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The politics of carbon markets: An introduction

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 Environmental Politics

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The politics of carbon markets: an introduction

Benjamin Stephan & Matthew Paterson

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 Environmental Politics
Vol. 21, No. 4, July 2012, 545–562

The politics of carbon markets: an introduction

Benjamin Stephana* and Matthew Patersonb
a
Centre for Globalisation and Governance, KlimaCampus, University of Hamburg,
Germany; bÉcole d’e´tudes politiques, Universite´ d’Ottawa, Canada
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This overview of the existing political analysis of carbon markets identifies

three broad strands in the literature. The first is concerned with the
processes by which particular carbon market schemes are established. The
second focuses on the role of particular actors in the creation of carbon
markets. The third strand assesses carbon markets on efficiency, legitimacy
or justice grounds. This existing literature is contrasted with the framework
developed by the contributions to this volume. Broadly drawing on
constructivist and poststructuralist approaches, the carbon economy is
deconstructed, its history scrutinised and the practices and technologies
that have been used to bring these markets into being are highlighted. Thus
it is demonstrated that politics is not limited to the policy process leading
up to the decision to implement an emissions trading scheme or offset
mechanism, but is also present in the forms of knowledge claims that
underpin these markets, as well as the various daily practices that constitute
them.
Keywords: carbon markets; emissions trading; market creation; climate
change; poststructuralism; constructivism

Introduction
Over the past 15 years carbon markets have become a dominant part of the
policy approach to address greenhouse gas mitigation in many countries.
Carbon markets constitute the central elements of the Kyoto Protocol –
specifically the intergovernmental emissions trading scheme (ETS), the Joint
Implementation (JI) and Clean Development Mechanisms (CDM) – and the
EU ETS is at the heart of the European Union’s climate policy. Furthermore
an emissions trading system is currently the only economy-wide climate policy
that has any chance of being implemented in the United States – even though
so far, this has only happened on a regional level (in the north-eastern states via
the Regional Greenhouse Gas Initiative). Trading schemes have also been

*Corresponding author. Email: benjamin.stephan@uni-hamburg.de

ISSN 0964-4016 print/ISSN 1743-8934 online

Ó 2012 Taylor & Francis
http://dx.doi.org/10.1080/09644016.2012.688353
http://www.tandfonline.com
 546 B. Stephan and M. Paterson

implemented in Japan, New Zealand and New South Wales (Betsill and
Hoffmann 2011). Beyond that, there has been a smaller voluntary carbon
market, which provides companies, organisations and individuals with offsets
for their emissions in the absence of any reduction requirements (as well as, via
the no longer operational Chicago Climate Exchange, a voluntary cap and
trade system).
While carbon markets have been the dominant policy response, the carbon
economy currently looks bleak. In the absence of a post-Kyoto agreement and
no binding global targets beyond 2012, it is unclear whether there will be an
enduring demand for CERs, ERUs or AAUs – the emissions reduction
commodities created through the Kyoto Protocol.1 The Durban Platform has
given a temporary lifeline to the CDM, but its longer-term future is far from
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certain. This uncertainty about the future of the markets, in combination with
recurrent fears about over-allocation within the EU ETS as well as the impact
of the recession on emissions themselves, have kept carbon prices at relatively
low levels.
Even though the current situation looks gloomy, it seems rather unlikely
that this will result in an abandoning of carbon markets. Quite the contrary: a
number of developments point to further expansion, despite the absence of a
binding international agreement. Several initiatives are currently underway
that will in the near- or mid-term future result in the creation of new domestic
markets: California has approved its emissions trading scheme scheduled to
come online in 2013, and other members of the Western Climate Initiative,
notably Québec, Ontario and British Columbia, may well join it at that point
or shortly afterwards. Australia’s scheme came into effect on 1 July 2012. Eight
developing and emerging economies – Chile, China, Columbia, Costa Rica,
Indonesia, Mexico, Thailand, and Turkey – have been allocated grants through
the World Bank’s Partnership for Market Readiness to devise domestic trading
schemes (World Bank 2011), while South Korea is an advanced state of
planning for a scheme due to be implemented in 2015. In addition, the efforts
to device a mechanism for Reducing Emissions from Deforestation and
Degradation (REDDþ) will possibly result in a new carbon offset mechanism
of significant size (see Stephan this issue).

