EU may re-ignite carbon trading following hack attack
Some EU carbon emission trading registries may start trading again later this week following the Europe-wide suspension of trading in response to a hacking attack on 19 January.
The cross-continental shutdown followed the theft of around two-million pollution licence allowances worth about €30m in the most serious of three cyber attacks since the start of 2011 alone.
Selected (unspecified) registries will be allowed to resume trading later this week but only after they have filed notice and also after they have passed undisclosed security conditions, which reported involved the use of two-factor authentication for account login1. Much the same timetable was announced this time last week without any action.
In a statement, the EU defended its go-slow approach, essentially arguing it was better to be safe than sorry.
The Commission notes the existence of a broad consensus that security should take precedence over speed in determining when national registries can resume business.
It adds that most trading on the markets involves carbon futures rather than spot trades, the segment of the carbon trading market terminated by the suspension of carbon-trading exchanges. Spot trades involve only a fifth of daily market volume.
Carbon-trading registries apply a market-based approach to tackling carbon emissions. Polluters are able to buy and sell emission credits, established in the framework of an overall pollution limit, so cleaner more environmentally conscious factories pay less.
The cap and trade system is equally hated by free market economists and green activists. A segment of cybercrooks (the Underpants Gnomes in this narrative) view the system as a mechanism for turning an illicit income even though it is less than clear who would buy stolen emission credits. It's not exactly something you could sell down the pub or even on an underground hacking forum. ®
1 Two-factor authentication has been routinely applied for logins to corporate email systems for at least 10 years, so why it hasn't been applied to a high-value trading system is more than a little puzzling.
"The Commission notes the existence of a broad consensus that security should take precedence over speed in determining when national registries can resume business"
.Maybe they should also note that they doing something practical and realistic (like, oooo... I dunno - cutting pollution, maybe?), should take precedence over pissing about with moving useless little pieces of green paper around?
Re: How crooks make money from this.
This isn't a case of opportunist hackers this is serious organised crime getting involved.
It works because anyone can apply for a carbon trading account subject to some basic, but it seems easily faked, background checks.
The mechanism is that they will compromise a legitimate trading account and transfer the carbon certificates to one or more compromised accounts or companies in another countries. Most have been in the former eastern block countries. They end up in a dummy which is then used to sell the certificates on the open spot market and the resulting cash siphoned off.
Because the only identification on the certificates is the serial number, and the only way to check ownership is to go back to the original issuing body and follow the trail of trades associated with those certificates traders assume that ownership is proof of legitimacy. Once the certificates have been stolen the thieves disappear with the cash. The whole issue is compounded by the fact that in a number of jurisdictions there is no requirement for the purchaser to return goods when they are shown to have been stolen.
By the time the whole mess is sorted out, ownership proved and the trades traced the perpetrators are long gone.