How Low Can It Go? Analysing the Political Economy of Carbon Market Design and Low Carbon Prices

ABSTRACT

Despite the ascendency of carbon pricing as a key regulatory strategy for governing anthropogenic climate change, insufficient attention has been paid to the issue of price discovery in emission trading schemes, now the dominant form of carbon pricing globally. By analysing the political economy of carbon market design, this paper highlights a number of design features that are instrumental in depressing carbon prices across the world’s emission trading schemes, keeping them well below those considered necessary to spur deep emission reductions in order to avoid catastrophic global warming. In doing so, it advances critiques of carbon trading by illuminating the extent to which carbon markets manifest as expressions of specific power relations rooted in the political economy of advanced capitalism, with low prices ensuring minimal disruption to business as usual.

KEYWORDS:

• Carbon pricing
• emissions trading
• climate change mitigation
• carbon revenue
• political economy

Acknowledgements

The author would like to thank participants in the research project that forms the basis of this paper; the anonymous reviewers; and participants in the Annual Conference of the Atlantic Provinces Political Science Association in Halifax, Canada, 25–27 September 2015, and the Annual Conference of the International Studies Association in Atlanta, Georgia, 16–19 March 2016, who provided useful feedback.

Disclosure statement

No potential conflict of interest was reported by the author.

Notes on contributor

Kate Ervine is an Associate Professor in International Development Studies at Saint Mary's University, Canada.

Additional information

Funding

Research for this paper has been supported by the Social Science and Humanities Research Council (SSHRC) of Canada.