Situating the special issue

There is now a substantial literature on carbon markets. Interestingly,
however, there has been surprisingly little published within the pages of
Environmental Politics. All we have is two articles on the Kyoto mechanisms
(Schmitz and Michaelowa 2005, Shin 2010), one on the EU ETS (Damro and
Luaces Méndez 2003), one on the role of carbon trading in the 2010 Australian
election (Rootes 2011), and one on intergenerational justice implications of cap
and trade systems (Schuppert 2011). Beyond that, there are occasional
mentions in the context of more general articles on the Kyoto Protocol,
European climate policy, or similar. So in one sense, the aim of this volume is
 Environmental Politics 547

to engage carbon markets strictly in relation to debates of interest to those in

the field of environmental politics, in order to fill this rather surprising gap
(especially given the number of articles in closely related journals, on which
more below).
Of course there is plenty within the field on which the focus on carbon
market politics can draw. Closely related debates about ecological modernisa-
tion (e.g. Mol 1996, Christoff 1996, Warner 2010) and new environmental
policy instruments (NEPI) (Jordan et al. 2003) are particularly relevant.
Carbon markets can clearly be seen as part of such novel instruments
(alongside voluntary agreements, public–private partnerships, and so on), or
what Albert Weale (1992) 20 years ago called ‘the new politics of pollution’, in
that they reflect the search to go beyond end-of-pipe regulatory measures and
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operate via economic incentives to achieve environmental goals. They can also
be seen as part of a broader ecological modernisation process, notably because
they reflect the broad discursive shift which rejects a strict opposition between
economic growth and sustainability, and because they directly entail the
generation of growth sectors (specifically carbon market financial instruments
but also carbon offset projects) that are designed (at least rhetorically) to be
organised around the decarbonisation of the (global) economy.
Finally, from a more critical perspective, carbon markets can be seen as
connected to these two broader processes in that both are shaped heavily by the
dominance of neoliberal ideology and practice since the early 1980s. Linked to
this is the ideological rejection of the growth-environment tension, the hostility
to what became known tendentiously as ‘command and control’ regulation and
the concomitant favouring of ‘market-based measures’. All this has taken place
in light of the rapidly increasing power of financial actors to shape policy in
their interests (see in particular Newell and Paterson 2010).
But these literatures, while useful as background, are limited in how they
deal with the complex specificities of carbon markets as policy tools and as
social institutions. Such markets have taken on a life of their own and have
themselves become a dominant response to climate change (and to a lesser
extent some other environmental problems, such as wetlands in the United
States, on which see Robertson 2007), so treating them as part of a basket of
‘new environmental policy instruments’ limits our attention to the details of
their political dynamics. Interestingly, while there were some early mentions of
carbon markets as instances of NEPI (e.g. Damro and Luaces Méndez 2003),
this frame has not been used within most of the literature on such markets.
Conversely, the literature on carbon markets themselves remains domi-
nated to an extraordinary degree by economists, lawyers, and those interested
in essentially normative fashion in how they should be designed. They take for
granted the positive value of carbon markets and are focused on questions of
environmental effectiveness, efficiency, and what might be thought of as the
‘optimal design’.2 These sorts of questions dominate not only the journals that
specialise in this area, such as Climate Policy and Energy Policy, but also the
broader environmental governance journals such as Environmental Policy and
 548 B. Stephan and M. Paterson

