ICE to Flag Unusable Carbon Credits to Rebuild Confidence
ICE Futures Europe, trying to restore investors’ trust after online thieves targeted emission permits, will publish a list of credits considered unacceptable for delivery.
ICE, the largest exchange for carbon trading, is seeking advice from members through March 4 on which permits or credits for quarterly and next-day delivery should be on the list, the company said today in an e-mailed document. ICE also is proposing that permits delivered for use in exchange contracts can come only from accounts in the U.K., German or Dutch registries or others to be named later.
Spot carbon trading in Europe has been disrupted since Jan. 20 after the EU regulator closed all 30 national registries that track ownership of emission permits. The move followed hacking attack by online thieves who illegally transferred permits valued at around 60 million euros in the past months. While Paris-based BlueNext SA, last year’s biggest exchange for spot contracts, reopened earlier this month, trading in next-day permits on ICE remains halted.
“These restrictions are designed to help maintain market confidence,” ICE said in a circular today. “Any EU allowances, Certified Emission Reductions or Emission Reduction Units that are delivered to the clearing house in the future will be reviewed in order to indentify whether any of them are included on the prohibited list.”
36 Hours
ICE said in the circular it will give at least 36 hours notice before reopening spot trading. Contracts for quarterly delivery weren’t affected by the suspension of registries, and benchmark permits for December rose 0.7 percent at 15.40 euros today in London.
ICE’s plan to publish the blacklist comes as the European Commission, the bloc’s regulatory arm, tries to speed up work on regulations to protect the world’s biggest carbon market from fraud. The commission plans to meet with emitters and traders next month to discuss how to handle allowances stolen in the computer-hacking attacks.
The commission has so far allowed 10 carbon registries to reopen, including Belgium, Estonia, France, Germany, Luxembourg, the Netherlands, Portugal, Slovakia, Spain and the U.K. The remaining 20 have yet to get EU approval for their independent reports showing they meet the minimum security requirements.
The EU regulator plans modification to the regulation on registries and will discuss with member states the idea of a 48- hour delay for delivery of spot carbon allowances. That would provide extra time for the transfer of permits between user accounts, a person with knowledge of the matter said yesterday.
The commission also may classify carbon allowances as financial instruments. An analysis by the EU regulator in December showed that while trading in carbon derivatives already falls under financial-markets regulation, spot trading requires further examination.
To contact the reporter on this story: Lars Paulsson in London at lpaulsson@bloomberg.net
To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net
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