Monday 29 June 2020 1:03 pm

Greta is wrong, environmentalists need markets to protect the planet

Matthew Lesh is head of research at the Adam Smith Institute

Free market advocates have too often vacated the environmental battlefield. 

And they have been scared off for good reasons. At best, climate politics is dominated by those who see little to no role at all for markets. At worst, environmentalism is a thinly disguised excuse for advocating far-left economic and social policies.

Some have labelled this the “watermelon” phenomenon: green on the outside hiding red on the inside.

Read more: A message from a former Extinction Rebellion activist: Fellow environmentalists, join me in embracing nuclear power

Indeed, Greta Thunberg herself has asserted that “the climate crisis is not just about the environment” and would mean addressing the “crisis of human rights, of justice, and of political will”, adding that “colonial, racist, and patriarchal systems of oppression have created and fueled it”.

Thunberg’s insertion of a medley of left-wing tropes into the climate debate is meaningless as soon as you start to dissect it. But her status and influence, especially among young people, means there is a real risk that an entire generation will take this drivel seriously. This nonsense must be debunked, and an alternative presented.

Thankfully, that alternative does exist.

Market environmentalists seek to harness the ingenuity of humankind to address climate challenges. This is an optimistic form of environmentalism, rejecting the doomsday defeatism that dominates so much of the public debate. Instead of calling for widespread bans, it seeks to take advantage of decentralised decision-making, markets, prices, and property rights to improve our world.

There are two stages key to market environmentalism.

First is letting markets do what markets do best: ensuring efficient use of scarce resources. We live in a world of finite physical things. The challenge is to use those in the best way possible. 

Free markets have consistently proved to be the most “productive” and efficient at resource allocation. That’s because entrepreneurs, motivated by seeking profit, aim to produce more and more with less. 

Despite what you may have been led to believe, the UK reached “peak stuff” around 2001. Since then, we have been using fewer physical resources, in both absolute and per capita terms, to produce more goods and services.

This not only makes us richer, but it means we are putting less pressure onto our natural environment. The market has thus proved the best environmental tool known to humankind.

The second stage is accepting that we do occasionally need the state to allocate property rights for limited resources such as land or carbon. This intervention should not be shunned by free marketeers, but rather appreciated as an effective tool to ensure the proper functioning of the market, in the same way that state provision of the rule of law protects contracts.

Take fisheries as an example. An anarchist approach, with no ownership of stocks, leads to a “tragedy of the commons” situation: overfishing and depletion. In contrast, a market approach, like in Scotland where many waterways are privately owned and rights are protected by the state, avoids overfishing because extinction would reduce future returns. 

Alternatively, there are quasi-property rights systems like New Zealand’s pioneering  “quota management system”. The New Zealand government sets a limit of each fish stock and allocates these to fishers through the Individual Transferable Quotas (ITQs). The ITQ, which can be bought, sold or leased in the same way as traditional property, gives the owner the right to catch a specified quantity of fish.

This, along with other market-enabling reforms over the decades, has enabled the rebuilding of previously depleted inshore fisheries and ensured that catches are limited to levels that can be sustained, to the country’s economic benefit. A broader study of 11,135 fisheries from 1950 to 2003, published in Science Magazine, found that quasi-property rights “catch share programmes, have broadly succeeded to halve, if not reverse, the collapse in fishery stocks”.

The same idea could be applied to carbon, limiting use while encouraging innovative alternatives.

The difference between market environmentalism and the broadstroke anti-capitalism espoused by Thunberg is that the former works. It does not require people and businesses to make overnight changes to their entire way of life, lowering living standards and risking jobs. Rather than trying to destroy our entire socio-economic system, it seeks to achieve meaningful, positive change through established mechanisms, channeling the power of competition and enterprise to drive progress. 

It’s not just an alternative. It is the only proven method to protect our planet for future generations.

Matthew Lesh has written a chapter in Green Market Revolution: How Market Environmentalism Can Protect Nature and Save the World, published today.

Main image credit: Getty

City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.

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