Carbon emissions trading schemes & anthropogenic climate change

5233LAW Environmental Justice Research Paper s2843749
1
A Critique of Market-based Policy Instruments:
Carbon Emissions Trading
Response question:
Q7 - Critically evaluate the effectiveness of carbon emissions trading as a mechanismfor redressing
anthropogenic climate change.
Over the last century, the world, in both a human and non-human environmental context, has
experienced extensive changesand development of unquantifiable proportions. This course of evolution
has yielded a contemporary world infrastructure predicated on an industrialised market economy that
consequently underpins the structure of society and its functions in connection with the natural
environment. In more recent years, significant technological advances resulting from increased
industrial economic activity have enabled humankind to illuminate the repercussions of global
economic practices insofar as they contribute to anthropogenic climate change. During the 1980s, as
the issue of rising greenhouse gas emissions became more prominent within the socio-political
spectrum,1
states adopted an increasingly overt role in the promotion, management and control of
economic and industrial growth2
in order to alleviate the effects of anthropogenic climate change.
However, in an effort to accommodate and maintain economic activity, market-based policy
instruments (such as carbon emissions trading schemes) have been preferred and utilised over other
alternatives to emissions reduction due to increased efficiency.3
Yet, despite such claims, actual global
emissions in 2011 increased by 1.4 per cent and were largely determined by energy-related human
activities that bore the purpose of achieving economic growth.4
As such, this essay argues that carbon emissions trading is not an effective mechanism for redressing
anthropogenic climate change because its function is primarily geared towards facilitating economic
growth rather than environmental conservation and emissions mitigation. This argument is premised on
the factthat the very nature of the scheme itself is anthropogenic, in the sense that it essentially involves
commodifying the right to produce emissions by giving it characteraspropertywhich is interchangeable
between countries and firms that are able to purchase that property right.5
The fundamental issue with
a carbon emissions trading scheme is that the exchange of currency for the right to produce emissions
is not commensurate, in that monetary value attributed to ordinary commodities is not a value of the
kind attributable to nature. Consequently, carbon emissions trading may be perceived as a mechanism
to facilitate the economic interests of developed, western societies that treat nature as an object,6
to the
disadvantage of both developing countries and future generations. It is therefore imperative that modern
1 Weart S (2011) ‘The Development of the Concept of Dangerous Anthropogenic Climate Change’in Dryzek J
and Schlosberg D (eds) The Oxford Handbook of Climate Change and Society, Oxford University Press,
Oxford, 72.
2 Neil Brenner ‘State Theory in the Political Conjuncture: Henri Lefebvre’s “Comments on a New State Form”’
(2001) 33(5) Antipode 783-808, 791.
3 Robert N. Stavins, ‘Experience with Market-Based Environmental Policy Instruments’(Discussion Paper No
1, Resources for the Future, November 2001) 1.
4 Oliver JGJ, Janssens-Maenhout G, Muntean M and Peters JAHW (2013), Trends in global CO2 emissions;
2013 Report, The Hague: PBL Netherlands Environmental Assessment Agency; Ispra: Joint Research Centre, 4.
5 Eckersley R ‘Just Carbon Trading?’in Moss J (ed) Climate Change and Social Justice,Melbourne University
Press, Melbourne, 103.
6 Lee Godden ‘Preserving natural heritage:nature as other’ (1998) 22 Melbourne University Law Review 719,
720.

2
approaches to the mitigation of anthropogenic climate change are redefined and re-evaluated in order
to effectively redress the issue.
Inherent flaws in Carbon emissions trading
The very nature of whathas become the primary solution to the problem of rising anthropogenic climate
change is at the very apex of factors which contribute to the overall issue itself. Emissions trading
schemes (ETS) are market-based solutions to climate change and are based on simplified economic
theories that claim efficiency is the critical societal objective.7
These regulatory approaches have
emerged with one fundamental, underlying purpose – to support and accommodate a market economy
which underpins the industrial capitalistic structure of modern society.8
The idea of an ETS is to
quantify the total permissible amount of carbon emissions, while permits to pollute up to that limit can
be issued and traded on the market between firms, countries and companies.9
However, while this may
lead to a decrease in those emissions, there remains significant difficulty in reducing the amount of
greenhouse gas (GHG) emissions enough to effectively mitigate climate change without also adversely
impacting on the economic environment.10
Thus, the solution itself is inherently flawed – a mechanism
to redress anthropogenic climate cannot effectively do so if its parallel objective is to facilitate a market
economy. Climate change, therefore,may be interpreted as a market failure. It is a pervasive externality
which cannot be correctedby standardmarket operations,11
and, assuch, it is necessarythatthe solution
exist outside the economic spectrum.
