Carbon trading: unethical, unjust and ineffective?

Produced as part of the Governments, markets and climate change mitigation CCCEP research programme theme

Working Paper 49


Cap-and-trade systems for greenhouse gas emissions are an important part of the climate change policies of the EU, Japan and New Zealand, among others, as well as China (soon) and Australia (potentially).

However, concerns have been raised on a variety of ethical grounds about the use of markets to reduce emissions.

For example, some people worry that emissions trading allows the wealthy to evade their responsibilities. Others are concerned that it puts a price on the natural environment. Concerns have also been raised about the distributional justice of emissions trading. Finally, some commentators have questioned the actual effectiveness of emissions trading in reducing emissions.

This paper considers these three categories of objections — ethics, justice and effectiveness — through the lens of moral philosophy and economics.

It is concluded that only the objections based on distributional justice can be sustained. This points to reform of the carbon market system, rather than its elimination.

Simon Caney and Cameron Hepburn