Fraud on the European Union emissions trading scheme: Effects, vulnerabilities and regulatory reform

European Energy and Environmental Law Review

Volumn 20, Issue 6, 2011, Pages 255-289

  Nield, Katherine ^a   Pereira, Ricardo ^a  

^a IMPERIAL COLLEGE LONDON   (United Kingdom)

Author keywords

[No Author keywords available]

Indexed keywords

EMISSIONS TRADING; EUROPEAN COMMISSION; EUROPEAN UNION; FINANCIAL MARKET; POLICY REFORM; REGULATORY FRAMEWORK; STAKEHOLDER; VULNERABILITY;

EID: 83055199992     PISSN: 18793886     EISSN: 25890387     Source Type: Journal    
DOI: 10.54648/eelr2011022     Document Type: Article

References (272)

1. By the implementation of Directive 2003/87/EC of the European Parliament and of the Council of 13 October 2003, establishing a scheme for greenhouse gas emission allowance trading within the Community and amending Council Directive 96/61/EC.
2. The 27 EU Member States, and Iceland, Lichtenstein and Norway. (European Commission, http://ec.europa.eu/cli- ma/policies/ets/index_en.htm).
3. Kossoy, A. and P. Ambrosi, "State and Trends of the carbon market 2010", [2010], Carbon Finance at the World Bank, Washington DC, USA.
4. These can be banks, credit institutions or investment firms.
5. Ellerman et al., Pricing Carbon: the European Emissions Trading Scheme (2010) p. 135-137. Cambridge University Press, Cambridge, UK.
6. Ellerman et al. (2010), above n. 5.
7. Daskalakis et al., Financial Aspects in Energy: The European perspective (2010) Chapter 4: "The CO2 trading market in Europe: a financial perspective". Springer [on- line].
8. Anonymous, senior representative of leading carbon trading bank, interview (07.07.2011).
9. Commission Draft Regulation (EU) No/. of XXX establishing a Union Registry for the trading period commencing on 1 January 2013, and subsequent trading periods, of the Union emissions trading scheme pursuant to Directive 2003/87/EC of the European Parliament and of the Council and Decision 280/2004/EC of the European Parliament and of the Council and amending Regulations (EC) No 2216/2004 and (EU) No 920/2010, Reference number: D014910/02, Brussels, Belgium.
10. Communication from the Commission to the European Parliament and the Council, "Towards an enhanced market oversight framework for the EU Emissions Trading Scheme" [2010] Brussels, Belgium.
11. Since the EU enlargement in 2004, the new Member States (except Malta and Cyprus) ratified the Kyoto
12. Protocol (their individual targets range from 6-8% indivi- dual reductions, but are not part of the burden sharing agreement). Under the Burden Sharing Agreement, while some countries have accepted tough reduction targets (e.g. Austria (±13%), Denmark (±21%)), others, such as Portu- gal, Ireland and Greece have been allowed to increase their emissions (e.g. Greece (+25%) and Ireland (+13)), taking into account economic growth projections. France, because of the high reliance on nuclear power and hydro, was given a stabilisation target (the same applied for Finland).
13. M Pohlmann, "The EU Emissions Trading Scheme", in Freestone and Streck (eds.), Legal Aspects of Carbon Trading (OUP, 2009).
14. Although the Directive allowed in principle up to 5% auctioning in Phase I, only three Member States have done so.
15. The EU ETS Directive 2003/87/EC did not indicate how many emissions should ultimately be reduced by sector in each Member, which was left to the National Allocations Plans (NAPs). It thus left Member States with ample regulatory discretion in setting a cap that applies to their industries (Art. 9).
16. Moreover, the Commission allows Member States' operators of covered installations to form a pool from the same activity and to jointly surrender EUAs for its combined verified emissions in the preceding year In principle, up to 10% of allowances could be allocated through auctioning in Phase II (Ibid).
17. Directive 2009/29/EC of The European Parliament and of The Council of 23 April 2009 amending Directive 2003/87/ EC so as to improve and extend the greenhouse gas emission allowance trading scheme of the Community.
18. The US brought a case before the WTO Panels against the Aviation Directive arguing that its "extraterritorial" application breaches WTO law, in particular the non- discrimination and most favourite nation (MFN) principle. The legality of the Directive is also at the time of writing under review before the ECJ. On the WTO law principles, see http://www.wto.org/english/thewto_e/whatis_e/tif_e/fact2_e.htm (accessed on 13/06/11).
19. It starts in 2013 with the power sector (electricity producers and CCS plants), due to the possibility of that sector to pass costs on to energy consumers. Thus, for the power sector all allowances will be auctioned (the Commis- sion estimates that 60% of total allowances will auctioned by 2013).
20. This is to gradually increased to include other sectors (70% of the installations covered by the scheme in 2020), "with view of reaching" full auctioning in 2027. The Commission sets a cap on the total allowances to be auctioned in the Member States, in line with the burden sharing agreement.
21. Keen, M. and S. Smith, "VAT fraud and evasion: what do we know and what can be done?" [2007], IMF working paper WP/07/31, International Monetary Fund, New York, USA.
22. Eurojust, "Fraud" [2011] Eurojust News, Issue No. 4, July 2011, Eurojust, The Hague, The Netherlands.
23. Ainsworth, R.,"CO2 MTIC fraud ± technologically exploiting the EU VAT (again)", [2010], Boston School of Law Working Paper 10(01), Boston, USA.
