The ideological differences among economists and ongoing politicisation of carbon pricing, particularly emissions trading, is best understood with regard to the broader political economy of the state's ongoing mismanagement of the climate crisis. The institution of carbon markets occurs through domestic and international law. The emergent pattern in carbon markets is legislation for cap-and-trade schemes in developed nations, linked to carbon offset programs in developing countries. Human activity has dramatically altered the global carbon cycle – the movement of carbon between living and non-living things in the earth, the ocean and the atmosphere. Neoclassical economic theory designates all forms of environmental degradation and pollution as aberrant 'externalities' to otherwise efficient markets. The concept of market failure traces back to British welfare economics, a subfield of neoclassical economics concerned with well-being at the aggregate level. This chapter outlines a neo-Polanyian political economic perspective on contestation and the contradictions of emissions trading.