Mitigating climate change calls for earth system governance -- the collaborative and international management of a range of socio-economic processes that produce greenhouse gas emissions. To date, the construction of earth system governance through supranational political channels has proven difficult. The growing momentum, particularly on the part of the global financial service industry, behind carbon markets suggests that carbon emissions trading schemes can instead be used to construct earth system governance. Using an interdisciplinary theoretical framework combining concepts from three fields -- environmental policy, economic geography and the sociology of finance -- the project seeks to: 1) investigate the nature of markets and their construction within an environmental context; 2) understand the relationship between market construction, design and path dependency; and 3) explain the role markets -- operating ahead of policymakers -- play in the construction of regulation. To accommodate the complex dynamic of the carbon markets, the research design includes an interdisciplinary mix of qualitative and quantitative elements. The primary method -- case studies of institutions in London, New York and Chicago as well as interviews with policymakers in Brussels at the European Commission, Washington D.C. and San Francisco -- will provide an in-depth understanding of a complicated and ongoing process. The role of financial service firms in constructing the market and the relationship between market processes and environmental policy are of particular interest. Quantitatively, Q-analysis applied to the interviews and close dialogue will reveal potential bias. The study will provide detailed analysis of the development of carbon markets through the lens of regulatory entities and the financial service industry (the market makers), and a transatlantic map of the demand-side of the carbon market network.
The study will make a unique contribution by providing important information about the nature of the demand-side operation of carbon markets. The research further presents the opportunity to capture the creation of a market at its inception, providing an invaluable baseline of comparison for future studies of the carbon market and markets in general. The results of the research will answer questions about the nature of environmental markets, the processes that drive their construction and the relationship between markets and environmental policy. In particular the study will provide valuable insight on the relationship between the finance or economics of these markets and their potential for achieving real environmental gains. This information will aid policy and market makers in efforts to enhance the efficiency and performance of the markets, which will strengthen the ability of the markets to contribute to society's goals of addressing climate change.
