Some thoughts about covenant theology from a recent presentation I gave:

Early in the Reformation, there was a difference within the
Reformed camp about how to think about the Old Covenant.  Turretin outlines this disagreement well in
Vol II, Twelfth topic, Q. 8 of his Elenctic Theology.  To summarize his argument, some Reformers
(Calvin and Olevianus, among others) take the term “old covenant” in a broad
sense, to mean everything that God did with His people from the fall to
Christ.  They speak of this covenant as
being one in substance, though different in accident, from the New Covenant in
Christ.  Others (Turretin names Rollock,
Piscator and Trelcatius among others) took the term “covenant” narrowly and
strictly, to refer only to the legal covenant under Moses.  They speak of this covenant as a covenant of
works, entirely different in substance from the New Covenant.  That covenant was given as a hypothetical
offer of salvation on the condition of perfect obedience, in order to show men
their hopelessness on their own and point them to Christ.  Turretin maintains that the difference
between these two camps was only in terminology, in the way they used the term
“covenant”- either broadly (the first group) or strictly (the second group).  Both agreed that the promises of the Messiah
were taught in the Old Testament, though not as clearly as in the New. 

Both camps also agreed that there was a pure legal principle
in the covenant with Moses that was opposed to grace and was there in order to
convict the Jews of sin and show them their need for a savior.  Calvin says (ICR 2:7:2) that Paul in
Galatians 3, in his statements about “law”, was referring to the law in its
narrow and strictly legal sense in order to refute the Judaizing legalists of
his day.  He therefore is agreeing that
there is such a strict legal conception in the Mosaic Covenant, which was
opposed to grace.  The difference is
whether they were comfortable speaking of this as a separate “covenant of
works” or not.  Turretin takes a position
much like Calvin’s, speaking of the Mosaic covenant as a whole as of the
substance of the covenant of grace, though it promulgates the law in order to
convict the people.  Turretin’s handling
of the subject is a wonderful presentation of Reformed consensus of the day.

In substance then the early Reformers were all largely agreed
that there were two principles at work in the Mosaic economy.  There was a works principle, a hypothetical
offer of salvation predicated on perfect obedience.  That legal element was placed there not
because the Israelites would ever be able to fulfill it, but because they
needed to be shown their need for a savior and convicted under the law.  It was, as Paul says, to make sin
“exceedingly sinful.”  Because God knew
they would not be able to keep these commandments, God also placed within the
Mosaic economy gracious foreshadowings of Christ, the sacrificial system, and
commanded them to make use of this sacrificial system whenever they fell into
sin.  The Mosaic economy as a whole functioned
within the broad plan of redemptive history. 
But it did so by highlighting the requirements of God’s law and holding
their guilt out to them.  Thus Peter
speaks of it as a burden which “neither we nor our fathers could bear.” (Acts 15:10) 
The Mosaic economy was also presented according to a particular form
suited to the Israelite nation in order to enclose them and preserve them as a
distinct people until the time of the coming of Christ and in preparation for
that coming.

Turretin clearly acknowledges the existence of this legal
principle in the Mosaic Covenant and has no major objection to calling it a
“covenant of works”.  However, he insists
that one cannot properly understand this legal principle outside of the scope
of redemptive history and the gracious purpose for which it was given, and for
this reason prefers to deal with it as just an element within the larger
covenant of grace, rather than speaking of it as a covenant of works contrasted
to the covenant of grace.  One difficulty
with this insistence is that as Turretin and Calvin both admit, Paul does
precisely this in Galatians 3-4, considering the “bare law in a narrow sense”
(Institutes 2.7.2) in order to refute legalists. 

A big part of the reason for the insistence on the language
of covenantal unity, according to Turretin (12th topic, q. 8, VIII),
is because the Lutherans of the day taught that “the promise of grace is to be
excluded from the Old Testament.”  (This
came from later Lutherans, not Luther himself who clearly grounded pre-Christ
salvation in faith in the promise of the Messiah.)  That is, they described the Old Testament,
the entire dealings of God with His people from fall to Christ as being a
covenant of works, and devoid of the promise of grace.  Many Reformers appear to have adopted a
stronger monocovenantal language perhaps in part to sharpen the distinction
between their theology and theology such as the Lutherans’ which denied the
promise of grace entirely in the Old Testament. 
One sees this same dynamic sometimes today in those who are intent on
discriminating the Reformed view from the dispensational view which likewise
denies that the promise of grace was present in the Old Testament period
entirely. 

I believe the two-covenant language is to be preferred, as
long as the proper caveats are made, because that two-covenant language is the
language the Bible uses- Jeremiah 31:31-34, Galatians 4:24, “new covenant”
language of the institution of the Lord’s Supper.  If you use that language, it is of crucial
importance however to distinguish, to say that by the “Old Covenant” or
“Covenant of Works” you are not referring to all of God’s dealings with His
people before the coming of Christ, but only to the strict legal principle of
the Mosaic economy, the Sinaitic covenant which said, “If you do this, you will
be to me a people.”  The promise of the
Messiah was clearly seen in the Old Testament throughout, and salvation in the
Old Testament was by faith in the promise of God just as in the New. 

One advantage of speaking in this manner is that it allows
you more clearly to separate the specific legal relation of the law from the
moral principles contained therein.  Then
we can say clearly that the law, as covenant, does not apply to the life of the
believer in any sense, while still making clear that all of the moral
principles taught in the law are just as valid today as they ever were.

It appears that speaking of the Mosaic covenant as an
administration of the covenant of grace is the majority language, however, in
the Reformed tradition.  The Westminster Confession
in particular more strongly uses this language. 
If the one-covenant language of Calvin is used, one must be careful (as
Calvin is) to ensure that the works-principle present in the Mosaic economy is
distinguished and separated from the overall promise of grace.  God’s people do not become God’s people by
obedience to law, whether moral or ceremonial. 
They do not “live” by the works of the law (Leviticus 18:5) but they
live by faith in Christ.  The great risk
is that in identifying the Mosaic covenant as an administration of the covenant
of grace, one has unwittingly smuggled into the gospel a great deal of language
speaking of blessings conditioned on obedience.

We ought not wrangle over words.  We should not present essentially
terminological differences as being differences in core doctrines.  But whenever possible, Bibilical language is
to be preferred, and the Bible speaks of the covenant of Moses and the covenant
of grace in sharply antithetical terms in a number of places, most prominently
Galatians 4, Jeremiah 31 and 2 Corinthians 3.