Governance and to an extent Environment and Planning C: Governance and

Policy.3 This can in part be explained perhaps by the habitus of the average
climate policy researcher, for whom the immediate policy concern is to
contribute to the next phase of whatever is being discussed, a process
uncharitably referred to as ‘ambulance chasing’. But this lack of attention to
politics has arguably produced inadequate understandings of how policy
develops and how the market institutions that policy creates operate.
More recently, however, there has been a growth in research on the politics
of carbon markets. Three types of research can be identified. The first focuses on
the process by which particular carbon market schemes are established. There is
now a significant and growing literature on the policymaking processes by
which various carbon markets have been established. Dominant amongst these
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are studies of the EU ETS (Cass 2005, Pinkse and Kolk 2007, Voß 2007,
Skjærseth and Wettestad 2008, 2009, 2010, and many other articles; Baldwin
2008, Braun 2009, van Asselt 2010), and the Clean Development Mechanism
(CDM) (Green 2008, Boyd 2009, Pulver et al. 2010, Shin 2010). There are,
however, also some studies of the Regional Greenhouse Gas Initiative (RGGI)
(Rabe 2004, 2007, Selin and VanDeveer 2011), New Zealand (Hood 2010, see also
Bullock 2012), the UK pilot emissions trading scheme (Nye and Owens 2008) and
the Voluntary Carbon Market (VCM, see Bumpus and Liverman 2008).
Furthermore, some broad comparative articles explore the patterns of policy
development across different markets (see in particular Betsill and Hoffmann 2011
and Paterson 2012), while others explore the CDM in the context of a ‘varieties of
capitalism’ argument4 about how this shapes national CDM governance systems
(Friberg 2009, Fuhr and Lederer 2009, Schroeder 2009).
The second focus has been on the roles and influence of particular actors
within the establishment of carbon markets. The majority of the work has been,
perhaps unsurprisingly, on the role of business actors in these processes. Some of
this is focused on the lobbying by particular industries, for example attempts to
enable the inclusion of carbon capture and storage in CDM projects (Vormedal
2008), while others focus more broadly on the role of business coalitions or
networks in developing carbon market policies (Pinkse and Kolk 2007, 2009, Kolk
et al. 2008, Meckling 2011a, 2011b, Stephan 2011, Paterson 2012).
Evaluating whether the schemes are any good is the third focus in the
political science literature on carbon markets. This research contributes to
broader debates about sustainability and environmental effectiveness, opens up
questions of legitimacy, or is concerned with questions of social justice. For
example, Toke (2008) explores how the EU ETS exists in significant tension
with the Renewables Obligation in the UK electricity regulatory system, and
with the promotion of renewable electricity generation more broadly, while
Skjærseth (2010) examines the legitimacy problems of the post-2012 EU ETS
reforms. Lovell et al. (2009) or Paulsson (2009) explore the limits of carbon-
offset markets as means for emissions reduction. Discussion of legitimacy is
most commonly situated in broader debates about the legitimacy of ‘privatised
governance’, to do with the changing role and power of private actors and their
 Environmental Politics 549

capacity either to shape interstate governance in their interests, or to directly

affect governance themselves (Lövbrand et al. 2009, Paterson 2010, Bernstein
2011). On the question of justice, there is a broad range of literature either
critiquing carbon markets on basic ethical grounds to do with the ethical
problems of ‘commodifying the atmosphere’ or the distributive aspects of
global carbon trading systems (see for example Caney 2010, Spash 2010, Page
2011), or alternatively through detailed analyses of specific cases, especially in
the carbon offset markets, exploring the exploitative relations and damaging
consequences of such projects (e.g. Boyd 2009). With regard to all these aspects
this last set of literature reflects closely the sorts of critiques of carbon markets
developed by critical social movement activists and their academic allies
(Bachram 2004, Lohmann 2005, 2006, Smith 2007, Böhm and Dabhi 2009,
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Gilbertson and Reyes 2009).

One aspect these various literatures on the politics of carbon markets have
in common is a relatively conventional and restrictive account of where politics
lies and what the political in creating carbon markets exactly is. They identify
politics as existing first and foremost in the policymaking process itself – in the
jostling for position by different actors to get their preferred policies
implemented, and in the discussion of the normative basis on whose grounds
what sorts of policies should be implemented or avoided. This is clearly
important and our aim in this volume is not to ignore this; indeed the policy
process appears as part of the narrative in all of the papers presented here. But
one of the premises for this volume is to go beyond this narrow understanding
of politics and start with the premise that the market itself is political.
Outside political science, notably in cultural geography and economic
sociology, there is in fact an emerging literature focusing precisely on the
complicated social life of carbon markets. Most of this takes as its point of
departure a very useful critique of neoclassical economics’ black-boxing and
reification of ‘the market’, which thus ceases to be interrogated as a social and
political institution. These approaches are strongly grounded in various sorts
of post-positivist social science theory, analysing the market creation and
commodification processes (e.g. Lohmann 2009, MacKenzie 2009, Lovell and
Liverman 2010, Knox-Hayes 2010, Bumpus 2011). Drawing on the sociology
of markets – particularly on Actor–Network Theory (Lohmann 2009,
MacKenzie 2009) – and the materiality of nature literature (Bumpus 2011)
these contributions have created the space for a critical social science
engagement with carbon markets. So, for example, Donald MacKenzie
(2009) focuses on the technical means by which the commensuration of the
different processes that make up carbon markets is affected. Michel Callon
(2009) highlights the character of carbon markets as ‘in vivo experiments’, as
projects where the actors are engaged in continually reflexive activity regarding
the nature of carbon markets, their limits and possibilities. The contributions
to this volume for the most part draw on and attempt to extend this strand of
literature. However, the papers collected here go beyond existing work by
stressing the political dimension in their analysis, discussing for example the
 550 B. Stephan and M. Paterson

