A Global Turn to Greenhouse Gas Emissions Trading?: Experiments, Actors, and Diffusion

The policy instrument of greenhouse gas (GHG) emissions trading has gained prominence since the early 2000s. At the end of 2016, twenty-one distinct GHG emissions trading systems (ETSs) covering thirty-five countries were operating worldwide (ICAP 2017). China has announced the launch of a national ETS for the second half of 2017, which is expected to become the world's largest carbon market. A number of other countries and subnational jurisdictions, including Thailand, Mexico, and Oregon, are considering the adoption of a GHG ETS. Hence, it is increasingly important to improve our knowledge about the forces that shape the initiation, design, and functioning of such systems, whether internal or external to the jurisdictions. This includes the interactions among individual systems and the precise ways in which ETS policy diffuses. With the increasing spread of GHG ETSs around the world over the past decade, sufficient empirical cases and variation are now available to provide a good knowledge base, and these warrant a thorough analysis.

This special issue of Global Environmental Politics contributes to our knowledge and understanding of the expanding turn to GHG emissions trading. In particular, we aim to investigate the role and detailed unfolding of diffusion processes in the emergence of various GHG ETSs globally, with a particular focus on the interaction between external influences and domestic dynamics within jurisdictions that newly design and adopt a GHG ETS. Since all GHG ETSs that have emerged so far have their own particular design, the global turn to emissions trading seems more complex than a simple policy diffusion account can explain. Domestic factors seem to be of great importance for understanding the growing adoption of ETSs in widely different jurisdictions.

Establishing a market is accompanied by uncertainty, and its functioning cannot be fully predicted. To deal with the uncertainty associated with such complex policy instruments as emissions trading, the initial phase of these schemes is frequently characterized by experimentation and learning through "pilot schemes" and "test phases." An ETS may need to be adjusted in response to new experiences and unanticipated events, such as an economic downturn or a low degree of trading activity. For this reason, one way to analyze ETSs is to conceive of them as experiments that produce information about successes and failures. Indeed, we have witnessed a remarkable level of testing and experimentation with GHG ETSs over recent years. One example of explicit experimentation is the seven pilot schemes that China launched in 2010. Another is the European Union's first trading period (2005–2007). These domestic experiments generated lessons tailored to a specific jurisdiction, since individual systems are developed in a particular context, which we could label islands of experimentation.

Conversely, policy-makers may alsoturntothe experiencesofother jurisdictions, which suggests diffusion and interdependent policy-making. Indeed, previous and emerging research points to the importance of diffusion dynamics in developing specific ETSs (Biedenkopf 2012; Müller and Slominski 2016; Wettestad and Gulbrandsen 2017). From a global perspective, this raises the question of how experiments and experiences in different jurisdictions may inform and interact with each other, potentially contributing to the creation of a future international carbon market through a bottom-up process. This connects to the rich discussion in political science on policy diffusion (for an overview, see Gilardi 2012). Underdal, Victor, and Wettestad (2015) distinguish the main mechanisms that underpin diffusion processes: competition (ratcheting up or lowering standards in response to economic interdependencies), learning (from the perceived policy successes and failures of others), and emulation (decisions based on norms and the logic of appropriateness).

Creating a market for GHG emission allowances requires a number of measures that are likely to be shaped by the features of the economy and the political preferences of the jurisdiction in which they are applied. For this reason, a carbon market is not a policy instrument that can be transferred easily and unchanged from one jurisdiction to another (Knox-Hayes 2016). Political controversies remain about the ways in which carbon markets should be organized, the role that they should play, and...