REGULAR ARTICLES Subprime catalyst: Financial regulatory reform and the strengthening of US carbon market governance Eric Helleiner and Jason Thistlethwaite Department of Political Science and Balsillie School of International Affairs, University of Waterloo, Ontario, Canada Abstract The 2008 financial crisis has had an important, but neglected, impact on carbon market governance in the United States. It acted as a catalyst for the emergence of a domestic coalition that drew upon the crisis experience to demand stronger regulation over carbon markets. The influence of this coalition was seen first in the changing content of draft climate change bills between 2008 and 2010. But the coalition’s more lasting legacy was its role in shaping the content of, and supporting, the passage of the Wall Street Reform and Consumer Protection Act (the Dodd–Frank bill) in July 2010. Although that bill was aimed primarily at bolstering financial stability, its derivatives provisions strengthened carbon market regulation in significant ways. This policy episode demonstrates new patterns of coalition building in carbon market politics as well as the growing links between climate governance and financial regulatory politics. At the same time, the significance of these develop- ments should not be overstated because of various limitations in the content and implementation of the Dodd–Frank bill, as well as the waning support for carbon markets more generally within the US since the bill’s passage. Keywords: carbon markets, climate change, derivatives, financial crisis, financial regulation. 1. Introduction From the perspective of many environmentalists, weak regulation over carbon markets has undermined the markets’ ability to play a significant role in reducing the greenhouse gas (GHG) emissions that fuel climate change. What are the prospects for stronger regulation that might provide more environmental integrity to the markets? At the end of their recent comprehensive analysis of the politics of carbon markets, Newell and Pater- son (2010, p. 179) speculate very briefly about whether the 2008 global financial crisis might provide an important political opening to allow carbon markets to be reformed. This potential implication of the financial crisis for climate governance has received very little subsequent attention from scholars. In this paper, we begin to fill this gap in academic literature with a special focus on the US experience. We demonstrate that the financial crisis has indeed had an important impact on carbon market governance in the United States. The crisis generated a domestic Correspondence: Eric Helleiner, Department of Political Science, University of Waterloo, 200 University Ave. West Hagey Hall, Rm. 315 Waterloo, Ontario N2L 3G1, Canada. Email: ehellein@ uwaterloo.ca Accepted for publication 16 February 2012. Regulation & Governance (2013) 7, 496–511 doi:10.1111/j.1748-5991.2012.01136.x © 2012 Wiley Publishing Asia Pty Ltd