24. Bluenext, Bluenext spot volume data, [2011], Bluenext exchange website, [online], available at: http://data.bluenext.fr/downloads/20110831_BNS_STATS.xls.
25. Frunza, M., D. Guegan and A. Lassoudiere, "Missing trader fraud on the emissions market", [2010], Journal of Financial Crime, 18(2) at p. 183.
26. Europol, "Carbon credit fraud causes more than 5 billions euros damage for European tax payer", [2009], Europol website, [online] available at: http://www.europol.europa.eu/index.asp?page=news&news=pr091209.htm.
27. Ainsworth [2010], above n. 24.
28. Frunza et al. [2010], above n. 27.
29. Reuters, "Italian bourse sees surge in spot EU carbon trades", [2010], Reuters news website, [online] available at: http://uk.reuters.com/article/2010/11/24/carbon-gme-idUKLDE6AN1VM2010112 4 (accessed on 19 October 2011).
30. Data from Bluenext (2011), above n. 26.
31. HMRC, Revenue and Customs Brief 46/09, [2009], HM Revenue and Customs website, London, UK, [online] available at: http://www.hmrc.gov.uk/briefs/vat/brief4609.htm.
32. Council Directive 2010/23/EU of 16 March 2010 amend- ing Directive 2006/112/EC as regards an optional and temporary application of the reverse charge mechanism in relation to supplies of certain services susceptible to fraud.
33. HMRC, Reverse charge on specified goods and services, [2011], HMRC manuals, VATF44200, HM Revenue and Customs website, London, UK [online] available at: http:// www.hmrc.gov.uk/manuals.
34. Tax News, "Estonia Rejects Reverse Charge Mechanism", [2011], Tax news website, [online] available at: http://www.tax-news.com/news/Estonia_Rejects_Reverse_Charge_Mechanism_50 723.html.
35. Stig Schjolset, Point Carbon (Norway), phone interview (16.6.2011).
36. Anonymous, senior representative of leading carbon trading bank, interview (07.07.2011).
37. Bloomberg, "GME Exchange in Italy Halts EU Carbon Trading, Cites 'Abnormal' Activity", [2010], Bloomberg news website, [online] available at: http://www.bloomberg. com/news/2010-12-02/gme-exchange-in-italy-halts-eu- carbon-trading-cites-abnormal-activity.html.
38. Reuters, "Italian bourse sees surge in spot EU carbon trades", [2010], Reuters news website, [online] available at: http://uk.reuters.com/article/2010/11/24/carbon-gme-idUKLDE6AN1VM2010112 4.
39. Serious Fraud Office (2011) Taxonomy of Fraud, Serious Fraud Office website, [online] available at: www.sfo.gov.uk/ taxonomy.swf.
40. BBC news, "Phishing attack nets three million euros of carbon permits", [2010], BBC news website, [online] available at: http://news.bbc.co.uk/1/hi/technology/8497129.stm.
41. The Guardian, "Carbon trading fraudsters steal permits worth £2.7m in 'phishing' scam", [2010], The Guardian news website, [online] available at: http://www.guardian.co.uk/environment/2010/feb/04/carbon-trading-fraudst ers-steal-permits.
42. European Commission, "Announcement of transitional measures: the EU ETS registry system", [2011], European Commission Climate Action News Archive, [online] avail-able at: http://ec.europa.eu/clima/news/articles/news_2011011901_en.htm.
43. Bloomberg, "Austria asks Sweden to return carbon
44. permits worth $3.9 million", [2011], [online] available at: http://www.bloomberg.com/news/2011-02-02/austria-asks- sweden-to-help-return-3-9-million-of-stolen-carbon- permits.html.
45. Emissions Handels Register, [2011], website, [online} available at: http://en. emissionshandelsregister.at/register/.
46. Holcim, "List of stolen allowances", [2010], Holcim website, [online] available at: http://www.holcim.ro/fileadmin/templates/RO/doc/EUA_identification_numbe rs.pdf.
47. OTE, List of allowances from illegal transactions on 18th January 2011, [2011], OTE website, [online] available at: http://www.ote-cr.cz/about-ote/file-news/blocks-cz- 20110118-public.pdf.
48. Note that these are lists of allegedly stolen allowances, and do not claim to be comprehensive or reliable.
49. Although victims of the attack on the Czech Registry have been demanding compensation from the company responsible for the administration of this registry for their negligence in implementing security measures: Bloomberg, "CEZ, Black- stone may get Czech paybacks for stolen CO2 permits", [2011], Bloomberg news website, [online] available at: http://www.bloomberg.com/news/2011-02-16/cez-blackstone-may-get-czech-co mpensation-for-stolen-emission- permits.html.
50. Wemaeres, M., "Fraud in the EU emissions trading scheme: a number of legal questions are still pending", [2011], Tendances Carbone, No. 57.
51. For example the UK Registry's disclaimer includes the statement: "In no event do we accept any liability whatsoever for any loss or damage (financial or otherwise) including, without limitation, indirect or consequential loss or damage, or any loss or damages whatsoever arising from use of data derived from this website. It is always wise for you to run an anti-virus program on all material down- loaded from the Internet. We cannot accept any responsi- bility for any loss, disruption or damage to your data or computer system which may occur whilst using material derived from this website." [available at http://etr.defra.gov. uk/Web_TsAndCs.asp].
