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EFET welcomes the temporary suspension of national registries to enhance their security, but urges for more attention to adverse market effects and clarification of the legal situation

Date

31 Jan 2011

Sections

Energy
Trade & Society

The European Federation of Energy Traders (EFET)* welcomes the decision of the European Commission (EC) and EU Member States (MSs) on 19 January, 2011, to suspend national registries in response to recent security breaches. The large number of events involving unlawful access to registry accounts and theft of EU allowances (EUAs) in the week preceding the suspension confirmed the vulnerability of registry systems, first revealed by similar events that occurred in 2010.

EFET believes the EU-wide suspension was a necessary measure to prevent any further liabilities for market participants. In order to restore market confidence, temporary or secondbest measures would be insufficient. The Commission and MSs have the joint responsibility to bring registries back to the best security standards.

However, the EU-wide suspension of registries does have a serious impact on the market, which has been dismissed too easily over the last few days. The resulting lack of a spot market reference will have cascading effects on contracts indexed on spot. Furthermore, as a number of structural sellers use spot contracts as a route to the market, the absence of a spot market risks modifying the supply-demand balance. The absence of a secure trading infrastructure supporting the main European carbon marketplaces will rapidly become untenable. Therefore, we insist that the registries in the UK, Germany and France ought to be brought back online as soon as possible, and no later than 7th February, 2011.

Furthermore, EFET members expect the EC and relevant national authorities across Europe to clarify, for each jurisdiction, those legal issues essential to preserve the integrity of transactions. It is also critical that national authorities, under strong EU coordination, provide and update lists of presumably and confirmed stolen EUAs to prevent further circulation of stolen EUAs and to minimise associated liabilities and losses for market participants.

The EC and MSs must recognise that the evident legal uncertainty associated with EUAs as a result of the current bottom-up approach based on interconnected national jurisdictions cannot be sustained and outstanding legal questions need to be addressed urgently. Otherwise, both the policy objectives of the EU and the cause of market-based climate change solutions may be jeopardised.

For further information, please contact:
Maria Popova, M.Popova@efet.org, Tel: +32 (0)2 737 11 01.

* The European Federation of Energy Traders (EFET) promotes and facilitates European energy trading in open, transparent and liquid wholesale markets, unhindered by national borders or other undue obstacles. EFET currently represents more than 90 energy trading companies, active in over 27 European countries. For more information:
www.efet.org.

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