Marketizing climate risk: an actuarial history of the European Union emissions trading system

When the European Economic Community (EEC) turned its attention to the issue of climate change in the late 1980s, it framed the ‘warming effect’ of greenhouse gases and the variability of climate anomalies as ‘an economic factor of high importance’. By that time, EEC governance had embraced an actuarial approach to managing risks: changing weather and its consequences could be measured, their costs calculated, and that data used to inform both proactive and reactive policy to mitigate economic threats. This article examines the management of climate risks in European political economy from the 1980s, when climate change became a politically salient issue and the Single Market Programme was the EEC’s primary objective, through the intergovernmental failure of the particularist carbon tax proposal in the 1990s, to the early 2000s, when the European Union (EU) embraced the universalist model of the market to establish the EU Emissions Trading System (EU ETS), the world’s largest carbon market, to mitigate greenhouse emissions across the European Economic Area. By historicizing the evolution of European approaches to climate change and the ultimate primacy of the market, this article uncovers the actuarial thinking deployed by European policymakers and officials as they debated how to mitigate greenhouse gas emissions and their economic consequences. It argues such thinking compromised the rigour of particularist climate change mitigation mechanisms while enabling the large and diverse EU to develop a common universalist mechanism to mitigate carbon emissions through the market.