52. Delbeke, J., "Statement on the recent incident of unauthorised access to EU ETS registry accounts in Romania, Statement made by Director-General, DG Climate Action", [2011], European Commission website, [online] available at: http://ec.europa.eu/environment/ets/.
53. Holman Fenwick Willan, "Are you a victim of stolen carbon credits?", [2011], Client Briefings, Holman Fenwick Willan website, London, UK, [online] available at: http:// www.hfw.com/publications/client-briefings/are-you-a- victim-of-stolen-carbon-credits.
54. IETA, "IETA position paper on Registry Security as response to EU stakeholder meeting on 15th March 2011 on registry security", [2011], IETA website, [online] available at: https://ieta.org.
55. IETA, "IETA position on market disruptive impacts of stolen allowances in the EU ETS", [2011], IETA website, [online] available at: http://www.ieta.org/.
56. BlueNext, [2011], The Safe Harbour Initiative™ website, [online] available at: http://safe-harbour-initiative.com.
57. Point Carbon, "Spot EUA discount to futures plummets on new safeguards", [2011], Point Carbon news website, [online] available at: http://www.pointcarbon.com/news/1.1533192.
58. Point Carbon, "Five Firms pledge to kickstart BlueNext spot trade", [2011], Point Carbon news website, [online] available at: http://www.pointcarbon. com/news/1.1529373.
59. Tschach Solutions, "Allocation Identifier ± Enable your company for Spot Trading by reducing your risk to accept stolen EUAs", [2011], Tschach Solutions website, [online] available at: http://www.tschach-solutions.com/products/tools/allocation-identifier/.
60. Data sourced from: Prada, M., "The regulation of CO2 markets: Assignment report by Michel Prada, Emeritus General Inspector of Finance", [2010], Paris, France.
61. Simone Ruiz, IETA, phone interview (15.07.2011).
62. And anonymous, Associate, Leading London law firm, interview (21.07.2011).
63. Anonymous, senior representative of leading carbon trading bank, interview (07.07.2011).
64. Stig Schjolset, Point Carbon (Norway), phone interview (16.6.2011).
65. Point Carbon, "EU carbon registries reopen after recent hacking attacks", [2011], Point Carbon news website, [online] available at: http://www.pointcarbon.com/aboutus/pressroom/pressreleases/1.1503820.
66. As confirmed by the European Commission, see Delbeke (2011), above n. 55.
67. Financial Times, "EU spot carbon market set for partial restart", [2011], Financial Times website, [online] available at http://www.ft.com/cms/s/0/c5d1392e-2efa-11e0-88ec- 00144feabdc0.html#ixzz1P9fZ5h9t.
68. Anonymous, senior representative of leading carbon trading bank, interview (07.07.2011).
69. Ellerman, 2010, supra n. 5.
70. Konrad Hanschmidt, Bloomberg New Energy Finance, interview (15.06.2011).
71. Reuters, "Slim pickings in 'dead' carbon market", [2011], Reuters news website, [online] available at: http://www.reuters.com/article/2011/03/02/us-carbon-eu-idUS TRE7214JK20110302.
72. Anonymous, Emissions exchange representative, inter- view (05.07.2011).
73. Anonymous, Senior representative of leading carbon trading bank, interview (07.07.2011).
74. Data sourced from: Bluenext, Bluenext spot volume data, [2011], Bluenext exchange website, [online], available at: http://data.bluenext.fr/downloads/20110831_BNS_ STATS.xls.
75. Stig Schjolset, Point Carbon (Norway), phone interview (16.06.2011).
76. Europol, "Carbon credit fraud causes more than 5 billions euros damage for European tax payer", [2009], Europol website, [online] available at: http://www.europol.europa.eu/index.asp?page=news&news=pr091209.htm.
77. Certified Emission Reductions (CERs) are a type of emissions unit (or carbon credits) issued by the Clean Development Mechanism (CDM) Executive Board for emission reductions achieved by CDM projects in non- Annex I countries, and verified by a DOE under the rules of the Kyoto Protocol. CERs can be used by Annex 1 countries in order to comply with their emission limitation targets or by operators of installations covered by the European Union Emission Trading Scheme (EU ETS) in order to comply with their obligations to surrender EU Allowances, CERs or Emission Reduction Units (ERUs) for the CO2 emissions of their installations.
78. An Assigned Amount Unit (AAU) is a tradable "Kyoto unit" or "carbon credit" representing an allowance to emit greenhouse gases comprising one metric tonne of carbon dioxide equivalents calculated using their Global Warming Potential. Assigned Amount Units are issued up to the level of initial assigned amount of an Annex 1 Party to the Kyoto Protocol.
79. Prada, 2010; above n. 65.
80. The Guardian, (2010) Carbon Traders Voice Fears Over Recycled Carbon Credits, 18 March 2010, available at http://www.guardian.co.uk/environment/2010/mar/17/carbon-traders-recycle d-credits.
81. European Commission, 2010a, above n. 11.
82. Prada (2010), above n. 65.
83. Serious Fraud Office (2011), above n. 41.
84. Prada (2010), above n. 64.
85. The EU Market Abuse Directive is discussed in section VII below, within the context of EU financial regulations reform.
86. Commission Regulation 920/2010 of 7 October 2010 for a standardised and secured system of registries pursuant to Directive 2003/87/EC of the European Parliament and of the Council and Decision No 280/2004/EC of the European Parliament and of the Council; Art 3.1.
