Who and what are carbon markets for? Politics and the development of climate policy

Why have carbon markets been rapidly adopted as policy solutions to climate change in the last decade? Perhaps surprisingly, this question has attracted virtually no attention in the large literature on such markets. The standard arguments given for why carbon markets are good ways to respond to climate change do not explain why such markets have flourished as governance mechanisms in relation to climate. Carbon markets have spread and become taken-for-granted because of the potential they give to certain powerful actors (financiers, specifically) to create new cycles of investment, profits and growth. As a consequence, they make possible a political coalition combining financiers with environmentalists. This coalition has considerable potential to legitimize substantial cuts in carbon emissions in the face of continued opposition from other interests. It is the combination of these two elements - the promotion of specific growth sectors and the construction of a political coalition - that constitutes the principal political virtue of carbon markets. In order to demonstrate this claim, the history of emissions trading is traced and the implication of this analysis is explored for the further building of climate governance centred on carbon markets.