Innovation processes in governance: the development of 'emissions trading' as a new policy instrument

This paper analyses the development of a new policy instrument as an innovation process in governance. Using the innovation journey concept to track the process in which ‘emissions trading’ emerges as a novel configuration in environmental governance shows how the policy instrument develops dynamics of its own, partly independently of policy problems and goals. These dynamics cut across governance domains, from air pollution policy in the USA to climate policy in the European Union. Interactions across science, policy development and the governance domains in which the instrument is applied prove to be critical for the transition between phases: from options to first developments; to experiments with a prototype; further diffusion; and, finally, the formation of a transnational policy regime. Key factors are openings in existing governance structures, establishment of linkages with contexts of implementation and the generation of momentum through the ‘carbon industry’ as an emerging service economy.