Closing the door to fraud in the EU ETS

In January 2011 cyber-criminals managed to steal allowances belonging to companies participating in the European Union Emissions Trading Scheme (EU ETS) by attacking several EU-Member States’ national emissions registries. While these attacks did not affect  the  environmental  integrity  of  the  EU  ETS,  they  are  the  latest  in  a  series whereby  fraudsters  have  targeted  the  carbon  market. As  such,  they  have  posed  a direct  challenge  to  the  confidence  of  market  participants  and  the  reputation  of  the EU’s  pioneering  scheme.  This  Brief  seeks  to  explain what  has  happened,  why,  and what is being done to restore confidence in the market. Importantly, it notes that these events  are  actually  better  explained  by  weaknesses  in  the  governance  of  anti-fraud measures in the carbon market than by the policy choice of emissions trading per se.