Celebrate Earth Day: Convert to Free Market Environmentalism

In contrast, standard environmentalists believe that regulation is a necessary remedy for markets’ failure to provide enough environmental amenity.

Economic Growth

Free-market environmentalists do not believe economic growth is destructive. First, the increased income that is generated when more goods and services are produced drives a demand for more environmental quality. Once per capita incomes cover basic food and shelter requirements, cleaner air and water become priorities. This explains why some of the richest countries in the world, like Canada and the US, are also the cleanest. Second, economic growth stimulates innovation. Since newer technology tends to be both more efficient and cleaner, it improves environmental quality.

According to the World Bank, pollution rates from particulate matter and sulphur dioxide begin to fall at per capita incomes of US$3,280 and US$3,670 respectively. Access to safe drinking water and the availability of sanitation improve almost immediately as incomes rise, and most indicators of pollution start to fall before a country reaches a per capita income of US$8,000.

Rather than focusing on the big picture (higher income countries have less pollution), standard environmentalists call our attention to individual examples of the trade-off between development and environmental quality. But given that humans populate the earth, the choice is not between a pristine environment if economic growth is controlled and a polluted one if it is not. Capitalist economies, which have higher levels of private ownership and tend to experience higher levels of economic growth, will not deliver a pristine environmental utopia with no pollution but they are capable of delivering more environmental amenity than socialist economies. This is the foundation of free-market environmentalism.

Free Trade

As recent protests demonstrate, most standard environmentalists oppose free trade. But free trade increases specialization, which ultimately leads to economic growth and the increases in income proven to create a demand for more environmental quality. Trade also forces industries to be more competitive than they otherwise might be, and accelerates the adoption of newer, cleaner technology.

It is a fallacy that trade agreements prevent countries from protecting their environments. Trade agreements permit restrictions that are necessary to protect human and animal health. But the restrictions must be based on sound scientific evidence and apply to both importers and domestic producers—measures necessary to prevent disguised protectionism.

Property Rights versus Regulation

Free-market environmentalists believe that well-defined property rights are a powerful tool for protecting the environment for two reasons: Ownership creates stewardship incentives and gives individuals the power to fight polluters. In contrast to this approach, standard environmentalists put their faith in government regulations.

Private property rights make it possible for environmental groups such as the Nature Conservancy and Ducks Unlimited to protect habitat by purchasing land and establishing wildlife preserves.

The easiest way to understand the power of property rights is to look at what happens when they are absent. Many fisheries, for example, are treated like common property—fish do not belong to anyone until they are caught. This leads to over-fishing. Although each fisherman would like the fishery to be healthy in the future, their short term incentives are at odds with this desire. They know that fish they do not catch today will be caught by someone else. Not surprisingly, this has led to the collapse of many fisheries around the world.

The second important feature of ownership is that, under common law, trespass, nuisance and riparian rights give people the ability to fight polluters. Where governments have not usurped these rights with statutes and regulations, they are powerful tools for protecting the environment.

This is not to say that free market environmentalists do not believe in any regulations. Governments do have a critical role to play in the definition and enforcement of property rights. Regulations may also have a role to play when property rights are as yet difficult or impossible to assign—for example in the case of air quality.

The Future of Environmentalism

The debate about how best to protect the environment is only just beginning. As incomes around the world continue to increase, so too will the demand for environmental protection. To date, standard environmental thinking has dominated the debate. But free-market environmentalism is gaining ground. People are beginning to understand that while markets are not perfect, neither are governments. They are beginning to recognize that markets can provide incentives for stewardship. As in other areas, the competition between these two ideologies is not to be feared. It can help generate thoughtful debate about how best to protect the environment.