The standard defence of emissions trading schemes is that they enable progressive reductions in the
total quantity of carbon emissions while affording emitters flexibility to pursue their own cost-effective
solutions through the sale and purchase of permits.12
This in itself is ironic and somewhat counter-
productive, as it enables developed countries or heavy polluters to dispense with their responsibilities
by avoiding costly domestic investments and instead complying with emissions reductions by obtaining
permits from a willing vendor.13
As such, carbon emissions trading can be perceived as a way of
facilitating the capacity of countries and firms that already produce GHG emissions in excessive
quantities to extend production levels even further. This consequence flows from the commodification
of emissions as a form of interchangeable property and actsasa more cost effective alternative for some
emitters, where the cost to buy permits and pollute above the excess level is cheaper than finding
methods to control and reduce emissions at its own facilities.14
In this sense,carbon emissions trading
schemes essentially act as a financial incentive for heavy emitters to produce more, sometimes beyond
the prescribed limit. Thus, carbon emissions trading, in actuality, has little effect in redressing
anthropogenic climate change, as countries and firms that would not otherwise produce emissions are
entitled to freely trade their right to emit on to a willing purchaser. In light of this, some method of
rationing may be preferable as responsibility to reduce emissions is not readily transferable. Instead, it
requires countries and firms to assume responsibility for the consequences of their production habits
7 Spash C (2011) ‘Carbon Trading: A Critique’ in Dryzek J and Schlosberg D (eds) The Oxford Handbook of
Climate Change and Society, Oxford University Press, Oxford, 550.
8 Steffen Böhm, Maria Ceci Misoczky and Sandra Moog ‘Greening Capitalism? A Marxist Critique of Carbon
Markets’ (2012) 0(0) Organization Studies 1-22, 1.
9 Frank Stilwell ‘Marketising the environment’ (2011) 68 Journal of Australian Political Economy 108, 110.
10 Felicity Deane ‘A new legal avenue for pricing GHG emissions? To trade or to tax?’ (2011) 28(2) EPLJ 111,
114.
11 Sagoff M (2011) ‘The Poverty of Climate Economics’ in Dryzek J and Schlosberg D (eds) The Oxford
Handbook of Climate Change and Society, Oxford University Press, Oxford, 57.
12 Above n 5, 101-102.
13 Ibid 102.
14 Lily N Chinn ‘Can the Market Be Fair and Efficient – An Environmental Justice Critique of Emissions
Trading’ (1999) 26(1) Ecology Law Quarterly 80, 89.

3
and necessitates preventative action to reduce emissions according to their ration quota, thereby
encouraging innovation and transformations towards more sustainable practices.15
Given the rise of anthropogenic climate change, it is undisputable that capitalist development and
growth requires a radically new conception with a view to being more socially just and environmentally
sustainable.16
This conceptual shift is mandated and further emphasised by the major economic17
and
environmental crises18
which have marked the historical development of capitalist accumulation.19
These environmental crises have resulted primarily from capitalism’s propensity to deplete natural
resources whilst simultaneously generating externalities.20
While the regime of what might be coined
‘climate capitalism’ is to ‘decarbonise’ and ‘green’ the economy whilst minimising disruption to
economic growth,21
critics have argued that the resulting environmental issues are symptoms of the
deficiency of carbon markets and the failure of neoliberal, market-based environmentalism to
adequately address problems such as climate change.22
Though, it is not really any surprise that market
mechanisms have been selected as the primary means to reduce emissions. In fact, if we consider that
this regulatory mechanism was most heavily advocated by a neoliberal politico-economic country (the
U.S) in the 1990s that argued only market-based policy solutions could achieve the most effective and
efficient emissions reductions,23
then the premise makes perfect sense. Yet,what can one expect when
a country of such influence is also the second largest contributor to GHG emissions.24
It is becoming
blatantly obvious that the politico-economic orientation of carbon markets is not in fact geared towards
reducing emissions, but instead preserving the economic interests of heavy emitting countries and
firms.25
As such, it is time for the theoretical scope from which we perceive the problem of
anthropogenic climate change to shift to a conception of the issue that effectively redresses the issue.