87. Unless no actual physical delivery of emissions allowances occurs ± as for onward traded futures contracts (see box 4.1.), in which case a Registry account is not required (see Ellerman et al., 2010, above n. 5).
88. Unless no actual physical delivery of emissions allowances occurs ± as for onward traded futures contracts (see box 4.1.), in which case a Registry account is not required (see Ellerman et al., 2010, above n. 5).
89. Regulation 920/2010.
90. Commission DRAFT Regulation, above n. 10.
91. Commission Directive 2003/87/EC of 13 October 2003 establishing a scheme for greenhouse gas emission allowance trading within the Community and amending Council Directive 96/61/EC.
92. European Commission, "Market Oversight, Ensuring the integrity of the European Carbon Market", [2011], Eur-opean Commission website, [online] available at: www.e-c.europa.eu/clima/policies/ets/oversight_en.htm.
93. Commission Regulation 994/2008 of 8 October 2008 for a standardised and secured system of registries pursuant to Directive 2003/87/EC of the European Parliament and of the Council and Decision No 280/2004/EC of the European Parliament and of the Council.
94. Regulation 994/2008, Annex I.
95. Simone Ruiz, IETA, phone interview (15.07.2011). 98 Regulation 920/2010.
96. Ibid, Article 13 and Annex IV.
97. Ibid, Article 27.
98. Cdc climat Research, "Closing the door to fraud on the EU-ETS", [2011], Climate Brief No. 4.
99. Regulation 994/2008, Article 80(3).
100. Regulation 920/2010, Article 63.3.
101. Simone Ruiz, IETA, phone interview (15.07.2011).
102. European Commission, "Announcement of transitional measures: the EU ETS registry system", [2011], European Commission Climate Action News Archive, [online] avail-able at: http://ec.europa.eu/clima/news/articles/news_2011011901_en.htm.
103. Simone Ruiz, IETA, phone interview (15.07.2011).
104. Simone Ruiz, IETA, phone interview (15.07.2011).
105. Cyprus, Lichtenstein, Hungary, Lithuania and Malta only reopened on the 20th April.
106. Directive 2009/29/EC of 23 April 2009 amending Directive 2003/87/EC so as to improve and extend the greenhouse gas emission allowance trading scheme of the Community.
107. Stig Schjolset, Point Carbon (Norway), phone interview (16.06.2011).
108. Stig Schjolset, Point Carbon (Norway), phone interview (16.06.2011).
109. Ainsworth (2010), supra n. 25.
110. Simone Ruiz, IETA, phone interview (15.07.2011).
111. Romanian Emission Trading Registry Secretariat, "The Romanian Emissions Trading Registry Procedures", [2007], Romanian Emission Trading Registry Secretariat website, [online] available at: http://www.anpm.ro/files2/Annex%208.2.6_%20-%20Roxmanian%20procedures%20 for%20-ERT_20095.pdf.
112. ICIS Heren, "Stolen allowances still missing, Polish Police alerted", [2011], ICIS Heren website, [online] avail-able at: http://www.icis.com/heren/articles/2011/01/19/ 9427602/emissions/edcm/stolen-euas-still-missing,-polish-police-alerted. html (accessed on 19 October 2011).
113. Regulation 994/2008.
114. Regulation 920/2010.
115. Adapted from: Europa, "Questions and Answers on emissions trading: new Registry rules", [2011], Europa website, [online].
116. Commission DRAFT Regulation, above n. 10.
117. European Commission, "Member States endorse more secure Registry rules", [2011], European Commission Climate Action news, [online] available at: http://ec.eur-opa.eu/clima/news/articles/news_2011061702_en.htm (ac-cessed on 19 October 2011).
118. Commission DRAFT Regulation, above n. 10, at Annex III (5) and (7).
119. Ibid, at Art 20, 2(b); emphasis added.
120. Ibid, at Art 20, 2(c)
121. The regulation does not provide any further clarification of what "reasonable grounds" might consist of however, and what level of suspicion or evidence would be required to refuse the opening of an account. If the draft regulation is passed, it will be interesting to see to what extent this provision is used in different Member States, and how exactly it is implemented.
122. Anonymous, senior representative of leading carbon trading bank, interview (07.07.2011).
123. Article 19 states that "any person may hold allowances".
124. During scrutiny of draft Regulations the Council and the Parliament can either accept or reject the whole draft; scrutiny of Directives on the other hand are much more burdensome and time consuming as all original provisions are open to scrutiny, not just the proposed amendments.
125. This does not include transfers from trading accounts, or from holding accounts to a trusted account list, as discussed below.
126. House of Lords, "The EU Internal Security Strategy", [2011], 17th Report of the Session 2010-2012, European Union Committee, House of Lords, London, UK.
127. Commission DRAFT Regulation, above n. 10, at Art 60; Art 61; Annex I.
128. Ibid, at Art 24.
129. Ibid, at Art 36. (3).
130. Ibid, at Art 36 (4).
131. Simone Ruiz, IETA, phone interview (15.07.2011): In one case, the delay would definitely have prevented the theft, as due to email spamming, it took two hours to see what had happened as the email notification on the transfer got "lost".
