Smog, self-interest and regulating markets: the commons approach and the establishment of the European Union Emissions Trading Scheme

Abstract

2014 has seen continuing strenuous international efforts to strengthen regulatory infrastructures in financial markets following the damage wrought by the global financial crisis. Most recently in November 2014 the G20 Leaders Summit in Brisbane Australia endorsed a raft of measures on issues such as: financial inclusion, global infrastructure and accountability assessment processes, thereby building on the work of international regulatory actors such as the Financial Stability Board and the International Monetary Fund. In this paper we propose that contemporary international regulatory efforts in the finance sector to generate improvements in areas such as: raising standards of behaviour by both individual and organisational finance actors; promoting higher levels of financial citizenship; strengthening international benchmarks; and mitigating systemic risk in capital markets can benefit from examining how multilateral initiatives in environmental protection have emerged. We propose that notions of the commons as a governance philosophy have not only underpinned how many climate change regulatory responses have evolved, but can also provide valuable insights into how fair and effective financial markets might be sustained. To this end we provide a case study on the establishment of the world's largest carbon trading market, the European Union Emissions Trading Scheme, which was built on a philosophical foundation of concern for the commons mediated by national and regional interest perspectives.