business as usual.

Nor do the thefts undermine the environmental integrity of the scheme – the cap on emissions remains exactly as before.

The psychological effects of the scandal and lower liquidity were partially blamed for increases in the carbon price, which jumped over 50 euro cents in the 3 weeks after the first attack. 

For Carbon Retirement, whilst the spot market suspension resulted in some delays in fulfilling orders for our clients, theft is much less of a risk; soon after purchasing the allowances, we ‘retire’ or cancel them out, so they can no longer be used, by polluting companies...or fraudsters.

What seems clear is that proposals such as a 48 time-delay on delivery of purchased credits are vital to deter thieves.  In addition, the central registry for the EU proposed for 2013 will be a safer way of operating the system. This scandal should hopefully serve to focus minds on the need for tighter security once that system is in operation, and promoter greater vigilance until that date from the authorities concerned.

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