The issue of a disparate exchange
A conceptual shift away from capitalistic modes of redressing anthropogenic climate change would
invariably also result in an abdication from allocating climate, or, more broadly, nature, as a form of
property right. This essayposits that the most objectionable aspectofcommodifying nature, and thereby
rendering it a form of property, is that it results in a fundamentally disparate exchange. The point here
is that currency is a human construct with value residing purely in purposes associated with human
activity and interactions - its exchange in the form of investment for the right to produce emissions is
not commensurate. In other words, monetary value that society attributes to ordinary commodities is a
disparate value to that which is attributable to nature. This disparity is ultimately a consequence of the
culmination of westernised notions of property rights into the concept of an individual’s capacity to
exercise sole despotic dominion over an object, in this instance, nature.26
However, climate is a multi-
15 Above n 5, 102.
16 Michael E. Porter and Mark R. Kramer ‘Creating Shared Value’ (2011) Jan-Feb Issue Harvard Business
Review 62.
17 For example, the global financial crisis.
18 Such as environmental costs that are borne by nature and society without being sufficiently accou nted for by
capitalist processes such as valuation,production and exchange.
19 Harvey D, The enigma of capital and the crises of capitalism (New York: Oxford University Press, 1st ed,
2010) 166.
20 Above n 8, 3.
21 Newell P and Paterson M, Climate capitalism:global warming and the transformation of the global economy
(Cambridge, UK: Cambridge University Press, 1st ed, 2010) 1-2.
22 Above n 8, 3.
23 Tietenberg T, Emissions trading:principles and practice (Washington DC, Resources for the Future, 2nd ed,
2006) 66.
24 Jamieson D (2011) ‘The Nature of the Problem’ in Dryzek J and Schlosberg D (eds) The Oxford Handbook of
Climate Change and Society, Oxford University Press, Oxford, 46.
25 Above n 8, 8.
26 Above n 6, 725.

4
dimensional common property resource and does not fit within the realm of private division,27
it is not
feasible that the atmosphere be divided in the same way land is divided. As such, the exchange of
currency for the right to produce that occurs between countries and firms needs to be modified in a way
that affords the exchange a quality or value intrinsic to and compatible with nature. It is therefore
necessary that the idea of emissions as a tradeable property right is reconceptualised so that producers
can take more effective measures to mitigate anthropogenic climate change.
The reconceptualization of the right to carbon pollution is necessitated by the fact that, once
commodified, carbon trading can be expressed in terms of a libertarian entitlement theory of justice.28
Consequently, the liberal theory of private property, through the legal fiction of a “bundle” of rights,
created,conferred,and enforcedby the state,29
empowersthe individual possessorto the use,exclusivity
and disposition of that property.30
In the context of economic transactions, according to this libertarian
entitlement theory, a transaction is considered fair if it is entered into voluntarily, lawfully and in good
faith, regardless of the moral or ethical correctness or distributive outcome of the exchange.31
However,
transaction fairness needs to be impugned in the context of carbon emissions trading because it involves
the commodification of what is essentially an environmental wrong into a tradeable property right. In
this sense, the association between marketization and commodification is crucial as markets require
‘things’ to be traded.32
By treating environmental resources such as climate as a commodity, they become involved in the
functions and processes of a market economy. It has been the very extension of markets in a capitalist
context that has yielded the environmental stresses and problems which contemporary society now
faces.33
GHGemissions alone do not impair the quality of global climate, rather,they threaten to change
the climate, and if the regulation of climate is left to the processes of market functions rather than
democratic negotiation or principles of equitable distribution, then this process will only be hastened.34
If the commodification of carbon emissions into a tradable property right ultimately results in chaotic
changes that upsets the natural climatic equilibria, how can private property rights be a justification for
this process if there are intergenerational ramifications? The justification is inherently flawed in the
sense that climate is a resource common to all humankind, yet its misuse through commodification
excludes a vast majority of society from it whilst impeding on individuals personal liberty due to its
adverse effects on climate change. Again, this is owing to the fact the solution of carbon emissions
trading is a market-based solution to serve a purpose existing in economic growth rather than
conservation of the environment.
