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Environmental Markets: Uses or Abuses?

By Emily Duchenne - Geography Student @ Brasenose College, Oxford


Environmental governance is a broad and dynamic concept that seeks to improve the state of the social and natural environment whilst supporting sustainable development. The use of environmental markets, an approach of increasing interest and funding for environmental conservation through the market mechanism where ecosystem services are assigned monetary value, is being increasingly considered a means of addressing conflicts over environmental resources such as rivers, forests and clean air.

This decentralisation from the state and monetisation of the environment is argued to be an efficient means of managing the environment privately as actors aim to mitigate their environmental impacts through profit-maximising methods such as cap-and-trade schemes, picking up government failures and providing social benefit through taxation. However, many argue that the use of markets continues to prioritise businesses, profit and accumulation in manners that may be considered sustainable, but still depend on environmental and ecological destruction. Here, I will assess the use of environmental markets in relation to greenhouse gases and carbon emissions, where carbon cap-and-trade schemes are being increasingly used to mitigate pollution.

Cap-and-trade schemes are a form of environmental market, where maximum levels of allowable carbon emissions are set for carbon-polluting industries by official bodies such as central governments. Where companies do not reach this maximum limit, they are able to sell their remaining allowable pollution credits to other companies. The profit-maximising nature of this sector means firms are likely to invest in research and technology to reduce the rate of carbon emissions and thus maximise their remaining sellable pollution credits, with supporters arguing this works to promote long-term climate-change prevention strategies. Cap-and-trade markets are therefore a popular way of mitigating greenhouse gas emissions, with the carbon offsets market in 2008 being worth $400m.

One example of carbon trading that has been hailed as a success is in the American Mid-West, where private landowners have been able to convert their land into carbon credi