Thursday

27th Jan 2022

EU proposals aim to increase security of CO2 trading

The European Commission has sent EU member states new proposals to increase the security of the bloc's emissions trading system (ETS), after cyber-thieves ran off with an estimated three million carbon permits earlier this year, valued at roughly €50 million.

The theft forced national trading registries, where pollution permits are bought and sold, to grind to a halt, with the commission now hoping that measures announced on Thursday (5 May) will prevent future attacks.

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  • A series of cyber-thefts have eroded confidence in the security of the EU's emission trading system (Photo: *n3wjack's world in pixels)

"Some amendments are required to implement the long-planned changes to the EU ETS in the third phase [2013 onwards]," the commission said in a statement.

"Another important element, however, is a new set of measures to further enhance the integrity and security of the current system of registries and the future single EU registry that will become operational next year."

The proposals include a 24-hour delay on permit transfer between registry accounts, making it easier to identify fraudulent trades before it is too late.

Other measures would see a harmonised alert mechanism established, together with a new authorising system that required at least two people to sign off before permits could be transferred.

People convicted over the last five years of terrorist financing, money laundering or tax fraud would be banned from having registry accounts.

The plans must now be approved by an EU climate committee, composed of member state experts, as well as the European Parliament, with implementation expected before the end of this year.

Europe's ETS system is the largest of its kind in the world, designed to force European businesses towards greener production methods by making them buy permits for the carbon emissions they produce. Those that produce less carbon dioxide than their quota can sell surplus allowances.

But industry critics complain that businesses could do without the additional burden during the current economic difficulties, while environmental groups say the emission cap has been set too low in previous years to force a change in behaviour, with the free handout of permits resulting in large windfall gains for certain companies.

This year's cyber-attacks have also eroded confidence in the system.

On Wednesday the commission held a stakeholder workshop on carbon market oversight and integrity, where wider issues about supervision and regulatory oversight were discussed.

The classification of all carbon permits as financial instruments was one of the themes discussed.

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