Environmental law scholarship has failed to appreciate fully the significant parallels between public law rules and private environmental governanceâ€”the traditionally â€śgovernmentalâ€ť standard-setting functions that private parties, including business firms, non-governmental organizations, and individuals, have adopted to govern behavior respecting the environment. Recognizing these parallels should affect how we think both about what methods are best for setting environmental standardsâ€”prescription, markets, property rights, informational governance, or hybrid approachesâ€”and who should be setting those standardsâ€”government regulators, private actors, or some combination of the two.
This Article examines the use of market approaches (carbon taxes) and hybrid market instruments (emissions trading) in the climate change context. A great deal of legal scholarship has examined both how to design carbon taxes and cap-and-trade systems and the merits of these approaches relative to other methods of public regulation, such as prescriptive rules. There has been virtually no legal scholarship, however, analyzing the adoption by business firms of private market and hybrid instruments to address climate change. By closely examining British Petroleumâ€™s use of a private emissions trading scheme and Microsoftâ€™s use of a private carbon fee, this Article illuminates some of the common challenges that decision makers face in designing public and private forms of environmental governance, while acknowledging some of the key distinctions. The Article concludes by arguing that this new â€śinsider tradingâ€ť has the potential to reap significant benefits in combating climate change. It is important, however, to remain cautious about its limitations.
Sarah E. Light, The Wharton School, University of Pennsylvania