contestedness of the market creation processes (Bullock; Stephan) or the

virtuousness that underwrites market routines (Paterson and Stripple). While
there are glimpses of political analysis in some of this literature (see notably in
Lohmann’s work, which extends the sorts of critiques of carbon markets
already highlighted above, or for example in Bumpus and Liverman 2008 or
Descheneau and Paterson 2011), there remains much more to be said.

The aims of this volume

Given the various contexts discussed above, this volume aims to do a number
of things. First, at the most basic, it aims to provide a series of articles that
expand our understanding of the politics of carbon markets, filling a gap in
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debates within the pages of this journal and beyond. But second, and more
specifically, it aims to do so with an expanded account of politics that is not
limited to policymaking processes or ethico-political critique, but that includes
the questions of power and authority within the markets themselves. This
perspective is influenced by an understanding of the political that is common
within poststructuralist political theory (Edkins 1999). Most poststructuralist
understandings differ from the conventional understanding of politics as taking
place in and around institutions like parliament. Instead, any form of
contestation linked to challenging or establishing social structures and our
understanding about right and wrong or true and false are understood to be
part of the political. With regard to environmental issues, the political then is
not limited to the parliamentary vote that establishes new environmental
regulations. The process of producing scientific knowledge, for example, is
intimately connected to the policy process, involves the production of claims
about truth, objective reality, and the appropriate responses, and is already
highly political. From this perspective markets are created through decisions in
conventional institutions of politics (despite what the acolytes of a simplistic
account of Adam Smith insist) and have knock-on consequences, on the
distribution of power, and so on, but they are themselves political in that they
involve relations of power and authority and the contestation of these
relations, which shape and reshape the structures of the markets and other
social structures beyond them. So the focus of the papers here is on the politics
of the markets themselves. This brings us to our third aim, which is to expand
on the emerging sociological literature on carbon markets by interrogating the
processes involved in assembling carbon markets as political processes.
To do this, the contributions to this volume analyse the creation of different
carbon markets and scrutinise the routines upon which the markets are based.
Most of the papers involve the application of broadly ‘poststructural’
approaches. Using one or more of these approaches, these contributions
investigate how different forms of emissions reductions are being produced,
commensurated and commodified and hence being made tradable on the
carbon market. Furthermore they identify key technologies and practices upon
which this market relies. The authors point out the messiness of
 Environmental Politics 551

commodification and market creation processes, illustrating their contingency

and highlighting the power structures at play. The six contributions to this
volume provide valuable insights, highly relevant in particular to the
understanding of the creation and character of future markets.
Three cross-cutting themes in the papers are worth highlighting in this
introduction: their choice of theoretical lens; the historical dimension found in
most of the contributions; and the interest in technologies and practices evident
in the analyses.

Deconstructing the carbon economy

With one exception, the papers collected here all deploy what can be called
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radical constructivist or poststructuralist approaches: Descheneau and Lane

