Uncertainty Markets and Carbon Markets
Variations on Polanyian Themes
first published 16 July 2010
New markets in uncertainty and in carbon are advertised as making both finance and climate action more cost-effective. Both fail to do so, argues this article in the journal New Political Economy. Creating the commodity framework necessary to make sense of the notion of 'cost-effectiveness' causes both markets to lose touch with what was supposedly being costed. One consequence is systemic crisis.
The new financial markets expanded credit and multiplied leverage by isolating, quantifying, slicing, dicing and circulating diverse types of uncertainty; an unchecked pursuit of liquidity led to a catastrophic drying up of liquidity. The carbon markets, meanwhile, by identifying global warming solutions with reductions in an abstract pool of tradable emission rights and commensurating them with 'offsets' manufactured by 'quants', ended up blocking prospective historical pathways toward less fossil fuel dependence and thus exacerbated the climate problem. Unsurprisingly, both markets have provoked strong, if diverse and confused, movements of societal self-defence. This pattern of action and reaction is similar to the one seen in movements to commodify land and labour.
Click here for a short version in German