Got an Environmental Catastrophe?

Blame the government.


While the oil spill in the Gulf of Mexico was dominating summer headlines, a July 16 article in Foreign Policy listed five ongoing ecological catastrophes around the world that hadn't attracted as much attention. The article didn't mention it, but all five had something in common with one another and with BP's oil leak as well: Each was rooted in public policies that encouraged environmentally risky behavior.

That shouldn't come as a surprise. The first question you should ask when you see environmental misbehavior is: What is the government doing that encourages people to act that way? 

The annual Economic Freedom Index put together by The Wall Street Journal and the Heritage Foundation is a good shorthand indicator of bad government policies; so is the World Bank's Rule of Law Index. With those two measurements in hand, let's briefly consider each of the catastrophes.

First on the Foreign Policy's list: five decades of Nigerian oil spills. On the economic freedom index, Nigeria ranks 106th out of 183 countries; it is described as "mostly unfree." On the rule of law index, the country garners a pitiful score of 11 out of a possible 100.

The Nigerian government owns all of the country's petroleum resources and works in partnership with Western oil companies to exploit them. Since 1966 some 546 million gallons of that oil have been spilled—the equivalent of an Exxon Valdez disaster every year.

Oil accounts for 90 percent of Nigeria's exports and 80 percent of the government's revenues. Naturally, the government is more interested in maximizing revenues than it is in reducing pollution. In fact, the government has been so assiduously draining the Nigerian National Petroleum Company of revenues that the company reportedly is now insolvent. Foreign Policy notes that the number and severity of spills may increase as oil exploration extends into more remote and difficult terrain.

The second disaster on the list is a massive collection of coal-seam fires in China. China ranks 140th on the economic freedom index—another "mostly unfree" rating—and scores 45 out of 100 on the rule of law index.

Foreign Policy cites 62 underground coal fires that have been burning since the '60s. That was when the coal industry was entirely run by the country's communist government; as part of its drive to develop its "socialist market economy," the Chinese government now leases some mineral rights to private companies. The underground fires burn up more than 20 million tons of coal annually, releasing 2 percent to 3 percent of the world's total greenhouse gases produced by fossil fuels.

The third ecological calamity is deforestation in Haiti. With a rank of 141, Haiti comes just after China on the economic freedom index. It lands below even Nigeria on the rule of law index, earning a score of 6 out of 100.

Haiti is 98 percent deforested, a condition that causes considerable erosion and boosts flood damage when hurricanes strike. Foreign Policy points to the next-door Dominican Republic as a success story because it banned cutting down trees. But the real root of the problem is a lack of secure property rights. Less than 5 percent of Haiti's land is accounted for in the public land records. Without those rights, owners cannot be sure that they will be able to reap the rewards from investing in reforestation or other conservation efforts. On the Property Rights Index, put out annually by a consortium of think tanks organized as the Property Rights Alliance, Haiti scored the same as communist Cuba, with 10 out of 100 possible points. The Dominican Republic did a bit better, at 30 out of 100.

The fourth eco-catastrophe is the shrinking Aral Sea in central Asia. Since 1960 the world's fourth largest lake has shrunk by about 70 percent, leaving former port cities and fishing villages high and dry. This disaster is entirely the result of Soviet central planning, under which the rivers that sustained the Aral Sea were diverted to massive irrigation projects that aimed to create a cotton industry in the deserts of Uzbekistan and Kazakhstan. The economic freedom index rankings for Kazakhstan and Uzbekistan are 82 and 158, respectively.

Uzbekistan scores a miserable 10 points out of 100 on the rule of law index. Kazakhstan's score is 24.

The last disaster highlighted by Foreign Policy is the Great Pacific Garbage Patch. The currents of the North Pacific Gyre collect a huge amount of plastic waste from East Asia and the West Coast of the U.S., funneling it into an area estimated to be somewhere between the size of Texas and the size of the lower 48 states. Over time, wave action and sunlight have been breaking up the plastic into ever smaller bits that float in the top 100 feet of ocean. Marine creatures are harmed when they mistake the plastic bits for food. There is a possibility that toxins released by the plastics are accumulating in the food chain, eventually reaching consumers on land.

The Garbage Patch is a classic example of the tragedy of the commons. If there is no clear ownership of a natural resource, the resource's users will overexploit it. In this case, no one owns the ocean, and therefore no one is responsible for protecting it. This same tragic dynamic of overuse and overharvesting operates in other open-access commons, including rivers, airsheds, fisheries, and tropical forests.

And the BP oil spill? It involved a resource owned by the U.S. government, which set the rules for how it would be managed and then enforced them with notorious ineptitude. BP's risky behavior also may have been encouraged by a paltry, congressionally mandated $75 million cap on liability for environmental and economic damages resulting from offshore drilling spills. And the Energy Policy Act of 2005 strongly encourages deep water oil exploration by offering a graduated suspension of royalties paid to the federal government. The deeper the water, the greater the number of barrels exempt from royalties.

In each of these disasters we see defective or nonexistent property rights. In the case of the oil spills in Nigeria and the Gulf of Mexico, the resource was owned by the state. The Chinese coal seam fires and the draining of the Aral Sea took place under communist regimes where private property was outlawed. In the sad case of Haiti, a lack of secure property rights means that few people have an incentive to reforest land. And with no ownership in the ocean, the water is treated as a global dump. 

When, by contrast, property rights are well established, resource exploiters have an incentive to behave responsibly—and if they don't, the rest of us can use our property rights to hold them responsible for any damage they might do.