Markets, Institutions and Sustainability

Encouraging and stimulating markets for new and innovative environmental goods and services is crucial to move our economy towards sustainability. Formal legislation, government policies, and price mechanisms alone, are not however, sufficient to guarantee the development of new markets. This paper demonstrates the importance of market participants developing their own ‘rules of the game’, their own sets of informal practices, routines, and institutions to make the market work. A case study on Australia’s successfully developing wind energy market is utilised to illustrate these market processes in action. Market ‘emergence’ or market ‘creation’ is explored from an institutional and evolutionary perspective. The first section is dedicated to elaborating the markets as institutions perspective whilst theoretical insights into how markets as institutions might emerge are detailed in the second section. In the third section institutional emergence of the wind energy market in Australia is explained by means of a theoretical framework developed from the case study. The research points to unique market behaviours, committed buyer-seller relationships, learned exchange capabilities, and institutionalised market practices as necessary features of successfully emergent markets. The paper concludes with directions to support new market development for environmental sustainability.