Carbon flows, financial markets and climate change mitigation

After initial debates and controversies, from the late 1980s onwards market instruments became fully accepted in environmental governance. However, with their inclusion in transnational and global environmental governance, market institutions seem to be in for a new round of discussions. Transnational carbon markets stand out in these debates, especially since the recent financial crisis made the world aware of the vulnerability of global financial markets. This paper uses a sociology of flows perspective to review current debates on the emerging global carbon markets as new – initially state-created – institutions to mitigate climate change. Do carbon markets aim primarily at climate change mitigation or mainly at financial gains? Who controls the functioning and outcome of these transnational carbon markets? And is there a risk of a global carbon market crisis, not unlike the global financial crisis? The paper concludes that current discussions and decisions on carbon market architectures are conducive for the future role of carbon markets in climate change mitigation. States are just one of the many actors shaping carbon markets and thus managing carbon flows.