132. Anonymous, associate, leading UK law firm, interview (21.07.2011).
133. Anonymous, senior representative of leading carbon trading bank, interview (07.07.2011).
134. Commission DRAFT Regulation, above n. 10, at Art 83; Annex XII.
135. Anonymous, associate, leading UK law firm, interview (21.07.2011).
136. IETA, "IETA position on Registry Security as response to EU stakeholder meeting on 15th March 2011 on registry security", [2011], IETA website, [online] available at: https://ieta.org.
137. Bloomberg, "Carbon traders seek fraud-compensation system, Norton Rose says", [2011], Bloomberg news website, [online] available at: http://www.bloomberg.com/news/2011-02-01/emission-traders-seeking-fraud- compensa-tion-system-norton-rose-says.html (accessed on 19 October 2011).
138. Above n. 119.
139. Wemaera [2011], above n. 53.
140. Commission DRAFT Regulation, above n. 10, at Art 37.
141. European Commission, "Emissions trading: Questions and answers on enhanced market oversight for the European carbon market", [2010], European Commission website, [online] available at: http://europa.eu/rapid/press-ReleasesAction. do?reference=MEMO/10/697.
142. See further Ellerman et al., 2010, above n. 5, pp. 135-137.
143. European Commission, "Towards an enhanced market oversight framework for the EU Emissions Trading Scheme", Communication from the Commission to the European Parliament and the Council, Brussels, Belgium.
144. Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments amending Council Directives 85/611/EEC and 93/6/EEC and Directive 2000/12/EC of the European Parliament and of the Council and repealing Council Directive 93/22/EEC.
145. Directive 2003/6/EC of the European Parliament and of the Council of 28 January 2003 on insider dealing and market manipulation (market abuse).
146. Directive 2005/60/EC of the European Parliament and of the Council of 26 October 2005 on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing.
147. As discussed above, insider dealing is when a trader makes trading decisions or deals based on "inside informa-tion" (Serious Fraud Office, 2011).
148. "Inside information" includes information that is not publicly available but is likely to have an affect on price (Prada, 2010, above n. 65).
149. Although narrowing these exemptions is being considered by the MiFID consultation. http://ec.europa.eu/internal_market/consultations/docs/2010/mifid/consul tation_paper_en.pdf
150. As discussed above, market manipulation occurs when a market player acts to control the rest of the market's perception of the state of supply and demand, and then takes a position to exploit the resulting effect on price. For example, "squeezing" the market by buying off and retaining a large amount of allowances to give a false impression of scarcity, waiting for prices to rise as a result, and selling them on at this inflated price (Prada, 2010, above n. 65).
151. Directive 2009/44/EC of the European Parliament and of the Council of 6 may 2009 amending directive 98/26/ec on settlement finality in payment and securities settlement systems and directive 2002/47/ec on financial collateral arrangements as regards linked systems and credit claims.
152. Directives 2006/48/EC and 2006/49/EC.
153. European Commission, Public Consultation, Review on the Markets in Financial Instruments Directive, [2010], Directorate General Internal Markets and Services
154. MiFID was open to Stakeholder consultation from 8th December 2010 to 2nd February 2011.
155. European Commission, Public consultation, A revision of the Market Abuse Directive (MAD), [2010], Directorate General Internal Markets and Services
156. MAD was open to stakeholder consultation from 28th June 2010 to 23rd July 2010. Both are currently under review. MiFID consultation document and responses available [online] at: http://ec.europa.eu/internal_market/consultations/2010/mifid_en.htm.
157. This proportion may have decreased however following the 2010-11 allowance thefts.
158. European Commission (2010a) Towards an enhanced market oversight framework for the EU Emissions Trading Scheme, Communication from the Commission to the European Parliament and the Council, Brussels, Belgium.
159. Ellerman [2010], supra n. 5.
160. In August 2010 France passed legislation to allow for the extension of regulated markets rules to the spot carbon market
161. Germany already regulates commodity spot trades that take place through exchanges (EC, 2010); Romania defines emissions allowances as financial instruments.
162. IETA, "IETA response to MiFID consultation", [2011] International Emissions Trading Association website, [online] available at: https://circabc.europa.eu/faces/jsp/extension/wai/navigation/container.j sp?FormPrincipal:_idcl=FormPrincipal:libraryContentList:pager&page=3 &FormPrinci-pal_SUBMIT=1.
163. Directive 2004/39/EC, Annex I, Section C.
164. IETA, "Emissions trading master agreement for the EU emissions trading scheme, Version 3.0", [2008], IETA website, [online] available at: http://www.ieta.org/index.php?option=com_content&view=article&id =229&Itemid=137.
165. See n. 65.
166. IETA [2011], above n. 171.
167. Prada [2010], above n. 65.
168. European Commission, "Towards an enhanced market oversight framework for the EU Emissions Trading Scheme", [2010], Communication from the Commission to the Eur-opean Parliament and the Council, Brussels, Belgium.
169. Romania is the only Member State to have indepen-dently applied this definition already.
170. Question 66 of the MiFID consultation document (available at: http://ec.europa.eu/internal_market/consultations/docs/2010/mifid/consul tation_paper_en.pdf).
171. All consultation responses available at: https://circabc.europa.eu/faces/jsp/extension/wai/navigation/container.j sp.
172. NASDAQ OMX, "European Commission Public Con-sultation on Review of Markets in Financial Instruments Directive (MiFID), Reply from NASDAQ OMX", [2011], [online] available at: https://circabc.europa.eu/faces/jsp/extension/wai/navigation/container.j sp
173. NASDAQ OMX run the Nordpool exchange, one of the largest EU emissions trading exchanges.
174. Stavins, R., "Transaction costs and tradable permits", [1995], Journal of environmental economics and management 29: 133-148.