both apply an Actor–Network Theory (ANT) framework; Paterson and
Stripple deploy the notion of governmentality; Stephan draws on Laclau and
Mouffe’s discourse theory and conception of hegemony; while Lederer
approaches the issue via an emphasis on the notion of practice. While some
of the contributions straightforwardly apply these theories (Lane, Lederer),
exploring empirical aspects that have been overlooked in recent analyses,
others innovatively combine different strands of theory to widen their
analytical lens. Thus, Descheneau uses literature on the sociology of money
to sensitise ANT for the social underpinnings of technological processes.
Paterson and Stripple rework Der Derian’s (2009) argument about the relation
between virtue and virtuality, placing it within a governmentality framework,
and Stephan combines insights from literature on the sociology of markets and
the commodification of nature with hegemony and discourse theory to develop
a discourse-theoretical approach to commodification.
Despite the diversity of theories upon which these papers draw, most of
them share a common interest in a deconstructive stance, problematising the
taken-for-granted routines and norms of carbon markets. Descheneau
problematises the proposal to understand carbon as currency, or as a form
of money highlighting both the conditions of possibility and the consequences
that this notion of carbon entails. Lane deconstructs the widespread idea of the
economic efficiency of carbon markets. Paterson and Stripple deconstruct the
tonne of carbon dioxide equivalent – the key metric of the carbon market –
while Stephan problematises the commodification of avoided deforestation. By
deconstructing taken-for-granted aspects, these contributions open up new
perspectives on carbon markets, giving us a better understanding of their
functioning as well as their possibilities and limitations.

Scrutinising the history of carbon markets

A second theme that can be found throughout most contributions to this
volume is a historical perspective on the evolution of carbon markets or
various aspects that constitute them. Bullock explores the recent history of
 552 B. Stephan and M. Paterson

New Zealand’s climate policy, scrutinising the emergence of its ETS by

discussing the initial scheme and the Climate Change Response Amendment
Bill that weakened it in 2009. Paterson and Stripple take us back to the 1990s
and analyse the early history of the United Nations Framework Convention on
Climate Change (UNFCCC) and the Intergovernmental Panel on Climate
Change (IPCC) to recap the origins of the tonne of carbon dioxide equivalent
(tCO2e). Lane looks far beyond the implementation of the first emissions
trading systems to analyse how claims about the efficiency of permit trading
schemes as opposed to command and control policy developed during the
1960s and 1970s amongst economists and policymakers, especially in the
United States. Stephan goes even further back, tracing the discursive links
between climate change and deforestation to the beginning of the twentieth
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century. As these contributions show, delving into the history of carbon

markets provides valuable insights that give us a better understanding of
current markets and teach us valuable lessons about the creation of new ones.

Focusing on practices and technologies

A third crosscutting theme is the authors’ interests in the practices and
technologies that underwrite and constitute carbon markets. Descheneau
investigates the calculating practices that are embedded in various carbon
market technologies converting emissions reductions undertaken in CDM
projects into reduction credits that can potentially serve as a currency.
Stephan’s analysis is concerned with the emergence of measurement
technologies and accounting practices necessary for the commodification of
avoided deforestation. Paterson and Stripple scrutinise the practices and
technologies that have enabled the commensuration of carbon and facilitated
its trading. And Lederer explores how our own practices – the practices of the
science community – have contributed to the emergence and influenced
the shape of carbon markets. Bullock’s paper, while it does not approach the
subject through these sorts of theoretical lenses, illustrates how the specific
material conditions – in his case the character of New Zealand’s emissions
profile – shapes the character of the markets that arise.
The authors all approach practices and technologies slightly differently but
share a common interest in their social embeddedness: to account for the social
underpinnings of involved technologies, Descheneau goes beyond a pure ANT
perspective on carbon markets and draws on literature on the sociology of
money; Stephan is interested in the discursive embedding of technologies and
practices, while a central theme in Paterson and Stripple’s contribution is the
virtue inherent in the technologies that constitute the carbon market.
By taking a deconstructive view on carbon markets, critically interrogating
their histories and scrutinising the practices and technologies that constitute
them, the six contributions to this volume present us with innovative
perspectives and exciting new insights on the creation and functioning of
carbon markets.
 Environmental Politics 553

Collective contributions
These three sorts of contributions, in combination, provide powerful ways into
existing debates about carbon markets and their value. To round this out we
take as an example the arguments of Schmitz and Michaelowa (2005), which
seem to us to embody many conventional assumptions in literature on carbon
markets, and show how the analyses developed in this volume would help
reformulate research on the debates about baselines and carbon offset markets
that Schmitz and Michaelowa engage. The analyses here provide powerful
correctives to the assumptions underpinning those debates, and at the very
least hint at how we might reformulate them more adequately.
Schmitz and Michaelowa focus on the question of how baselines get
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determined in JI projects. The question of baseline determination – the

