Free-market Environmentalism – Creating Sustainable Incentives

By Brent Fewell

Great article today by Brad Plumer of WaPo regarding my friend, Jonathan Adler, arguing why conservatives can also be environmentalists.  Adler is a strong proponent of using private property rights to create the right incentives for promoting efficient and cost-effective imagesCA9LY8G3conservation – taking a more libertarian approach as I discussed previously here.   Adler has written extensively on free-market environmentalism.   On climate change, something which many conservatives respond to about as well as swallowing a hair ball, Adler is fully consistent in his argument.

[I]f you take property rights seriously, then climate change is a problem even if you don’t believe in the apocalyptic climate-change scenarios.  Even most skeptics believe, for instance, that there will be some degree of sea-level rise — they might not think it’s catastrophic, but they’ll concede it exists.  And over hundreds of years of common-law tradition, we’ve recognized that flooding a neighbor’s land is a property right’s violation.

So if there’s a conservative commitment to property rights, you can’t ignore that by talking about Al Gore or saying that it’s inefficient or too costly to deal with it. Folks on the right didn’t say it was wrong for New London to take [Susette] Kelo’s land because it was inefficient. It was wrong because it was her land!

On climate change policy,

I’m not a fan of regulating greenhouse gases under the Clean Air Act, I don’t think that’s particularly effective or efficient. But I don’t see the argument for doing nothing. I don’t think that’s consistent with conservative principles. So I’ve done papers on adaptation and how do we get the degree of energy innovation that many people think will be necessary. And most controversially, I’ve argued that a revenue-neutral carbon tax would be a good idea.

As Adler points out, to often conservatives have a knee-jerk reaction to all things environmental, because of their dislike of Al Gore or radical environmentalists whose tactics they perceive as threatening conservative ideals, such as limited government.

Where conservatives need to do more soul-searching and acknowledge government’s proper and necessary role is where market forces fail and externalities result in environmental degradation.  Large scale environmental problems, such as water pollution and hypoxic conditions in the Chesapeake Bay and the Gulf of Mexico from excess nutrients is a perfect example.  And if indeed anthropogenically produced climate change is being caused by excessive greenhouse gas emissions, this too is an example of a failure in market forces.  These examples of environmental degradation reflect the space where government can and must play a signficant role in correcting failed market signals and forces.  This doesn’t mean, however, that more top-down traditional command-and-control regulations is the correct response.  Rather, through wise policies, the government can fashion regulations that promote market forces, thereby engendering strong incentives to respond to and correct market failures.  A great article here by Environmental Defense Fund explaining how market forces helped save our forests from acid rain.  Also, nutrient credit trading is something I’ve long advocated to help accelerate the cleanup of hypoxic waters – trading has also been supported by environmental groups like WRI, CBF, and EDF, among many others.  Also, lots of good work by groups like Forest Trends to foster market-based ecosystem services to promote more conservation (cleaner water, cleaner air, species and habitat protection) where market forces have been relatively quiet or non-existent to date.  Mitigation banking, another market-based approach, has been successful in helping to restore lost and degraded wetlands.

However, even with emerging environmental markets, the government plays a critical role through informing these markets with good science (e.g., defining the “playing field” with pollution budgets such as TMDLs for impaired waters), overseeing that market mechanisms are working correctly, ensuring transparency in market transactions, making policy and regulatory adjustments when needed, policing against market cheats, and ultimately ensuring that the environmental problem is being solved.

As always, welcome the thoughts of others.