Sustainable Development and Market Liberalism's Shotgun Wedding: Emissions Trading under the Kyoto Protocol


This article analyzes the international emissions trading regime at the heart of the world’s effort to address global warming as a means of exploring broader international governance issues. The trading regime seeks to marry two models of global governance, market liberalism, which embraces markets as the model of global governance, and sustainable development, which seeks to change development patterns to protect future generations. This article explores emissions trading’s implications for understanding the relationship between these ideals.

This article presents new data and theory unsettling the traditional view that market mechanisms encourage innovations vital to sustainable development. Market actors fail to take positive spillovers, e.g. benefits accruing to competitors and thence to future generations, into account in making technological choices. Because of this failure to take long-term economic development into account, the international trading markets have contributed far less to sustainable energy development than more targeted programs.

Consideration of these spillovers yields fresh insights. Market liberalism’s ideal of comprehensive evaluation of costs and benefits conflicts with its preference for free markets. Conversely, sustainable development advocates’ tendency to rely on collective decision-making to make difficult technological choices may prove unrealistic. This article unsettles prevailing notions of governance and seeks to stimulate a richer more subtle discourse about the roles of government and markets in addressing global problems.


Environmental Law | International Law | Law and Economics

Date of this Version

August 2006