GLOBAL WARMING
Apr 21st 2005
Market forces could prove the environment's best friend--if only greenscould learn to love them"THE environmental movement's foundational concepts, its method forframing legislative proposals, and its very institutions are outmoded.Today environmentalism is just another special interest." Those damningwords come not from any industry lobby or right-wing think-tank. Theyare drawn from "The Death of Environmentalism", an influential essaypublished recently by two greens with impeccable credentials. Theyclaim that environmental groups are politically adrift and dreadfullyout of touch.They are right. In America, greens have suffered a string of defeats onhigh-profile issues. They are losing the battle to prevent oil drillingin Alaska's wild lands, and have failed to spark the public'simagination over global warming. Even the stridently ungreen GeorgeBush has failed to galvanise the environmental movement. The solution,
and policies and "energise" ordinary punters with talk ofglobal-warming calamities and a radical "vision of the futurecommensurate with the magnitude of the crisis".Europe\'s green groups, while politically stronger, are also starting tolose their way intellectually. Consider, for example, their invocationof the woolly "precautionary principle" to demonise any complextechnology (next-generation nuclear plants, say, or geneticallymodified crops) that they do not like the look of. A more sensiblegreen analysis of nuclear power would weigh its (very high) economiccosts and (fairly low) safety risks against the important benefit ofgenerating electricity with no greenhouse-gas emissions.SMALL VICTORIES AND BIGGER DEFEATSThe coming into force of the UN\'s Kyoto protocol on climate changemight seem a victory for Europe\'s greens, but it actually masks alarger failure. The most promising aspect of the treaty--its innovativeuse of market-based instruments such as carbon-emissions trading--wasresisted tooth and nail by Europe\'s greens. With courageous exceptions,American green groups also remain deeply suspicious of market forces.If environmental groups continue to reject pragmatic solutions andinstead drift toward Utopian (or dystopian) visions of the future, theywill lose the battle of ideas. And that would be a pity, for the worldwould benefit from having a thoughtful green movement. It would also beironic, because far-reaching advances are already under way in themanagement of the world\'s natural resources--changes that add up to adifferent kind of green revolution. This could yet save the greens (aswell as doing the planet a world of good)."Mandate, regulate, litigate." That has been the green mantra. And itexplains the world\'s top-down, command-and-control approach toenvironmental policymaking. Slowly, this is changing. Yesterday\'s",1]
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argue many elders of the sect, is to step back from day-to-day politicsand policies and "energise" ordinary punters with talk ofglobal-warming calamities and a radical "vision of the futurecommensurate with the magnitude of the crisis".Europe's green groups, while politically stronger, are also starting tolose their way intellectually. Consider, for example, their invocationof the woolly "precautionary principle" to demonise any complextechnology (next-generation nuclear plants, say, or geneticallymodified crops) that they do not like the look of. A more sensiblegreen analysis of nuclear power would weigh its (very high) economiccosts and (fairly low) safety risks against the important benefit ofgenerating electricity with no greenhouse-gas emissions.SMALL VICTORIES AND BIGGER DEFEATSThe coming into force of the UN's Kyoto protocol on climate changemight seem a victory for Europe's greens, but it actually masks alarger failure. The most promising aspect of the treaty--its innovativeuse of market-based instruments such as carbon-emissions trading--wasresisted tooth and nail by Europe's greens. With courageous exceptions,American green groups also remain deeply suspicious of market forces.If environmental groups continue to reject pragmatic solutions andinstead drift toward Utopian (or dystopian) visions of the future, theywill lose the battle of ideas. And that would be a pity, for the worldwould benefit from having a thoughtful green movement. It would also beironic, because far-reaching advances are already under way in themanagement of the world's natural resources--changes that add up to adifferent kind of green revolution. This could yet save the greens (aswell as doing the planet a world of good)."Mandate, regulate, litigate." That has been the green mantra. And itexplains the world's top-down, command-and-control approach toenvironmental policymaking. Slowly, this is changing. Yesterday's
