Thursday, January 20, 2011

EU Carbon Trading: "In pursuit of 475,500 stolen European Union Allowances"

Tip o'the old iceberg. This racket is riddled with deals ranging from the nefarious to the blatently fraudulent.
And the German hausfrau picks up the tab. Danke.
[umm, nefarious means evil or wicked, you've inverted the spectrum -ed]
From FT Alphaville:
If you thought illiquid European sovereign markets weren’t enough of a problem — time now to familiarise yourselves with the latest trading quagmire to hit Europe.

On Wednesday, the European Union was forced to suspend transfers of its carbon units, known as European Union Allowances (EUAs), after it transpired that yet more contracts had been stolen from national registry accounts. The Czech Republic’s, in this case.

This, of course, is not the first time the European Union Emissions Trading Scheme (ETS) has been rocked by such a scandal.

Others have included VAT fraud, a phishing scam and even the re-sale of used carbon credits.

The competent registration of units, though, is especially essential to making the scheme work — since carbon permits are a synthetic market with no natural supply or demand fundamentals of their own. Supply is stagnant and determined by countries’ National Allowance Plans, themselves negotiated bitterly over many months between governments and the European Commission.

If the NAPs (based on pollution quotas) have been mis-assessed, say over-estimated — demand for the units is likely to be limited with a price collapse a very possible consequence. This, by the way, is exactly what happened during the first round of the scheme.

The systematic theft of units, consequently, can lead to the same thing, since all it does is pump more (illegal) supply into the closed-end structure....MORE