Carbon Markets Regulation: the case for a CO2 Central Bank

Part of the ‘Climate Change and Environment Seminar Series: Michaelmas Term 2011’, hosted jointly by the Grantham Research Institute, the Centre for Climate Change Economics and Policy, and LSE’s Department of Geography and Environment

How does one steal billions of Euros from fiscal authorities or embezzle millions from blue chip companies? Just use the European carbon market! The rapid development of this new market has attracted professional traders that have contributed to its success, but also criminal players that have undermined its reputation. After VAT frauds and unlawful recycling of CERs in 2009 and 2010, the EU ETS was disrupted by massive cyber attacks in January 2011. The European Commission reacted rapidly by blocking all spot transactions for several days, in order to restore confidence. These occurrences give rise to the question as to what type of regulation is needed in this new market.

Discussion on ways to enhance carbon market oversight was initiated by a European Commission communication in December 2010. So far the discussion has mainly focused on the issues of the market infrastructure security and the legal status of allowances. This paper recalls the main failings that have appeared in the carbon market, analyses the ongoing decisions taken by the European Commission and stresses the need for a new independent body acting as a CO2 Central Bank.

Speaker: Christian de Perthuis (Climate Economics Chair, University Paris-Dauphine)

Biography of Christian de Perthuis

Christian is Professor of Economics at University Paris-Dauphine and head of the Climate Economics Chair, a joint initiative of CDC Climat and Paris-Dauphine University. He is a member of the CEDD, the advisory committee of the French minister of Environment.

Christian started his career in the agricultural sector, then went on to work in leading French research and forecasting institutes: first, at Rexecode, where he served as the Deputy Director; then, at Bipe, where he held the position of General Director. He then headed the Mission Climat of Caisse des Depots between 2004 and 2008.

Since 2004, Christian’s research focuses on the economics of climate change. Author of several articles and books he is co-author of ‘Pricing Carbon’ with Denny Ellerman and Frank Convery. His last book, ‘Economic choices in a warming world’ has just been published by Cambridge University Press.