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Carbon Trading: Unethical, Unjust and Ineffective?

Published online by Cambridge University Press:  22 September 2011

Simon Caney
Magdalen College, Oxford
Cameron Hepburn*
New College and Smith School, Oxford
*Corresponding author.E-mail


Cap-and-trade systems for greenhouse gas emissions are an important part of the climate change policies of the EU, Japan, 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.

Copyright © The Royal Institute of Philosophy and the contributors 2011

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1 United Nations Framework Convention on Climate Change (UNFCCC): 1992, Article 2, text available at

2 We focus on carbon dioxide emissions given their sheer volume and contribution to climate change but we should note, of course, that carbon dioxide is not the only greenhouse gas.

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13 Ibid., 176: cf 176–178.

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20 Andre ‘Blocked Exchanges’, 180–187.

21 This table captures, we hope, the logical possibilities but it obviously does not describe all the kinds of issues that might arise under the various headings. For excellent discussion of the kinds of issues that arise and the relevant normative consideration see Satz, Debra, Why Some Things Should Not Be for Sale: The Moral Limits of Markets (New York: Oxford University Press, 2010)CrossRefGoogle Scholar.

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31 We are grateful to Luc Bovens for raising this objection.

32 Note, incidentally, that this argument does not object solely or even primarily to the ‘trading’ of permits. Rather its concern seems to be with a system which distributes ‘rights to use the atmosphere’ whether or not they are tradeable.

33 Michael Sandel has given this kind of argument. See ‘Should we Buy the Right to Pollute?’, 95. Sandel's argument against emissions trading is a part of a more general civic republican concern about the role of markets and the way they encroach into many domains in human life. See Sandel, Michael J.Justice: What's the Right Thing to do? (London: Penguin Books, 2009), 8491Google Scholar and his discussion of ‘republican citizenship’ in Sandel ‘What Money Can't Buy: The Moral Limits of Markets’, The Tanner Lectures on Human Values delivered at Brasenose College, Oxford, May 11 and 12, 1998, 107ff. This is available at: (last accessed on 8 September 2010). See also his first Reith Lecture (‘Markets and Morals’) at (last accessed on 8 September 2010).

34 For further discussion see Caney ‘Markets, Morality and Climate Change’, 208.

35 Waldron, Jeremy, ‘Money and Complex Equality' in Pluralism, Justice, and Equality (Oxford: Oxford University Press, 1995) edited by Miller, David and Walzer, Michael, 152Google Scholar. Waldron's statement may overstate the exceptional nature of in-kind contributions. The challenge, nonetheless, remains: we need an argument for the claim that we must discharge our environmental duty in an in-kind form when there are other possibilities.

36 We are grateful to Luc Bovens for raising the objection presented in this paragraph and the example we use to illustrate it.

37 Sandel ‘Should we Buy the Right to Pollute’, 95. See also Goodin's discussion of the related, but distinct, argument that it is wrong to have a scheme that allows ‘some but not all’ to be exempt from some burden or to enjoy some benefit, ‘Selling Environmental Indulgences’, 584–585. How objectionable we find such schemes will depend heavily on whether the allocation of the scarce good is fair.

38 Tobin, James defends restrictions on trade for this reason: ‘On Limiting the Domain of Inequality’, Journal of Law and Economics, 13:2 (1970), 266CrossRefGoogle Scholar.

39 We are grateful to Luc Bovens for pressing us on this point.

40 James Tobin ‘On Limiting the Domain of Inequality’, 271. He makes the same point in a discussion of food vouchers (268).

41 See Shue, HenrySubsistence Emissions and Luxury Emissions’, Law and Policy 15:1 (1993), 58CrossRefGoogle Scholar, and Shue, ‘Climate’ in A Companion to Environmental Philosophy (Oxford: Blackwell, 2001) edited by Jamieson, Dale, 455456Google Scholar. This kind of argument is also endorsed by Hyams, A Just Response to Climate Change: Personal Carbon Allowances and the Normal-Functioning Approach’, Journal of Social Philosophy 40:2 (2009), 244CrossRefGoogle Scholar. See also 243–244 for further discussion where Hyams discusses what we term the Paternalism and the Unreliable Trustee Arguments. Hyams appears to think that Shue's claims are a paternalistic claim about whether to prevent individuals from selling their own emission rights. Shue, however, is not discussing individual carbon permits and rejecting them for being paternalistic. His point rather is about the dangers of letting states sell all ‘their’ emissions permits, thereby jeopardising the needs of their citizens. See also Shue ‘Equity and Social Considerations related to Climate Change’, Papers presented at the IPCC Working Group III Workshop on Equity and Social Considerations Related to Climate Change, Nairobi, Kenya 18–22 July (1994) especially 389.

42 Shue ‘Subsistence Emissions and Luxury Emissions’, 58 and ‘Climate’, 455.

43 On the moral limits of state sovereignty see Caney, SimonJustice Beyond Borders: A Global Political Theory (Oxford: Oxford University Press, 2005), chapter 5CrossRefGoogle Scholar.

44 What about states that do not deny their subjects the emissions needed for a decent standard of living but which nonetheless distribute them unjustly? This raises a number of complex issues that we cannot hope to resolve here. Much depends on factors such as (i) whether emissions trading with this unjust state improves or worsens the condition of the unjustly treated within that state at all, (ii) whether withholding trade incentivises the unjust government to engage in reform or whether, by contrast, engaging in trade is a more effective way of encouraging improvements, and (iii) how much weight we accord to self-determination as compared with securing an internally just distributions. See, further, Caney Justice Beyond Borders, chapter 5 and 7.

45 For further discussion see Caney ‘Markets, Morality and Climate Change’, 206.

46 Sandel ‘Should we Buy the Right to Pollute?’, 94.

47 Ibid., 95.

48 Ibid., 94–95. See also Goodin ‘Selling Environmental Indulgences’, 581–583.

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