The politics of carbon markets: an introduction

Abstract

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 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 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 (REDD+) 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 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 modernisation (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 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 dominated 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 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 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 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, 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 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 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 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 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 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 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.

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 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, 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. 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 (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

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 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 REDD+. 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. Furthermore, he points to the carbonification of forests – the obscuring of other non-carbon stock meanings of forests – as a consequence should REDD+ 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 contributions, 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 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 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).

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).