counterfactual exercise of calculating what emissions would be if the project
did not go ahead, in order to determine how many credits the project should be
allowed to generate – is widely regarded as a central question underpinning the
credibility or otherwise of offset projects, whether JI, CDM or in the voluntary
market. The distinctiveness of the JI system is that given that both countries
have targets under the Kyoto Protocol, the baseline is determined by
negotiation between the two countries involved in the project. This should in
principle lead to a realistic determination since the host country in particular
has no reason to overstate the emissions reductions from the project (by
inflating the baseline to generate more credits), as this would undermine its
own emissions allowances under Kyoto. By contrast, in the CDM, since the
host country has no target, it has an interest in maximising the credits issued.
These are the sorts of assumptions about how the baselines get determined
in offset markets that are made by Schmitz and Michaelowa and, we suggest,
by the vast majority of the literature on these subjects. As is evident, they are
strict rational choice assumptions. All actors, public or private, are assumed to
be behaving on the basis of calculations of self-interest. Our contributions in
this volume are useful first for undermining these assumptions, and second for
providing hints about how we might go about investigating these aspects of
carbon markets more fruitfully. Two aspects of the Schmitz and Michaelowa
argument, which pervade the literature on carbon markets, are worth
highlighting here.
The first concerns the nature of agency. The strict rational choice
assumptions in dominant accounts of carbon markets can be contrasted
usefully with the accounts of actors who are understood variously to be
performing particular identities, embedded in either institutional settings or
actor–networks that shape their activity, or via the notion of practice which
emphasises routinised actions. Following this line of thinking, the calculation
of baselines can be understood more readily as the outcome of a much more
messy process whereby actors, while they may well be doing some calculations
of interest, will be doing so within the normalised practices of the organisations
they work in – the consultancy firms or certifiers – as well as specific,
 554 B. Stephan and M. Paterson

historically contingent, institutions that shape what is to count as a

‘reasonable’ judgement. They will often be under considerable time pressure
and thus use existing off-the-shelf ways to calculate baselines that may bear
little relation to the strict calculations of interest on a case-by-case basis. Thus
for example while Schmitz and Michaelowa (2005, p. 83) interpret the practices
of host country (in the case of JI, East European states) bureaucrats having to
‘learn’ the issues that baseline negotiations raise for them, in order to realise
their interests, it is just as useful to focus precisely on the practices that actually
determine those agents’ activities rather than simply assume they are failing to
live up to some externally decided yardstick of ‘rationality’.
At the same time, the rational choice account of agency relies on the notion
of a single, easily identifiable agent whose interests can be clearly deduced.
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Where more than one actor is involved in drawing up a project document, this
would be interpreted as a principal–agent problem in rational choice theory –
how does the principal (say, the Ukrainian government) ensure that the agent
(say Tüv Süd, a carbon offset consultancy and certification firm) pursues the
former’s interests rather than their own (Schmitz & Michaelowa 2005, p. 87)?
By contrast, the articles presented in this volume portray an image of agents
both deeply embedded in complex networks, institutions and discourses, and of
agents who are messy hybrids rather than ones that can be neatly categorised
as representing particular interests. What to make, for example, of carbon
market trading firms made up by people who used to be in an environmental
non-governmental organisation (NGO), and who have brought in some
financiers, and whose employees move across the NGO-trader space fluidly,
and occasionally sit on the CDM Methodologies Panel? How are they to be
understood as actors with clear interests to defend when it comes to calculating
a baseline? Rather, their agency in this context is better understood via notions
of actor–networks (Descheneau), routinised practices (Lederer), or as effects of
broad discourses (Paterson and Stripple, Stephan).
Second is the rigid distinction between technicalities and politics. Schmitz
and Michaelowa’s article is very interesting in its focus on the political
implications of technical choices. They share this with much of the ANT
literature on carbon markets as highlighted in the articles presented above (see
also Callon 2009, MacKenzie 2009 in particular). But they police a rigid
boundary between the two, stating for example that the ‘choice of baseline is
not only one of technical rigour but also one of political decision’ (Schmitz and
Michaelowa 2005, p. 87). Elsewhere, they draw a similar distinction between
the ‘subjective’ and ‘objective’ qualities of baseline determination. In this more
normatively driven distinction, politics appears as the ‘subjective’ noise that
intrudes into a process that should be ‘objective’ – i.e. technical and thus non-
political. The import of the articles presented here is to insist that this
distinction cannot usefully be drawn so neatly. First, politics cannot be reduced
to the decision to implement an emissions trading system or on outlining its
rules – there is politics going on in the establishment of a baseline for an offset
project, or any other ‘moment’ in the process of assembling carbon markets
 Environmental Politics 555