International and intergenerational unfairness
A furtherimplication that comes with the financial commodification of carbon is the inherent unfairness
that subverts both developing countries and future generations. In the first instance, the repercussions
of climate change are experienced by developing countries and areas affected by famine and poverty to
a far greater extent than first world countries. This is owing to the fact that the negative impacts of
climate change are likely to be felt more severely in these areas and at a greater frequency, while the
support mechanisms available to these regions with which they are to deal with the adverse effects of
27 James C Wood ‘Intergenerational Equity and Climate Change’ (1995-6) 8 The Georgetown International
Environmental Law Review 293, 307.
28 Above n 5.
29 Stephen R. Munzer A theory of property (Cambridge University Press, 1st ed, 1990) 95.
30 Margaret Jane Radin Reinterpreting Property (The University of Chicago Press, 1st ed, 1993) 121-3.
31 Above n 5.
32 Above n 9, 121.
33 Ibid.
34 Above n 27.

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climate are both limited and restrictedby widespreadpoverty.35
In the second instance,intergenerational
injustice is an inherent aspect of a market economy, with the essential problem being that modern
society is predicated this same market economy. An efficient market is able to implement gains that can
be achieved through trade, yet may ignore the interests of those who cannot trade. Thus, what we
perceive to be an efficient, and therefore desirable, market is able to ignore the interests of future
generations asthey have no capacityto engage in trading.36
Again, carbonemissions trading is therefore
an ineffective means of reducing anthropogenic climate change by virtue of the fact it is orientated to
facilitate market growth rather than environmental conservation.
While traditional economic theory assumes that equal bargaining power is a precondition to the market
and its functionality,37
the same principle eludes market-based policy instruments designed to redress
anthropogenic climate change. Market-based policy solutions are an inadequate means to address these
concerns because they inhibit and oppress developing countries whilst privileging developed countries
by failing to account for realworld intersections that affectequalexchange in areassuch asrace,gender
and social status.38
The problem is that once developing countries participate in market-based climate
change reduction mechanisms and adopt emissions reduction targets,they may sell their spare emissions
for other goods and services or for capital raising purposes.39
A further issue within this is that if many
developing countries decide that it is most profitable to trade their emissions in early rounds, the
resulting effect will be to depress the net price of emissions and thereby reduce the overall earning
potential of these countries. Thus, market-based solution systems have the effect of both privileging
elite groups in developed, westernised countries, whilst at the same time they also create perverse
incentives for the exploitation of under-privileged, developing countries.40
Clearly there are significant
flaws within a market-based solution to reducing anthropogenic climate change, particularly in regards
to the efficacy of the market as a method to distribute environmental burdens and benefits. Although
most GHG emissions can be traced to the economically inclined practices of developed countries, the
adverse implications resulting from such action is borne disproportionately by developing societies.41
However,despite the prevalence of this disproportionate distribution, developing countries continue to
participate in market-based solutions as the transference of value to the ‘core’, production dependant
countries remains a fundamental precondition of developing countries introduction into the world
economy.42
In this light, it is evident the problem exists within the alleged solution itself as it retains an
approach primarily concerned with facilitating economic efficiency and growth.
The issue of climate injustice does not only pertain to the international spectrum – it is also a problem
that plagues arguments of intergenerational equality. As noted, a market-based policy solution to
redressing anthropogenic climate change contends that efficiency is paramount. However, where
efficiency is paramount, the interests of future generations is relegated and the negative impacts of
climate change are unjustly shifted on to them. The issue with the distribution of this burden onto future
generations is that they have no ability to mitigate it or defend current strategies that aim to alleviate
the effects of climate change.43
Instead, the fight for justice is left to environmental justice advocates
and environmentalists who can rely only on arguments of ethical and moral responsibility. As such,
given the major time lags that the effects of climate change are subject to, there will be the incentive
35 Gardiner S (2011) ‘Climate justice’ in Dryzek J and Schlosberg D (eds) The Oxford Handbook of Climate
Change and Society, Oxford University Press, Oxford, 311.