175. Gangadharan, L., "Transaction costs in pollution markets: an empirical study", [2000], Land Economics, 76(4): 601-614.
176. Jaraite, J., F. Convery and C. Di Maria, "Transaction costs of firms in the EU-ETS: Lessons from Ireland", [2009], Climate Policy 10(2): 190-215.
177. Anderson et al., "Climate change policy and business in Europe. Evidence from interviewing managers", [2011], Centre for Economic Performance, Occasional Paper 27, London School of Economics, London.
178. Above n. 180.
179. UK Treasury and FSA, "UK response to the Commis-sion Services' consultation on the Review of the Markets in Financial Instruments Directive (MiFID)", [2011], Con-tributions authorised for publication, Consultation on the review of the Markets in Financial Instruments Directive (MiFID), European Commission website, [online] available at: http://ec.europa.eu/internal_market/consultations/2010/mifid_en.htm.
180. For example EON; Council of European Energy Regulators; EDF trading; consultation documents available form above n. 180.
181. Responses available at above n. 180.
182. Johnathan Herbst, Norton Rose LLP, interview (29.07.2011).
183. Prada [2010], supra n. 65.
184. Anonymous, associate, leading UK law firm, interview (21.07.2011)
185. Johnathan Herbst, Norton Rose LLP, inter- view (29.07.2011): What inside information is there on the carbon market. There is no one with enough market power to manipulate the market.
186. Simone Ruiz, IETA, phone interview (15.07.2011): mentioned that market participants cannot think of obvious instances of market manipulation or insider trading in the spot carbon market.
187. Anonymous, associate, leading UK law firm, interview (21.07.2011).
188. Anonymous, associate, leading UK law firm, interview (21.07.2011).
189. International Swaps and Derivatives Association, "IS- DA's response to the European Commission's public consultation on the review of the Markets in Financial Instruments Directive (MiFID)", [2011], [online] available at: https://circabc.europa.eu/faces/jsp/extension/wai/naviga- tion/container.jsp.
190. European Commission, "Discussion paper in view of a European Climate Change Programme (ECCP) stakeholder meeting on carbon market oversight organised by the Commission services", [2011], Brussels, Belgium.
191. Prada [2010], above n. 65.
192. European Commission, "Emissions trading: Questions and answers on enhanced market oversight for the European carbon market", [2010], European Commission website, [online] available at: http://europa.eu/rapid/press- ReleasesAction.do?reference=MEMO/10/697.
193. Regulation 1031/2010 of 12 November 2010 on the timing, administration and other aspects of auctioning of greenhouse gas emission allowances pursuant to Directive 2003/87/EC of the European Parliament and of the Council establishing a scheme for greenhouse gas emission allowan- ces trading within the Community.
194. Johnathan Herbst, Norton Rose LLP, interview (29.07.2011).
195. For example: HM Treasury, French Ministry of Finance and IETA all expressed support for a bespoke regime within their MiFID consultation responses.
196. Anonymous, EU ETS policy expert, interview (15.07.2011).
197. Johnathan Herbst, Norton Rose LLP, interview (29.07.2011)
198. Steiner, J. and L. Woods, EU Law, (10th edition, 2009), Oxford, UK: Oxford University Press.
199. European Commission, "The recognition of decisions between EU countries", [2011], European Commission Criminal Justice website, [online] available at: http://ec.europa.eu/justice/criminal/recognition-decision/index_en.htm.
200. Steiner, J. and L. Woods [2009], supra n. 206.
201. Art 88 Lisbon Treaty, See, www.europol.europa.eu/;http://europa.eu/agencies/pol_agencies/europol/in dex_en. htm.].
202. Art 85 Lisbon Treaty. [source: http://www.eurojust.europa.eu/] 201
203. [Source: http://ec.europa.eu/dgs/olaf/mission/index_en- new.html.] [Regulation 1073/1999; 2185/96; 2988/95].
204. Council Framework Decision 2008/978/JHA of 18 December 2008 on the European evidence warrant for the purpose of obtaining objects, documents and data for use in proceedings in criminal matters.
205. Council Framework Decision 2002/584/JHA of 13 June 2002 on the European arrest warrant and the surrender procedures between Member States.
206. There is growing discontent in particular with the impact on civil liberties arising from the application of mutual recognition instruments, such as the European Arrest Warrant (see below).
207. European Commission, "Recognition of decisions be- tween EU countries: Evidence", [2011], European Commis- sion website, [online] available at: http://ec.europa.eu/justice/criminal/recognition-decision/evidence/index_en.htm.
208. See Communication from The Commission to the European Parliament, The Council, The European Eco- nomic and Social Committee and The Committee of Regions Delivering an area of freedom, security and justice for Europe's citizens: Action Plan Implementing the Stock- holm Programme, COM(2010) 171 final.
209. Price Waterhouse Coopers, "How does organised crime misuse EU funds?", [2011], Study for Directorate General for Internal Policies, Policy Department D, European Parliament, Brussels, Belgium.
210. Crown Prosecution Service, "Central Fraud Group Frequently Asked Questions"', [2011], Crown Prosecution Service website, [online] available at: http://www.cps.gov.uk/your_cps/our_organisation/cfg/our_work/frequently_ asked_questions.html#a07.