have been driving public policy quietly towards market-basedapproaches. One example lies in the assignment of property rights over"commons", such as fisheries, that are abused because they belong atonce to everyone and no one. Where tradable fishing quotas have beenissued, the result has been a drop in over-fishing. Emissions tradingis also taking off. America led the way with its sulphur-dioxidetrading scheme, and today the EU is pioneering carbon-dioxide tradingwith the (albeit still controversial) goal of slowing down climatechange.These, however, are obvious targets. What is really intriguing areefforts to value previously ignored "ecological services", both basicones such as water filtration and flood prevention, and luxuries suchas preserving wildlife. At the same time, advances in environmentalscience are making those valuation studies more accurate. Marketmechanisms can then be employed to achieve these goals at the lowestcost. Today, countries from Panama to Papua New Guinea areinvestigating ways to price nature in this way (see article[1]).RACHEL CARSON MEETS ADAM SMITHIf this new green revolution is to succeed, however, three things musthappen. The most important is that prices must be set correctly. Thebest way to do this is through liquid markets, as in the case ofemissions trading. Here, politics merely sets the goal. How that goalis achieved is up to the traders.A proper price, however, requires proper information. So the secondgoal must be to provide it. The tendency to regard the environment as a"free good" must be tempered with an understanding of what it does forhumanity and how. Thanks to the recent Millennium Ecosystem Assessmentand the World Bank\'s annual "Little Green Data Book" (released thisweek), that is happening. More work is needed, but thanks totechnologies such as satellite observation, computing and the internet,",1]
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failed hopes, today's heavy costs and tomorrow's demanding ambitionshave been driving public policy quietly towards market-basedapproaches. One example lies in the assignment of property rights over"commons", such as fisheries, that are abused because they belong atonce to everyone and no one. Where tradable fishing quotas have beenissued, the result has been a drop in over-fishing. Emissions tradingis also taking off. America led the way with its sulphur-dioxidetrading scheme, and today the EU is pioneering carbon-dioxide tradingwith the (albeit still controversial) goal of slowing down climatechange.These, however, are obvious targets. What is really intriguing areefforts to value previously ignored "ecological services", both basicones such as water filtration and flood prevention, and luxuries suchas preserving wildlife. At the same time, advances in environmentalscience are making those valuation studies more accurate. Marketmechanisms can then be employed to achieve these goals at the lowestcost. Today, countries from Panama to Papua New Guinea areinvestigating ways to price nature in this way (see article[1]).RACHEL CARSON MEETS ADAM SMITHIf this new green revolution is to succeed, however, three things musthappen. The most important is that prices must be set correctly. Thebest way to do this is through liquid markets, as in the case ofemissions trading. Here, politics merely sets the goal. How that goalis achieved is up to the traders.A proper price, however, requires proper information. So the secondgoal must be to provide it. The tendency to regard the environment as a"free good" must be tempered with an understanding of what it does forhumanity and how. Thanks to the recent Millennium Ecosystem Assessmentand the World Bank's annual "Little Green Data Book" (released thisweek), that is happening. More work is needed, but thanks totechnologies such as satellite observation, computing and the internet,
Which leads naturally to the third goal, the embrace of cost-benefitanalysis. At this, greens roll their eyes, complaining that it reducesnature to dollars and cents. In one sense, they are right. Some thingsin nature are irreplaceable--literally priceless. Even so, it isessential to consider trade-offs when analysing almost all greenproblems. The marginal cost of removing the last 5% of a givenpollutant is often far higher than removing the first 5% or even 50%:for public policy to ignore such facts would be inexcusable.If governments invest seriously in green data acquisition andco-ordination, they will no longer be flying blind. And by advocatingdata-based, analytically rigorous policies rather than pious appeals to"save the planet", the green movement could overcome the scepticism ofthe ordinary voter. It might even move from the fringes of politics tothe middle ground where most voters reside.Whether the big environmental groups join or not, the next greenrevolution is already under way. Rachel Carson, the crusadingjournalist who inspired greens in the 1950s and 60s, is joining handswith Adam Smith, the hero of free-marketeers. The world may yetleapfrog from the dark ages of clumsy, costly, command-and-controlregulations to an enlightened age of informed, innovative,incentive-based greenery.