Financial lobbyists target carbon market

Brussels, 10 October 2011 – Finance sector lobbyists are pushing the European Commission to block tighter regulation of the EU’s carbon market, a new report from Corporate Europe Observatory and Carbon Trade Watch, published today, reveals[1].

The Commission is currently reviewing regulation of the market following a number of fraud cases [2] and leaked documents suggest that it will include carbon trading under the revised Market in Financial Instruments Directive [3].

But according to Letting the market play, lobbyists from the International Emissions Trading Association – the main body representing carbon traders - and BusinessEurope have sought to minimise new regulations, with BusinessEurope claiming “no further regulation” is needed.

Report author Oscar Reyes said:
“Carbon markets are a playground for fraudsters and speculators. Financial regulations are the Commission’s belated attempt to trim the excesses, but the problems lie at the core. Handing over environmental policy to traders has done nothing to address climate change.” 

Belen Balanya from Corporate Europe Observatory added:
“The Emissions Trading System’s vulnerability to industry lobbying leaves it incapable of effectively reducing carbon emissions in Europe. Treating carbon as a financial product that is bought and sold to boost corporate profits does not lead to the carbon cuts urgently needed in response to climate change. The Commission has failed to adequately regulate this market – and should clamp down on carbon trading in the interests of the environment.”

The report shows that while IETA has blamed a “lack of action from the side of the regulators” for the cases of carbon fraud, its lobby strategy has been driven by a desire to find new opportunities for speculation by whatever means are necessary.

In January 2011, the European Commission halted trading on a key part of the carbon market after the latest in a series of large fraud cases was uncovered. Less than a month later and with the suspension still partly in place, the International Emissions Trading Association (IETA, the main carbon traders’ lobby group) was privately insisting to Brussels officials that “there might be no need to regulate this market”.

Contact:
Oscar Reyes, Carbon Trade Watch, oscar@carbontradewatch.org, tel: +34 644 139 190


Notes:
[1] Letting the market play – corporate lobbying and the financial regulation of carbon trading, Carbon Trade Watch and Corporate Europe Observatory, October 2011, http://www.corporateeurope.org/publications/letting-market-play
[2] In December 2009, Europol revealed that “carousel” (or “missing trader”) fraud resulted in a loss of around €5 billion in tax revenues “Carbon Credit fraud causes more than 5 billion euros damage for European Taxpayer”, 9 December,
http://www.probeinternational.org/carbon-credit-watch/carbon-creditfraud...
In January 2011, the theft of €34 million worth of permits forced the closure of “spot trading” markets after thieves gained unlawful access to an account in the Czech Republic using fake internet sites and emails. Similar attacks had already been reported in Austria, Germany, Greece and Romania. See: http://www.reuters.com/article/2011/01/19/carbonczech-idUSLDE70I0Y020110119
[3] The Market in Financial Instruments Directive (MiFID) regulates the trading of derivatives within the EU and is currently under review. http://ec.europa.eu/internal_market/consultations/2010/mifid_en.htm