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

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.