(see Paterson and Stripple, or Descheneau, on ‘moments’). Second, the

technicalities, or ‘objective’ criteria by which a baseline might be chosen, are
themselves to be understood as always political, in a number of ways (see
Stephan). The authority to determine what is the objective measure entails
political power for the experts involved. The criteria that are presented as
objective usually are deeply embedded norms that reflect past political conflicts
(the economists’ account of ‘efficiency’ is a paradigmatic example of this). The
choice of baselines determined on ‘objective’ criteria nevertheless shifts the
balances of power between different agents in the process.

From virtuality to New Zealand: the papers in this volume

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The volume starts with a paper by Matthew Paterson and Johannes Stripple
that develops a general conceptual framework for thinking about the
construction of carbon markets. Drawing on Der Derian’s concept of ‘virtuous
war’, they develop an argument about carbon as a virtuous commodity. With
this they refer to the interrelatedness of virtuality and virtue – the technological
and the ethical – in the construction of carbon markets, which produces a self-
evident ethical imperative underpinning carbon markets. Their paper explores
virtuality and virtue at five moments in the commodification process of carbon.
They analyse the invention of the tCO2e as the basic unit of account, its
proliferation into several asset classes, its verification – assuring that a tonne is
a tonne is a tonne – and finally its differentiation into boutique and Walmart
carbon. Through the concept of virtuous carbon they capture the emergence of
a distinct form of governmentality, which aims to neutralise resistance by
imbuing the commodities of carbon markets with a self-evident moral quality.
Richard Lane’s contribution takes us back in time to the early history of
emissions trading, tracing important elements in the first of Paterson and
Stripple’s five moments. Lane draws on ANT to investigate how the efficiency
claim that accompanies emissions trading has been constructed. He traces the
origins of this claim back to the 1970s when command-and-control-regulation
was framed as inefficient – due to the distinction between the means and ends
of regulatory frameworks. At the same time emissions trading was constructed
as efficient through modelling exercises and the re-construction of the
Environmental Protection Agency’s early Emissions Trading System as an
implementation of ‘pure’ economic theory. On these grounds very specific
policy tools have been translated into a universal economic narrative and
emissions trading has been established as an efficient policy tool that can be
applied to a broad variety of environmental issues.
Philippe Descheneau also draws on ANT to problematise the monetisation
of carbon – another important moment in the commodification of carbon. He
starts by critiquing proposals to consider carbon a form of money (Victor and
House 2004, Button 2008). His paper goes beyond these accounts and shows
how current market devices such as exchange platforms or registries already
enable actors to make money from carbon. At the same time however, this
 556 B. Stephan and M. Paterson

process creates a permanent institution of carbon as money – something he

argues we should see as a ‘fundamentally social process’.
Following this is a case study of a particular example of carbon market
creation: Benjamin Stephan develops a discourse-theoretical understanding of
commodification and uses it to assess the efforts of commodifying avoiding
deforestation under REDDþ. Comparing these to the failed attempt to include
avoiding deforestation as a project category into the CDM, his paper focuses
on contestations during various moments of the commodification process,
which have to be pacified in order to make avoiding deforestation tradable on
the carbon market. Even though we have come a long way since these earlier
debates, Stephan argues that limited to the voluntary market avoiding
deforestation does not yet present a fully disentangled commodity. Further-
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more, he points to the carbonification of forests – the obscuring of other non-

