The New Insider Trading: Environmental Markets within the Firm


Environmental law scholarship has failed to appreciate fully the significant parallels between public law rules and private environmental governance—the traditionally “governmental” 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 standards—prescription, markets, property rights, informational governance, or hybrid approaches—and who should be setting those standards—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 Petroleum’s use of a private emissions trading scheme and Microsoft’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 “insider trading” 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


Stanford University Stanford, California
  • Sarah E. Light, The New Insider Trading: Environmental Markets within the Firm, vol.34 Stanford Environmental Law Journal 3 (2015).
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