Growth of liquidity in the European Emissions Trading Scheme (ETS) is being hampered by software issues that are reportedly preventing development of a carbon spot market.
Registry software that tracks the ownership of rights for the spot trading of carbon dioxide enables participating countries to pay emissions allowances directly into company accounts. However, problems with this software has apparently meant companies are unable to physically deliver the emissions rights for spot market trades, raising credit worthiness issues and opening the possibility of price spikes for carbon should these systems fail.
Registry programs from the UK and France are used for the bulk of such trades. The UK designed program will be used by a dozen countries including Finland, Denmark, Sweden, the Netherlands, Italy, Latvia, Estonia, Lithuania, Slovenia, Ireland, and Norway. The French designed program will be used by Germany, Spain, Portugal, Belgium, Luxembourg, and the Czech Republic.
However, only five countries have managed to implement their registries successfully with Denmark, Finland, Sweden, and the Netherlands up and running and the UK expected to be running by mid-May. Germany has also got its French system running recently after technical glitches prevented German companies from delivering on spot trades, the French software has also had difficulty synchronising with the EU master registry. According to industry analysts, the software glitches are both damaging the credibility of the ETS and keeping prices high with a lack of market participants with physical delivery capability.