Environmentalism Corners the Market


Last fall the media paraded a number of pressing ecocrises—the greenhouse effect, ozone depletion, dirty syringes on the beach—across the electoral stage in a clamorous attempt to make the presidential contest a referendum on Reagan's environmental legacy. The people voted. Bush won.

But rather than exiting toward the traditional stage left, environmental issues retained the postelection spotlight. Debate has simply shifted from crisis to solution, with some surprising champions promoting the free market as a mechanism for "cleaning up." For instance, Sens. Tim Wirth (D–Colo.) and John Heinz (R–Pa.)—neither of whom has amassed a profound pro-market record in Congress—sponsored a study entitled "Harnessing Market Forces to Protect Our Environment: Initiatives for the New President."

The study recommends that many forms of regulation and pollution taxes be replaced with tradable permits defining how much the bearer can pollute. Long advocated by free-marketeers, the permit system would specify how clean the environment is to be without mandating particular mechanisms, thereby giving businesses the incentive to develop "clean" technologies that boost productivity while minimizing pollution.

By advocating the permit alternative, Wirth and Heinz are challenging what Harvey Alter of the U.S. Chamber of Commerce calls Congress's "mistaken belief that you have to beat on people to get anything done." Merging environmentalism and market incentives, Wirth and Heinz say, would produce a more certain regulatory system (taxes are notoriously unpredictable) that gets more protection bang for the buck while avoiding additional burdens on American businesses or the federal deficit.

The study also recommends ending government subsidies that encourage pollution in streams and on public lands and reducing state and federal barriers to the development of water markets. "By allowing free markets to arise for water rights, voluntary exchanges can take place in which both parties are made better off," the study says. Water markets "promote more efficient allocation of scarce water resources and curb the perceived need for additional (expensive and environmentally disruptive) water supply projects."

The study is not devoid of more-traditional congressional approaches, including higher fuel-efficiency standards for automobiles, federal management of an expanded strategic petroleum reserve, and above all, a call for more "study" by the Environmental Protection Agency. Still, the Wirth and Heinz effort represents a major shift in establishment thinking by asserting that economic growth and a clean environment are not only compatible but intimately linked.

Given the public's increased concern about the environment—documented by polls taken before and after election day—the senators are surely mixing a little politics in with their policy analysis. As their study remarks, "new policies which deliver improved environmental quality at reasonable cost and which are consistent with American traditions favoring volunteerism and disliking government coercion should have a promising future." As will, no doubt, the politicians advancing them.