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UPDATE 1-EU carbon market to reopen step by step after theft

Source: Thomson Reuters Foundation - Thu, 20 Jan 2011 12:23 GMT
Author: (c) Copyright Thomson Reuters 2011. Click For Restrictions.
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* Czech registry says closure may last beyond EU deadline

* EU official says to phase re-opening of spot trade

* BlueNext exchange says to isolate any stolen credits

(Adds detail)

By Pete Harrison and Gerard Wynn

BRUSSELS/LONDON, Jan 20 (Reuters) - The EU will reopen its 72 billion euros emissions trading scheme step by step, as each registry proves its security, a senior official said after the bloc froze spot trade due to possibly concerted permit thefts by hackers.

The European Union on Wednesday imposed the week-long freeze in its carbon market, its chief weapon for fighting climate change, after the emissions permits called EU Allowances (EUAs) were stolen from accounts in the Czech Republic and Austria.

But a wholesale reopening on Jan. 26 appeared in doubt as the Czech carbon registry said on Thursday it would be closed indefinitely.[ID:nLDE70J0KJ]

The senior official at the EU's executive Commission, who declined to be named, told Reuters on Thursday the suspension would be lifted in phases, starting with registries that proved their security.

An EU spokeswoman said that the theft may have resulted from "concerted action", but ruled out for now deliberate sabotage of the scheme which is the EU's main weapon against climate change.

The EU ETS caps nearly half the bloc's carbon emissions by allocating a fixed quota of EUAs to factories and power plants.

"For us at this stage, it is theft, not sabotage. It could be possible that it is concerted action, because the recent incidence, they happened within the last five days," the Commission's climate action spokeswoman Maria Kokkonen told a regular briefing.

"The member states are now investigating. We are in close contact," she said.

Asked when trade might resume, she said: "It depends (on) the action and the speed of reaction of the member states. The sooner they increase the security measures, the sooner we can re-open the systems."

Freezing of the spot market did not interrupt the much bigger futures trade in EUAs. Benchmark EUAs <CFI2ZZ1> were up 4 cents at 1130 GMT at 14.42 euros.


The Czech carbon registry said it would remain closed for an indefinite period, following a similar statement by the Austrian registry, target of a Jan. 10 hacking attack, on Tuesday. [ID:nLDE70H0IP]

Miroslav Rehor, who runs the registry for Czech market operator OTE, said that more than one account holder was affected by what he described a likely hacker attack.

"We don't see a time when the registry will be open again because the attack was very serious and the situation is quite complex now," he told Reuters in a telephone interview.

"Somebody definitely manipulated the data in the registry of other account users. It was probably a hacker."

The United States, Japan and Australia have all delayed implementing cap and trade schemes, and the latest glitch to the EU system -- by far the largest and most successful such scheme in the world -- could detract further from global adoption.

"You don't want to have a whole bunch of reputational problems, it discourages other countries taking the same policy route," said Trevor Sikorski, carbon analyst at Barclays Capital.

The latest attack follows several scandals to hit the market in the past two years, including VAT fraud, a phishing scam and the re-sale of used carbon credits.

The European Commission said on Wednesday that it would be busy in the week ahead repairing the system, and from 2013 the EU would move to a safer centralised registry that it hoped would benefit from tough market oversight.

The carbon trading lobby group, the International Emissions Trading Association, said it wanted clarity on recovering the estimated 475,000 EUAs missing from the Czech registry.

"IETA expects that the Commission will be able very quickly to provide a fuller explanation of what has happened and what detailed steps are proposed. There are arguments that, at least in the longer term, centralised EU decisions need to be taken on the status of stolen certificates." (Additional reporting by Michael Kahn in Prague)

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