This chapter interrogates trends in how the natural world is taken up, governed and constituted by international law, in particular the growing marketisation of environmental governance. This chapter suggests it is fruitful to understand these contemporary forms of governance as constituted by the co-articulation of two older anthropocentric modalities of exercising power over nature: appropriative domination and stewardship. It provides a background to both these modalities, showing that though these are often understood as opposites, on a deeper level they are similar. It suggests that the ‘offset’ relation is the paradigmatic example of the co-articulation of these two modalities, as the ‘offset’ establishes a relationship between activities that damage the environment at one site and activities intended to protect, repair, or improve the environment elsewhere. This chapter situates such mechanisms as one element of a broader project to make nature legible in economic terms. In closing, this chapter considers the effects of the rise of ‘green governmentality’ and maps the terrain against which struggles for different nature/human relations take place.

This chapters introduces some basic concepts around the theoretical and historical aspects of carbon trading, exploring key governance aspects and the challenges of carbon markets.

Voluntary or local renunciation of fossil fuels will not keep us within a carbon budget, and direct control along the lines of wartime rationing would be overbearing and inefficient. This leaves either carbon taxes or carbon permits as the main instrument. At a first approximation these are mirror images of each other: raising the price to reduce emissions or vice versa. Under uncertainty, however, taxes make prices predictable but leave emissions unpredictable, while permit systems do the reverse, which should be an argument for permits. Moreover, quantity controls better manage interdependent (multiple equilibrium) economic structures than price controls. Real-world implementation has been poor, as seen in the European Trading System and California’s Cap-and-Trade program. The culprits are weak targets, widespread exemptions, handouts to business and abundant offsets. The dismal experience of the Clean Development Mechanism shows that such offsets function mainly as loopholes. Better would be a system of permits with universal coverage, auctioned rather than given away, and not exchangeable for offsets. It should be accompanied by other policies to mitigate the distortions caused by rapid carbon price increases and to accelerate the development of non-carbon energy sources and non-carbon-using goods and services.

International institutions established to promote carbon pricing and carbon markets (including carbon taxation, emissions trading and offsets) constitute a rapidly growing alphabet soup of acronyms straddling the boundaries between public and private organisations. All institutions within the carbon pricing sub-field subscribe to the norm that climate change should be addressed through placing a price on emissions. The various institutions perform different roles. While several of the private institutions set standards and commitments regulating how private actors should trade emission allowances and offset emissions, public and hybrid institutions tend to play information dissemination and networking roles focused on supporting political decisions to implement carbon pricing and to link carbon markets. The carbon pricing sub-field is characterised by coordination or co-existence, with significant attempts to establish a division of labour, and only little outright competition or conflict. Focusing on the interlinkages between the UNFCCC and the World Bank institutions that address carbon pricing, we found that also the relationships between these two particular sides are characterised by close coordination. This coordination is informed by cognitive and normative interaction mechanisms, while differences between both sides are managed in a bottom-up, incremental manner.

Climate–sincere citizens are frustrated with three decades of global and national failures to reduce greenhouse gas emissions, so they are receptive to arguments that they can make a difference by various means, one of which is to make an offset payment to someone else to reduce emissions while they continue to cause emissions when, for example, flying in an airplane. Unfortunately, research shows that a significant percentage of so–called offsets do not reduce emissions from what they otherwise would have been. Instead, offset payments are made to someone for doing something they would have done without the payment. Climate-concerned citizens would have greater impact if they instead made their offset payments to help elect climate–sincere politicians and to make sure that these politicians implement policies that require ezveryone to reduce greenhouse gas emissions, not just the people who buy offsets.