Carbon Trading Halted After EU Exchange Is Hacked

chicksdaddy writes "The European Commission (EC) suspended trading in carbon credits on Wednesday after unknown hackers compromised the accounts of Czech traders and siphoned off around $38 million, Threatpost reports. EU countries including Estonia, Austria, The Czech Republic, Poland and France began closing their carbon trading registries yesterday after learning that carbon allowances had been siphoned from the account of the Czech based register. A notice posted on the Web site of the Czech based registry said that it was 'not accessible for technical reasons' on Thursday and the EC issued an order to cease spot trading until January 26 so that it can sort out what appears to be chronic security lapses within the system."

Comments

It wasn't me

[Huzzah!]

I don't take Czechs.

Re:Wait, carbon trading wasn't a scam to BEGIN wit

[Ihmhi]

You mean paying another group to reduce pollution so you can pollute isn't a scam? It's a shell game whose goal isn't to improve things just to maintain the status quo. It's a pointless exercise. Offer companies tax credits to reduce emissions and fine them for exceeding but letting them pay to pollute is a joke.

I have a headache and I'm quite tired, so feel free to correct me if any of my understanding of the subject is wrong here.

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As I understand it, the basic concept is thus (shown via a hypothetical example):

1) The nation of Countrystan decides that there will be no more than 1,000 tons of carbon exhausted per year, by law, from certain industries.

2) Each business within the industry is allocated a certain number of "carbon credits" that effectively cap how much bad stuff they can spew into the air.

3) Since the total number of credits is a fixed number, any business that doesn't want to be hit with major fines will try to stay under their credits.

4) Businesses that are way below their credits can sell other businesses their credits. Businesses that may exceed their cap can purchase credits from other businesses, but the total number of credits (and thus the total amount of pollution) out there doesn't increase in any way.

5) Due to 4, there are economic incentives to reduce carbon output. Heavy polluters would likely need to buy extra credits, thereby incurring a cost that would offset any financial benefits of lackadaisical pollution control. Light (or non) polluters would (rather than a cost) receive a gain in revenue by selling their allotted credits to businesses that can't keep pace. Therefore, businesses stand to lose money if they pollute and gain money if they cut back on pollution, thereby providing the best kind of incentive (economic) for businesses to get their pollution under control.

6) Eventually, more businesses would have a surplus of credits that no one needs to buy. At this point, I imagine the total number of credits in circulation could be reduced.

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So, this is how I roughly understand the whole carbon credits thing is supposed to work. Am I right here? And does the real-world application work like this model, or is it rife with corruption, bureaucracy, and an inability to accomplish its stated goals like every other government project? Have their been any studies on the effectiveness of such a system?