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E-mail this Environmental economics Rescuing environmentalism Apr 21st 2005 From The Economist print edition Market forces could prove the environment's best friendif only greens co uld learn to love them THE environmental movement's foundational concepts, its method for frami ng legislative proposals, and its very institutions are outmoded. Today environmentalism is just another special interest. Those damning words come not from any industry lobby or right-wing think-tank. They are draw n from The Death of Environmentalism, an influential essay published r ecently by two greens with impeccable credentials. They claim that envir onmental groups are politically adrift and dreadfully out of touch. In America, greens have suffered a string of defeats on h igh-profile issues. They are losing the battle to prevent oil drilling i n Alaska's wild lands, and have failed to spark the public's imagination over global warming. Even the stridently ungreen George Bush has failed to galvanise the environmental movement. The solution, argue many elder s of the sect, is to step back from day-to-day politics and policies and energise ordinary punters with talk of global-warming calamities and a radical vision of the future commensurate with the magnitude of the c risis.
Europe's green groups, while politically stronger, are also starting to l ose their way intellectually. Consider, for example, their invocation of the woolly precautionary principle to demonise any complex technology (next-generation nuclear plants, say, or genetically modified crops) th at they do not like the look of. A more sensible green analysis of nucle ar power would weigh its (very high) economic costs and (fairly low) saf ety risks against the important benefit of generating electricity with n o greenhouse-gas emissions. Small victories and bigger defeats The coming into force of the UN's Kyoto protocol on climate change might seem a victory for Europe's greens, but it actually masks a larger failu re. The most promising aspect of the treatyits innovative use of market -based instruments such as carbon-emissions tradingwas resisted tooth a nd nail by Europe's greens. With courageous exceptions, American green g roups also remain deeply suspicious of market forces. If environmental groups continue to reject pragmatic solutions and instea d drift toward Utopian (or dystopian) visions of the future, they will l ose the battle of ideas. And that would be a pity, for the world would b enefit from having a thoughtful green movement. It would also be ironic, because far-reaching advances are already under way in the management o f the world's natural resourceschanges that add up to a different kind of green revolution. This could yet save the greens (as well as doing th e planet a world of good). And it exp lains the world's top-down, command-and-control approach to environmenta l policymaking. Yesterday's failed hopes, toda y's heavy costs and tomorrow's demanding ambitions have been driving pub lic policy quietly towards market-based approaches. One example lies in the assignment of property rights over commons, such as fisheries, tha t are abused because they belong at once to everyone and no one. Where t radable fishing quotas have been issued, the result has been a drop in o ver-fishing. America led the way w ith its sulphur-dioxide trading scheme, and today the EU is pioneering c arbon-dioxide trading with the (albeit still controversial) goal of slow ing down climate change. What is really intriguing are effort s to value previously ignored ecological services, both basic ones suc h as water filtration and flood prevention, and luxuries such as preserv ing wildlife. At the same time, advances in environmental science are ma king those valuation studies more accurate. Market mechanisms can then b e employed to achieve these goals at the lowest cost.
Rachel Carson meets Adam Smith If this new green revolution is to succeed, however, three things must ha ppen. The most important is that prices must be set correctly. The best way to do this is through liquid markets, as in the case of emissions tr ading. The tendency to regard the environment as a free good must be tempered with an understanding of what it does for humani ty and how. Thanks to the recent Millennium Ecosystem Assessment and the World Bank's annual Little Green Data Book (released this week), that is happening. More work is needed, but thanks to technologies such as s atellite observation, computing and the internet, green accounting is ge tting cheaper and easier. Which leads naturally to the third goal, the embrace of cost-benefit anal ysis. At this, greens roll their eyes, complaining that it reduces natur e to dollars and cents. Some things in nat ure are irreplaceableliterally priceless. Even so, it is essential to c onsider trade-offs when analysing almost all green problems. The margina l cost of removing the last 5% of a given pollutant 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 and co-ordinati on, they will no longer be flying blind. And by advocating data-based, a nalytically rigorous policies rather than pious appeals to save the pla net, the green movement could overcome the scepticism of the ordinary v oter. It might even move from the fringes of politics to the middle grou nd where most voters reside. Whether the big environmental groups join or not, the next green revoluti on is already under way. Rachel Carson, the crusading journalist who ins pired greens in the 1950s and 60s, is joining hands with Adam Smith, the hero of free-marketeers. The world may yet leapfrog from the dark ages of clumsy, costly, command-and-control regulations to an enlightened age of informed, innovative, incentive-based greenery.
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