211. Eurojust [2011], above n. 23.
212. European Commission, "Communication on the protec- tion of the financial interests of the European Union by criminal law and by administrative investigations", [2011], COM(2011)293 final, Brussels, Belgium.
213. Eurojust, "Annual Report 2010", [2011], Eurojust, The Hague, The Netherlands.
214. Eurojust [2011], above n. 23.
215. Price Waterhouse Coopers [2011], above n. 217.
216. European Commission [2010], "Towards an Enhanced Market Oversight Framework for the EU Emissions Trading Scheme."
217. Ziare, "Romanian hackers attack the EU emissions trading system", [2011], [translation] Ziare news website, [online] available at: http://www.ziare.com/articole/romania+ certificate+emisii+gaze.
218. SOCA has been working with Europol to coordinate investigations in which operatives at SOCA are posing as carbon traders in an attempt to expose fraudulent players on the EU ETS market involved in both allowance thefts and VAT fraud (BussinessGreen, 2011).
219. Treaty of Lisbon, 2007, amending the Treaty on European Union and the Treaty establishing the European Community, signed at Lisbon, 13 December 2007. (OJ C 306,13.12.2007).
220. The first pillar consisted of the EC Treaty; the second pillar: foreign and security matters; and the third pillar: the area of freedom security and justice.
221. Herlin-Karnell, E., "The Lisbon Treaty and the Area of Criminal Law and Justice", [2008], European Policy Analysis 3: 1-10, Swedish Institute for European Policy Studies.
222. Davoli, A., "Judicial Cooperation in Criminal Matters", [2010], European Parliament website, [online] available at: http://www.europarl.europa.eu/ftu/pdf/en//FTU_4.12.6.pdf.
223. The Lisbon Treaty was signed on 13 December 2007 by the heads of government and state of the Member States and was ratified in November 2009, following the Irish second referendum and the Czech and Polish ratifications. It came into force in December 2009.
224. Art. 9 of the Protocol No. 36 on Transitional Provisions
225. Art 83 (1), Treaty on the Functioning of the European Union (TFEU), 2010, Consolidated versions of the Treaty on European Union and the Treaty on the Functioning of the European Union Charter of Fundamental Rights of the European Union (OJ C 83, 30.3.2010).
226. Paragraph 1 of Article 83 of the Treaty on the Functioning on the European Union states that: The European Parliament and the Council may, by means of directives adopted in accordance with the ordinary legislative procedure, establish minimum rules concerning the definition of criminal offences and sanctions in the areas of particularly serious crime with a cross-border dimension resulting from the nature or impact of such offences or from a special need to combat them on a common basis. These areas of crime are the following: terrorism, trafficking in human beings and sexual exploitation of women and children, illicit drug trafficking, illicit arms trafficking, money laundering, corruption, counterfeiting of means of payment, computer crime and organised crime (emphasis added).
227. The Council must obtain the consent of the European Parliament.
228. Fletcher, Loof and Gilmore, EU Criminal Law and Justice, (Edward Elgar, 2008).
229. Proposal for a Directive of the European Parliament and of the Council on attacks against information systems and repealing Council Framework Decision 2005/222/JHA, Brussels, COM(2010) 517.
230. The following new elements are proposed under the Directive: Penalisation of the use of tools (such as malicious software ± e.g. "botnets" ± or unrightfully obtained computer passwords) for committing the offences; Introduction of "illegal interception" of information systems as a criminal offence; Improvement of European criminal justice/police cooperation by strengthening the existing structure of 24/7 contact points, including an obligation to answer within 8 hours to urgent request and; and including the obligation to collect basic statistical data on cybercrimes.
231. Aggravated circumstances under the Directive proposal occur when: (i) committed within the framework of a criminal organisation; (ii) committed through the use of a tool conceived to launch either attacks affecting a significant number of information systems, or attacks causing con- siderable damage, such as in terms of disrupted system services, financial cost or a loss of personal data. This provision would be particularly relevant to tackle the spread of malicious software that is now used widely to launch
232. Framework Decision 2008/841/JHA of 24 October 2008 on the fight against organised crime.
233. Ibid, Art 1.
234. Ibid, Art 3.
235. This four-year threshold is also found in the United Nations Convention against Organised Transnational Crime.
236. Mitsilegas, V., "The third wave of third pillar law: which direction for EU criminal justice?", [2009], European Law Review, 34: p. 523.
237. The Framework Decision creates two offences that need to be criminalised by the Member States (Article 2): a) Directing a criminal organisation, which must be punishable by a maximum term of imprisonment of at least ten years (Article 3 (1)). Actively taking part in the organisation's activities, which incurs a maximum term of imprisonment which is no lower than five years. 237 (Art. 2).
238. Mitsilegas, V., EU Criminal Law, (Hart Publishing, 2009), p. 96.
239. Moreover, the harmonisation of organised crime offences is central to the mandate of Union criminal justice bodies such as Europol and Eurojust. (Mitsilegas 2009, supra).
240. Prior to the ratification of the Lisbon Treaty, a number of Member States have submitted declarations granting the ECJ jurisdiction over the validity of Framework Decisions adopted under the third pillar.
