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EU Emission Trading Rocked By Scandal Over Recycled Carbon Permits

Europe’s emissions trading system was in uproar yesterday amid a mounting scandal over “recycled” carbon permits. Two carbon exchanges were forced to suspend trading as panic hit investors fearful that they had bought invalid permits.

BlueNext and Nord Pool, the French and Nordic exchanges, suspended trading in certificates of emission reduction (CERs) when it emerged that some had been illegally reused.

Concern that used and worthless permits were circulating caused the spot price of the certificates to collapse, from €12 ($17.87) a tonne of carbon to less than €1.

The scare erupted after Hungary said last week that it had sold two million CERs submitted by Hungarian companies to satisfy their carbon emission allowances under the EU’s emission trading system (ETS).

Carbon permits submitted by companies every year to the national register are usually cancelled.

However, Hungary exploited a loophole that allows CERs – which are issued not by European Union governments but by the United Nations under its Clean Development Mechanism – to be traded.

Investors in the carbon market took fright as it emerged that some of the Hungarian CERs had found their way back into the market, despite having been used to meet the carbon targets of Hungarian companies.

The double counting is threatening confidence in the ETS, according to staff at one energy consultancy. Icis Heren said: “For companies obliged by law to buy carbon credits … government-led carbon credit recycling means they risk buying a worthless asset.”

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