36 Above n 11.
37 Above n 14, 82.
38 Ibid.
39 Above n 5, 109.
40 Above n 8, 3.
41 Dave Owen ‘Climate change and Environmental Assessment Law’ (2008) Columbia Journal of
Environmental Law 33(1) 57, 58.
42 Above n 8, 13.
43 Above n 11, 62.

6
for current and future generations alike merely to passon the costsand harms of their behaviour to more
distant future generations, even if unjustified.44
Consequently, this also means it is more likely that
current generations dealing with the effects of climate change will be more likely to over-consume if it
is driven primarily by concerns that subsist during its own lifetime. In this light, it is clear that market-
based policy instruments used to redress anthropogenic climate change also unfairly distribute
environmental burdens and harms that transcend generations. It is therefore imperative that current
mechanisms for mitigating climate change are radically redefined, or alternatives methods are adopted,
in order to both justly distribute intergenerational climate burdens and prevent international subjugation
of developing countries.
Solutions & alternatives
Given the extent of the problems associated with market-based solutions to redress anthropogenic
climate change, it is evident that an alternative method of addressing the issue be utilised, or at least
adapt the current regime so that emission levels are in fact reduced. One way in which to do this may
be to remove the trade aspect from the current regime and set a definitive cap on emissions allowances.
If countries and firms are not able to trade their right to emit, then atleast there is no incentive to exploit
developing countries. However, where countries and firms do not meet their emissions cap, perhaps
they can receive a compensatory government payment, the amount of which being commensurate to
the proportion of emissions within the cap that remained unused. Of course, the only real way to
implement such a measure would be to increase current taxes or introduce a new tax system which
spreads the burden amongst all of society. Alternatively, if tradable permits are to remain in use, the
consideration for the permits needs to change drastically. Instead of merely purchasing the permits,
producers should instead be required to pursue practical means of engaging in biological carbon
sequestration (biosequestration) measures by protecting existing stores, creating new ones, or
replenishing depleted stores.45
However,these solutions are not significant. If the world truly wishes to
see a dramatic reduction in GHG emissions and their resulting effects,the solution needs to be ongoing,
redefine perspectives, and abdicate from the capitalist economy that generates the problem in the first
place.
Conclusion
In summation, it is clear that market-based policy instruments are inherently flawed insofar as they aim
to redressing anthropogenic climate change. This is primarily owing to the fact that carbon emissions
trading schemes are fundamentally geared towards facilitating economic growth rather than
environmental and ecological conservation. This premise is emphasised by the fact that the very nature
of such a scheme serves anthropogenic purposes, in that it commodifies the right to produce emissions
and renders them a tradeable property right. The fundamental issue that emerges as a result of such
commodification is that the exchange which occurs is not commensurate. This is due to the fact that the
value which is attributed to ordinary commodities as understood by humankind, and, as such, that same
value, as understood by humankind, is not a value which is attributable to nature. Consequently, this
results in a variety of injustices and unfair distribution of environmental burdens. These effects
transcend intergenerational frontiers and are experienced predominantly by developing countries who
are economically incentivised to participate in the system that subverts them. As such, it is clear that
market-based solutions to anthropogenic climate change are inadequate mechanisms to effectively
redress the issue. It is for this reason that, ultimately, the world needs to take a step back and attempt to
redefine the structure of society, moving away from capitalistic modes of production and instead
44 Above n 35, 313.
45 Katrina Cuskelly ‘Legal frameworks for regulating biosequestration in Australia’ (2011) EPLJ 28(5) 348,
348.

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preferring something more environmentally sustainable. If not, the world will surely be feeling the true
effects of anthropogenic climate change in many years to come.

