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32 Harv. Envtl. L. Rev. 571 (2008)
Carbon: Commodity or Currency - The Case for an International Carbon Market Based on the Currency Model

handle is hein.journals/helr32 and id is 575 raw text is: CARBON: COMMODITY OR CURRENCY? THE CASE FOR AN INTERNATIONAL CARBON MARKET BASED ON THE CURRENCY MODEL Jillian Button* I. INTRODUCTION In an unregulated state, the emission of greenhouse gases (GHGs) into the atmosphere in the course of commercial activities such as generating electricity, manufacturing products, and transporting goods is a negative en- vironmental externality. In other words, the natural service the atmosphere provides in absorbing and storing GHGs is not limited and the right to par- ticipate in this service need not be bought; the service therefore cannot be priced. Recent efforts to cap GHG emissions, including the Kyoto Protocol, as well as some governments' actions, have led to what is commonly referred to as the commodification of carbon. This refers to the restriction of GHG emissions, including carbon dioxide (CO2), and characterization of the right to emit GHGs as a tradable unit which may be transferred or sold. The holder of such a unit can express certain rights in relation to it. The phrase carbon trading therefore refers not to trade in physical GHGs as such, but to trading in the right to emit GHGs.' Previously freely available to any person, permission to pollute acquires its character as a private asset (as opposed to public wealth) and its exchange value from its scarcity.2 As existing carbon markets - including the European Union's Emis- sions Trading System (EU ETS) and the United Kingdom's Emissions Trading System (UK ETS) - mature, and new markets such as New Zea- land's Emissions Trading Scheme (NZ ETS), the Regional Greenhouse Gas Initiative (RGGI) and the Western Climate Initiative (WCI) de- velop, there has been a strong push towards global convergence of markets into a global carbon market. Governments outside the EU are considering * B.A., LL.B. (Hons.) (Melb.); LL.M. Candidate, Harvard Law School, 2008. The author thanks Professor David Wirth of Boston College, as well as Professors Jody Freeman, Howell Jackson, Seung Wha Chang and Byse Fellow Stavros Gadinis from Harvard Law School, for their advice in relation to this note; Michelle Perse from the Harvard Law School Library for her assistance with resources; and the organizers and speakers at the McDermott, Will & Em- ery 2008 Energy Conference, for sharing their industry perspective on carbon finance. Special thanks go to Tony Judd for proofreading drafts, sending through articles and providing encour- agement. Please direct questions or comments to jbutton@llm08.law.harvard.edu. 'Rutger de Witt Wijnen, Emissions Trading under Article 17 of the Kyoto Protocol, in LEGAL ASPECTS OF IMPLEMENTING THE KYOTO PROTOCOL MECHANISMS 403, 403 (David Free- stone & Charlotte Streck eds., 2005). 2 Herman E. Daly, The Return of Lauderdale's Paradox, 25 ECOLOGICAL EcON. 21, 22 (1998), (citing JAMES MAITLAND, EARL OF LAUDERDALE, AN INQUIRY INTO THE NATURE AND ORIGIN OF PUBLIC WEALTH AND INTO THE MEANS AND CAUSES OF ITS INCREASE 57 (2d ed. 1819)).

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