Emissions allowance theft

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Emissions allowances

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Pro tip: for tons of information about EU ETS and EU financial services regulation see Michał Głowacki’s magnificent emissions-euets.com website.

Emissions trading documentation
ISDA: EU AnatomyEU Wikitext EU Nutshell (premium) • UK AnatomyUK Wikitext (to be merged into EU Anatomy)
IETA: IETA Master AgreementIETA WikitextIETA Nutshell (premium)
EFET: EFET Allowances AppendixEFET Allowances WikitextEFET Nutshell (premium)

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A strange artefact of all the carbon emissions allowances master trading documentation is their obsession with theft. What should happen if your emission allowances are, for want of a better word, nicked.


Now who, in their right mind, would want to steal emissions allowances? What would you do with them? Who would you sell them to? You might well ask: but the upshot is that, over a few months in 2010 and 2011 they did: in several incidents at different registries in different European states, the best part of 3 million Allowances — at the time trading at around EUR15 a piece — were stolen.[1]

There is a lot of information about all this, FAQs and so on at the European Commission’s web page on climate action, which at the time of writing was here.

Allowances stolen via registry hacks (late 2010/ early 2011)
National registry Allowances stolen Date Recovered? Nicker’s location
Romania 1,600,000 16th November 2010 600,000 Lichtenstein
Italy 267,911 24th November 2010 unknown unknown
Austria 488,141 10th January 2011 488,141 Lichtenstein and Sweden
Czech Republic 950,000 18th January 2011 225,001 Estonia
Greece 300,000 18th January 2011 unknown unknown

How did it happen?

Phishing, basically. In early 2010 phishers posing as registry administrators emailed thousands of registry account holders instructing them to disclose their user identification numbers and passwords on a fake registry website and scarfed 250,000 Allowances this way. Really: it seems lame but you have to remember it was a kinder, gentler time then. Later more sophisticated attacks happened between November 2010 and January 2011, prompting the European Commission to set in and suspend spot trading on 19 January 2011, and only permitting resumption when individual registries could demonstrate minimum security standards.

The stolen allowances accounted for about 0.003% of the market, and while a good proportion were recovered and returned to their owners some of the “tumbled” the Allowances through a series of onward transactions to make them untraceable — the same sort of thing happens on the blockchain to conceal drug transactions on the Silk Road, we hear, although it doesn’t work awfully well there.[2]

The thefts significantly dented confidence in the spot market, and it did not recover even after introduction of revised security procedures.


You might think the administrators of an environmental protection product would be grateful for efforts to recycle, but not when it comes to reusing emissions credits previously surrendered in compliance with emissions obligations.

But, this is what the resourceful Hungarian government did, courtesy of a loophole it found in the EU ETS legislation — long since closed, opportunists — enabling it to resell surrendered allowances into the market, raising valuable extra revenue. But not really in the spirit of things. So, while this was not technically a fraud, it wasn’t a good look and further dented the credibility of the EU emissions trading scheme, already weak due to the ongoing phishing scandals. No longer a thing.

It is better now

The ETS has robustified its systems and issued several helpful documents recommending you have solid passwords that don’t involve your pets, two factor authentication and all that jazz, and as far as we know there haven’t been any really sketchy frauds upon or abuses of the EU ETS in the last decade or so.

See also

European Commission’s page of resources about the Registry and all the things they have done to reduce fraud


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  1. See Nield, Katherine and Pereira, Ricardo: Fraud on the European Union Emissions Trading Scheme: effects, vulnerabilities and regulatory reform. European Energy & Environmental Law Review 20 (issue 6, December 2011), pp. 255-289.
  2. See Andy Greenberg’s excellent Tracers in the Dark: The Global Hunt for the Crime Lords of Cryptocurrency.