8
Bibliography
Articles/Books/Reports
A) Articles
Babie, Paul‘Choices That Matter: Three Propositions on the Individual, Private Property, and
Anthropogenic Climate Change’ (2011) Colorado Journal of International Environmental Law and
Policy 22(3) 323
Blustein, Shol ‘Towards low emissions in the electricity generation sector:Creating a coherent legal
model for Australia’ (2011) 28 EPLJ 77
Böhm, Steffen, Maria CeciMisoczky and Sandra Moog ‘Greening Capitalism? A Marxist Critique of
Carbon Markets’ (2012) 0(0) Organization Studies 1-22
Brenner, Neil ‘State Theory in the Political Conjuncture: Henri Lefebvre’s “Comments on a New
State Form”’ (2001) 33(5) Antipode 783-808
Chinn, Lily N. ‘Can the Market Be Fair and Efficient – An Environmental Justice Critique of
Emissions Trading’ (1999) 26(1) Ecology Law Quarterly 80
Cuskelly, Katrina ‘Legal frameworks for regulating biosequestration in Australia’ (2011) EPLJ 28(5)
348
Deane,Felicity ‘A new legal avenue for pricing GHG emissions? To trade or to tax?’ (2011) 28(2)
EPLJ 111
Godden L ‘Preserving natural heritage: nature as other’ (1998) 22 Melbourne University Law
Review 719
Owen,Dave ‘Climate change and Environmental Assessment Law’ (2008) Columbia Journal of
Environmental Law 33(1) 57
Pearse,Rebecca ‘Carbon Trading for Climate Justice?’ (2014) 17 Asia Pacific Journal of
Environmental Law 111
Porter,Michael E. and Mark R. Kramer ‘Creating Shared Value’ (2011) Jan-Feb Issue Harvard
Business Review62
Stilwell, Frank ‘Marketising the environment’ (2011) 68 Journal of Australian Political Economy 108
Wood, James C. ‘Intergenerational Equity and Climate Change’ (1995-6) 8 The Georgetown
International Environmental Law Review 293
B) Books
Eckersley R ‘Just Carbon Trading?’ in Moss J (ed) Climate Change and Social Justice,Melbourne
University Press,Melbourne
Gardiner S (2011) ‘Climate justice’ in Dryzek J and Schlosberg D (eds) The Oxford Handbook of
Climate Change and Society, Oxford University Press,Oxford
Harvey D, The enigma of capital and the crisesof capitalism (NewYork:Oxford University Press,1st
ed, 2010)
Jamieson D (2011) ‘The Nature of the Problem’ in Dryzek J and Schlosberg D (eds) The Oxford
Handbook of Climate Change and Society, Oxford University Press,Oxford

9
Munzer, Stephen R., A theory of property (Cambridge University Press,1st
ed, 1990)
Newell P and M. Paterson,Climate capitalism: global warming and the transformation of the global
economy (Cambridge, UK: Cambridge University Press,1st
ed, 2010)
Radin, Margaret Jane Reinterpreting Property (The University of Chicago Press,1st
ed, 1993)
Sagoff M (2011) ‘The Poverty of Climate Economics’ in Dryzek J and Schlosberg D (eds) The Oxford
Spash C (2011) ‘Carbon Trading: A Critique’ in Dryzek J and Schlosberg D (eds) The Oxford
Tietenberg T, Emissions trading: principles and practice (Washington DC,Resources for the Future,
2nd ed, 2006)
Timmons, Roberts J. and Bradley C. Parks, A Climate of Injustice: Global Inequality, North-South
Politics, and Climate Policy,MIT Press,Cambridge, MA, 2007
Weart S (2011) ‘The Development of the Concept of Dangerous Anthropogenic Climate Change’ in
Dryzek J and Schlosberg D (eds) The Oxford Handbook of Climate Change and Society, Oxford
University Press,Oxford
C) Reports
Climate Change 2001: Working Group III: Mitigation, A Report of Working Group III of the
Intergovernmental Panel on Climate Change (3rd
March 2001), 10.1.2.2
Intergovernmental Panel on Climate Change (IPCC). 2001. Climate Change 2001: The Synthesis
Report
Oliver JGJ, Janssens-Maenhout G, Muntean M and Peters JAHW (2013), Trends in global CO2
emissions; 2013 Report, The Hague: PBL Netherlands Environmental Assessment Agency; Ispra:
Joint Research Centre
Stavins, Robert N., ‘Experience with Market-Based Environmental Policy Instruments’ (Discussion
Paper No 1, Resources for the Future, November 2001)

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