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Monday, 07 February, 2011 |
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Following several high profile thefts from private registries of carbon credit markets in Europe, the European Commission suspended most of its Emissions Trading Schemes in the EU. Over $40m of carbon credits have been stolen from registries in the Czech Rep., Austria, Germany and Romania during the last few months. These hacking attacks and thefts are seriously undermining the fledgling carbon trading market and fueling a black market for the right to pollute.
Security for EU Emission Allowances (EUAs) needs to be assured for confidence to return. Why are these assets being held in private registries with little experience of ‘custody’, when there are perfectly good utility infrastructures in Europe with proven track records in the form of Central Securities Depositories (CSDs)? CSDs are specialists in efficient and secure custody of financial instruments (both physical and dematerialised) and have decades of experience in physical and electronic security measures, robust internal controls and low cost service provision. Cash markets have been through the process of centralising safekeeping in CSDs years ago, and under the provisions of the new EC’s European Markets Infrastructure Legislation, derivatives will go the same way through Central Trade Repositories (CTRs). It is a sign of the carbon credit market’s immaturity that asset safety issues are yet to be addressed, but isn’t the solution staring us in the face?
Jim Micklethwaite, Associate Director, Capital Market Infrastructure
jmicklethwaite@thomasmurray.com |