241. Subject to transitional, and in the case of the UK, Ireland and Denmark, opt-in arrangements.
242. See 10th Report of Session 2007-2008, supra n. 83.
243. Directive 2008/99/EC of the European Parliament and of the Council of 19 November 2008 on the protection of the environment through criminal law (Text with EEA rele- vance) For comments on the directive and the original proposal
244. see e.g. Pereira, The Legal Basis for Harmonisa- tion of Environmental Criminal Law in the European Union: Past and Future Challenges", in Theory and Practice of Harmonisation, Andenas and Anderson eds. (Edward Elgar, 2012)
245. Faure, M., (2010) Effective, Proportional and Dissuasive Penalties in the Implementation of the Environ- mental Crime and Ship-source Pollution Directives: Ques- tions and Challenge, European Energy and Environmental Law Review, vol. 19 issue n. 6,
246. Hedemann-Robinson, Martin (2008) The emergence of European Union environ- mental criminal law: a quest for solid foundations, Part II. Environmental Liability, 16 (4). pp. 111-136.
247. Pereira, R. "Environmental Criminal Law in the First Pillar: A Positive Development for Environmental Protection in the European Union?" (2007) 16 European Environmental Law Review.
248. The environmental crime directive requires the criminali- sation of the discharge, emission or introduction of a quantity of materials or ionising radiation into air, soil or water, which causes or is likely to cause death or serious injury to any person or substantial damage to the quality of air, the quality of soil or the quality of water, or to animals or plants.
249. European Commission, "The recognition of decisions between EU countries", [2011], European Commission Criminal Justice website, [online] available at: http://ec.eur-opa.eu/justice/criminal/recognition-decision/index_en.htm.
250. Council Regulation (EU) no 904/2010 of 7 October 2010 on administrative cooperation and combating fraud in the field of value added tax (recast).
251. Reg 904/2010, Art 33-37.
252. Council Framework Decision of 13 June 2002 on the European Arrest Warrant and the Surrender of Procedures between Member States, OJ 2002 L 190. The Framework Decision was amended by Council Framework Decision 2009/299/JHA of 26 February 2009 amending Framework Decisions 2002/584/JHA, 2005/214/JHA, 2006/783/JHA, 2008/909/JHA and 2008/947/JHA, thereby enhancing the procedural rights of persons and fostering the application of the principle of mutual recognition to decisions rendered in the absence of the person concerned at the trial.
253. See Alegre S. and Leaf, M. "Mutual Recognition in European Judicial Cooperation: A Step too Far too Soon? Case Study ± The European Arrest Warrant", European Law Journal, (2004) 10.
254. 250 See generally Vervaele, J.A.E. European Evidence War- rant: Transnational Judicial Inquiries in the EU, Intersentia 2005.
255. Council Framework Decision 2009/948/JHA of 30 November 2009 on prevention and settlement of conflicts of exercise of jurisdiction in criminal proceedings L 328/42 15.12.2009.
256. For comments on the original proposal see Peers, Steve. Statewatch Analysis "The proposed Framework Decision on conflict of jurisdiction in criminal proceedings: Manipulat- ing the right to a fair trial?" 12 March 2009, available at http://www.statewatch.org/analyses/no-76-conflict-of-juris- diction. pdf [accessed on 13 March 2009] Mechanisms and criteria for allocation of jurisdiction also exist in sectoral third pillar instruments ± e.g. the Framework on combating terrorism stipulates, when an offence falls within the jurisdiction of more than one Member State and when any
257. Mitsilegas (2009), above n. 254.
258. European Commission, "Communication on the protec- tion of the financial interests of the European Union by criminal law and by administrative investigations"", [2011], COM(2011)293 final, Brussels, Belgium.
259. See Mitsilegas (2008) at 168.
260. In 2010 this contribution totalled 14 billion Euros (Price Waterhouse Coopers [2011]).
261. Price Waterhouse Coopers [2011], supra n. 237.
262. Art 86(2) TFEU.
263. Herlin-Karnell, E., "What principles drive (or should drive) European criminal law?", [2010], German Law Journal, 11(10): p.1115-1130.
264. European Commission [2011]. Above n. 270.
265. Wemaeres [2011], above n. 53.
266. Although a EU-wide carbon tax has recently been proposed for the use of fuel in the transport and heating sectors, this does not imposed on the industrial emissions abatement facilitated by the EU ETS. http://www.euractiv.- com/en/climate-environment/britain-set-veto-eu-carbon- tax-plans-news-504022.
267. Stig Schjolset, Point Carbon (Norway), phone interview (16.06.2011).
268. Reuters, "South Korea to start emissions trading in 2013-2015", [2011], Reuters news website, [online] available at: http://www.reuters.com/article/2011/02/07/us-carbon-korea-idUSTRE7161II2 0110207.
269. Anonymous, senior representative, leading carbon trad- ing bank, interview (07.07.2011).
270. Stig Schjolset, Point Carbon (Norway), phone interview (16.06.2011).
271. Prada [2010],above n. 65, p. 54.
272. The difficulties and delays experienced in the implemen- tation of anti-fraud measures on the EU ETS have also exposed deeper running EU governance questions. To what level is it practicable or appropriate to harmonise Member States' national laws and procedures? And who is respon- sible for the implementation of these policies? Such issues will pose even more significant obstacles to the successful linking of the EU ETS to the Californian or Australian emissions trading scheme as is currently being proposed (The Guardian, 2011; Point Carbon, 2011) and to the development of a global emissions trading scheme that may be developed for a post-Kyoto commitment period (Eller- man, 2009).