carbon stock meanings of forests – as a consequence should REDDþ be
integrated into the compliance end of carbon markets.
In his contribution, Markus Lederer revisits the conceptual material and
draws on ‘the practice turn’, in particular in International Relations to flesh out
a practice approach to carbon markets. He argues that this approach allows us
to transcend the actor–structure dichotomy and thus helps us to understand
carbon credits as a specific configuration of power and authority. Furthermore
he uses his practice approach to get a better understanding of the knowledge
embedded in commensuration, commodification and trading – daily practices
which he argues reify a specific approach towards the climate. Lederer
concludes with a reflection on our own role and uses the practice approach to
discuss the accountability of academics as ‘practitioners’.
The volume closes with an analysis of the recent implementation of an
emissions trading system in New Zealand. David Bullock’s paper diverges from
the poststructural theoretical approaches underpinning the other contribu-
tions, and instead focuses on the policy process similar to the first type of
carbon market literature outlined above. He presents a rich account of how
New Zealand’s unique emissions profile, in combination with the influence of a
powerful agricultural sector and other stakeholders, shaped an emissions
trading system with distinct characteristics. Furthermore, his paper gives us the
chance to reflect on insights from the analytical frameworks presented in the
previous papers. Does creating a carbon market become any different if you
want to include 33 million sheep and 10 million cows as the most significant
emissions source (Statistics New Zealand 2012)? What type of actor networks
do they become part of, once one wants to commodify their emissions?

Conclusion
This introduction has outlined the contributions of this volume and highlighted
key insights this line of inquiry provides into the creation and emergence of
carbon markets. Political science literature on carbon markets has so far been
focused on the policy process leading up to their implementation, on the role of
 Environmental Politics 557

important stakeholders during these processes, or on assessing these markets

on efficiency, legitimacy or justice grounds. What has been missing so far is a
thorough assessment of the markets themselves. This approach can be found in
a number of articles by geographers interested in the commodification of
nature or sociologists concerned with the sociology of markets, yet it lacks a
political science angle. The articles assembled here go beyond the existing
literature in two respects: on the one hand they complement the work on the
creation of carbon markets that has been done by sociologists and
geographers, by highlighting the political character of these processes; on the
other hand the papers add to the existing political science literature on carbon
markets. By drawing on a broader understanding of the political and hence
locating politics not just in the policy process leading up to the decision to
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implement a carbon market, the contributions to this volume show how these
markets themselves are fundamentally political.
We have identified three overall characteristics of the contributions to this
volume: the application of what can broadly be called poststructuralist theories
and, linked to this, an attempt to deconstruct previously taken-for-granted
aspects of the carbon market; critical engagement with the history of carbon
markets as a whole or with individual aspects of them; and last but not least,
analyses taking into account practices and technologies involved in assembling
and maintaining these markets.
As we have pointed out, taking Schmitz and Michaelowa’s article as a
baseline setting under the JI as an example, the perspective developed in this
volume provides us with tools to rethink existing work on carbon markets. It
allows us to contextualise actors’ actions and go beyond the simple notion of
rational actors who maximise their profits. Hence, it helps to account for the
complexity and messiness involved in carbon markets.
Opening up a new way of thinking about carbon markets also points to
further aspects, which still need to be analysed. More work is needed on
assessing the role and impact of resistance from within and outside the market,
and it will be very interesting to see how the current depression in the carbon
market affects its character and – to stay with the focus of this volume – its
politics.

Notes
1. CERs refer to Certified Emissions Reductions, the unit operated via the CDM.
ERUs are Emissions Reductions Units, the units produced in JI, while AAUs are
Assigned Amount Units, Kyoto’s basic unit of account that can be traded directly
in the Emissions Trading System. See Paterson and Stripple (this issue) for details.
2. To adequately survey all of this literature would be beyond the scope of this
introductory article. For a selection, see Ellerman et al. (2010), Hansjürgens (2005),
den Elzen and de Moor (2002), Morthorst (2003), Halsnaes (2002), Varma (2003),
Godby (2002), Bosello et al. (2003), Woerdman (2001). On various aspects of design
questions, see for example Grubb (1989), UNCTAD (1992), Kosobud (2000),
Tietenberg (2006), Tuerk (2009), Kartha et al. (2004), Svendsen and Vesterdal
(2003), Jepma (2003), Michaelowa and Jotzo (2005).
 558 B. Stephan and M. Paterson

3. In Climate Policy for example, this is obvious. See Paterson (2012) for what is
probably the first paper published there to be solely focused on the question of what
drives the politics of carbon markets.
4. Engels et al. have made a related argument in context of the EU ETS. They have
shown how companies, depending on which EU member state they are based in,
tend to vary in the way they put the new requirement of having to participate in the
EU ETS into practice (Engels 2009, Engels et al. 2008).

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