The Evolution of Carbon Markets: Design and Diffusion ed. by Jørgen Wettestad, and Lars H. Gulbrandsen (review)

The Evolution of Carbon Markets is a collection of nine case studies from various countries around the world: the United States, China, Australia, New Zealand, South Korea, Japan, and Kazakhstan, as well as the European Union (EU). The volume analyzes the evolution of carbon emissions trading systems (ETS) in these locations, as a process of policy/mechanism diffusion across countries.

The editors of the book set out to answer three broad research questions. First, what are the similarities and differences in ETS systems across the globe? Second, how can policy diffusion explain these similarities and differences? Third, what is the role of domestic politics in shaping the diffusion and the design outcomes? The editors use "structured, focused comparison" (p. 25) as a research design, and compare a wide range of case studies from across the globe of countries whose programs are at different stages of maturity, to understand the process and outcomes of policy diffusion.

The first three case studies from the EU and the United States (the Regional Greenhouse Gas Initiative [RGGI] and California) explain the conditions that led to the uptake of ETS by the global first movers. Lack of political consensus over regulatory measures like a carbon tax (in the case of the EU and United States) and the absence of a national policy to address climate change (in the case of the United States) have been the main reasons for adoption of ETS in these locations. In these three cases, we see a case of mutual learning. The EU developed ETS based in part on lessons from the United States' sulfur dioxide emissions trading program, and RGGI and California developed their ETS based on lessons from the EU. While the EU ETS inspired RGGI and California's ETS, regional political and economic considerations have led to significant divergence across programs.

Japan and South Korea are two fascinating case studies from East Asia. Japan has a mandatory subnational ETS, covering emissions from large commercial buildings in Tokyo. The program emerged from the absence of a national mandatory ETS combined with a local environmentally proactive government. South Korea was the pioneer of ETS in East Asia, pressured internationally by the EU for trade reasons when its increased greenhouse gas emissions put it in the category of significant emitter. While both these programs were inspired by, and modeled after, EU and US programs, specifications are based on local political and economic conditions.

A similar story can be told about New Zealand and Australia, with EU influence but local variation in the character of the programs created. In the case of New Zealand, there is no national cap on emissions because of the country's heavy dependence on agriculture, forestry, and agriculture-based exports. In Australia, regional industries dependent on fossil fuels for production and export led to a patchy and contested ETS.

The ex-Soviet state Kazakhstan implemented an ETS quickly, pushed by international pressure because of its unusual position within the Kyoto Protocol. Under the agreement, it was categorized as a developed country but had no emissions reductions obligations and was thus not able to participate in the flexibility mechanisms (including international emissions trading) the Protocol outlined.

China is one of the most important case studies in the book because once its ETS is implemented nationally, it will be the world's largest ETS. Though China still does not want to accept a formal cap on its national emissions, it is open to experimenting with ETS as one of the mechanisms to mitigate climate change. In addition to policy diffusion from the EU ETS, the Chinese case shows domestic learning from participation in the Clean Development Mechanism.

This book makes an excellent and easy-to-read text for students and researchers wanting to understand the polycentric evolution of carbon markets. The findings from the various case studies presented in the book are nevertheless fairly intuitive. The use of the concept of "diffusion" does...