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EC seeks to plug security holes in EU ETS

(24 Feb 11) The European Commission has announced further measures to improve security of the EU emissions trading scheme (ETS), following a spate of cyber thefts of carbon allowances worth €50m and criticism about its handling of the situation.

Spot trading of allowances (EUAs) was shut down last month after the thefts came to light. National registries have begun to reopen – the latest in Belgium, Luxembourg and Estonia on Thursday. But still only a third of registries are functioning.

The commission suggested a range of short-term actions, including stronger controls on registry users, more regular reviews of registry security and better communication between member states in cases of suspicious activities.

It will also host a meeting of national regulators in March to try to agree a common line on how to handle stolen allowances. In January, emissions trading association IETA criticised the EU's secrecy over the adoption of minimum security requirements to be met by member states before reopening trade.

For the longer term, the commission suggests actions to strengthening EU registry rules, and to bring spot trading in carbon under mainstream financial market rules. It promised to launch a consultation on enhanced carbon market oversight shortly.

National regulators discussed the commission's ideas at a meeting in Brussels on Wednesday. The EU executive said in a statement that member states had "welcomed in broad terms" the proposals. However, it also acknowledged that some countries were concerned that new controls would increase administrative costs.

Many market operators are angry about the EU's lack of preparedness and uncertain response to security issues. In a strongly worded letter to the Financial Times on Monday, James Atkins of Vertis Environmental Finance accused the commission and member states of a "disgraceful lack of political leadership".

Europe has created an "amateurish hotch-potch of insecure systems" to manage emissions trading, Mr Atkins wrote, and is now failing to take responsibility for the resultant problems. "Cleaning up the mess will be a Herculean task,” he added. "The scheme is rudderless and its officials wholly unaccountable."

Follow-up: European Commission press release plus memo summarising discussions at the meeting in Brussels

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