Can the financialized atmosphere be effectively regulated? A critical analysis of the proposed Australian carbon pollution reduction scheme as a complex market solution to global warming

Purpose – This study examines the complex financial and reporting regulation that will oversee and monitor the veracity of newly commoditised carbon financial products traded in the proposed cap and trade Australian Carbon Pollution Reduction Scheme (CPRS), the government’s centrepiece of a domestic GHG mitigation strategy.

Design/methodology/approach – A critical examination of the financialization of the atmosphere to be traded as financial instruments by private corporations in a largely opaque and deregulated commodities market. The financialization of the atmosphere follows the growth of the financialization of capitalism when economic activity shifted from production and service sectors to finance. Financialization of capitalism is supported by capitalist regulation propelled by neo-liberal doctrines of free markets and small government that replaced social objectives of equality and justice with short-term business goals. The CPRS therefore could well be regulated by the same institutional framework influenced by capitalist regulation which failed to prevent the global financial crisis.

Findings – Complex financial products recently developed to hedge future risk as in a largely unregulated, opaque commodities market underlies the current financial meltdown.

Practical implications/limitations – If the current financial infrastructure required for the GHG emissions trading is inadequate as evidence indicates, no amount of taxpayer funded bailouts will reverse the extreme climate change associated with an environmental meltdown.

Originality/value – One of the first time applications of financialization of capitalism and capitalist regulation theories to the critical analysis of commoditized GHGs traded as financial products in the forthcoming Australian CPRS.