Global Warming: A Dialogue

Should victims receive compensation?

This discussion is an edited version of comments made in December 2004 on the Free Market Environmentalism (FME) Roundtable list-serve. Jonathan Adler prodded his colleagues to forget, for just a minute, the debate over the impacts of warmer temperatures or whether humans are contributing or not. He asked the list-serve members to assume that burning fossil fuel will warm the earth's atmosphere. Even if some benefits occur, this warming will cause some harm to some people.

Then he asked: If one takes a position of principle, do those who are harmed by global warming have the right to compensation from those who contributed to it? This evoked a discussion.

 

Participants are listed below in order of their appearance. All discussants are pictured, except for Jane Shaw, who thought that one photograph (see p. 22) was enough.

 

Jonathan H. Adler, Associate Professor and Associate Director of the Center for Business Law and Regulation, Case Western Reserve University School of Law, Cleveland

 

Steven F. Hayward., F. K. Weyerhaeuser Fellow, American Enterprise Institute, Washington, D.C., and Senior Fellow, Pacific Research Institute, San Francisco

 

Robert L. Bradley Jr., President, Institute for Energy Research, Houston

 

Roy E. Cordato, Vice President for Research, John Locke Foundation, Raleigh, North Carolina

 

Jane S. Shaw, Senior Fellow, PERC, Bozeman, Montana

 

Julian Morris, Executive Director, International Policy Network, London

 

Kenneth W. Chilton, Director, Institute for Study of Economics and the Environment, Lindenwood University, St. Charles, Missouri

 

Jonathan Adler: If one accepts conservative predictions about climate change such as those championed by many global warming skeptics that there will be a modest warming over the next century and it will produce some costs, as well as substantial benefits-is the proper global response to "do nothing"?

 

Even if one believes that the benefits of such climate change may exceed the costs- or merely that the costs of climate change are far less than the costs of trying to stop it—the distribution of climate changes impacts will not be uniform. Temperate regions may be significant winners and tropical areas significant losers. If this is the case, do those nations most "responsible" for the warming have any obligation to compensate the losers?

 

If the industrialized nations, which are concentrated in temperate regions, are the dominant contributors to climatic changes, are not these nations (or industries, or wherever one wishes to assign responsibility) guilty of violating the property rights of those in the tropical world? If the land of a farmer in Bangladesh is flooded, due in part to human-induced climate change, is he any less entitled to redress than the individual who has his land flooded by his neighbor's land-use changes? There is a long-standing cause of action under the common law for the latter. Is the former any less worthy of redress?

 

More broadly, if we accept a property rights framework, as free market environmentalists do, must we not accept the fact that even noncatastrophic climate change to which human activity contributes produces property rights violations? In a perfect world, should not those whose property rights are violated have a remedy?

 

I recognize that implementation and public choice considerations may make this choice moot. There is no global institution capable of administering such a rule, and we would all rightly fear any institution that had such power. Nor should we have any confidence that current multinational institutions or national governments would handle compensation in a just or efficient manner. My question is, what would be the best normative resolution of such concerns, assuming away such considerations?

 

Steven F. Hayward: I want to second Jonathan's query. With so many past predictions of the eco-apocalypse, deep skepticism is the sensible default position on global warming. But I am not sure I am comfortable with it. Jonathan's property rights query is a good first step to thinking through and articulating a serious position.

 

Robert L. Bradley Jr.: The fact that there may be some regional losers is a powerful argument for open borders so that folks can travel to the best climates, seasonally or permanently.

 

Adler: Open borders certainly make it easier for those affected to escape the costs of climate change, but they don't address the property rights concern. If one takes a principled property rights position, it seems inescapable to me that such regional losers have had their property rights violated. In an ideal world, they would have a remedy.

 

What makes this particularly difficult is that for a property rights violation to exist, climate change need not be catastrophic, nor even produce more costs than benefits. Rather, all it needs to do is impose identifiable costs on those who have not consented to the imposition of such costs- and even some of the most ardent skeptics expect that such a scenario is likely.

 

Furthermore, the costs of preventing climate change are not particularly relevant from a property rights perspective. If company A pollutes in such a way as to harm person B, it is irrelevant that the costs to person B are less than the costs of controlling the pollution. If B's property rights have been violated, B is entitled to injunctive relief and compensation for the harm incurred. If A feels this is too costly, A can seek to negotiate a settlement with B, but that should not affect the adjudication of a potential dispute.

 

Roy E. Cordato: As libertarians, it seems to me that what we should do, in the famous words of the late Edwin Starr, is "absolutely nothin'." It seems to me that there is very little that can be done in terms of real-world CO2 reduction that could significantly alter the climate. Plus all this cost/benefit talk is mumbo jumbo anyway. If an aggrieved party can figure out a way to sue someone for damages and get it to stick, then go for it. Let the common law process figure out how damages should be allocated and who should get paid what and by whom. To do anything other than this takes us right back to F. A. Hayek's pretense of knowledge (the idea that policy makers assume or "pretend" to have information that, in a complex society, they cannot possibly obtain).

 

Adler: I think the "let someone file a claim and let the common law sort it out" is a bit of a cop-out. I say this because the common law as it stands today, at least in the United States, is not particularly protective of property rights, either for plaintiffs or defendants.

 

Let me cite just a few ways in which the common law-as it stands today—is less than fully protective of property rights. First, in the environmental context, almost all nuisances with any interstate component are preempted by federal law, and climate change claims would almost certainly fall into this set. Second, in many states, additional types of environmental claims are preempted by state law. So there is often no remedy for certain property rights violations in court because of government action. Property rights advocates typically condemn this state of affairs rather than accept it. Third, in most states, courts have shifted away from property rules toward liability rules. As a result, the preferred remedy today is often damages, rather than an injunction. The polluter effectively gets to conscript a pollution easement across the plaintiff 's land at a "fair" price determined by the courts.

 

In short, I see little reason why an advocate of property rights would defend the common law as it exists in the United States today (as opposed to how the common law once existed and, I hope, will exist again). Common law principles are worth defending; the practice of American courts circa 2004 is not. It also seems to me that a defender of property rights would want—at least in principle, if not in practice—for there to be a potential for relief across international boundaries. That is, if there was a global classical liberal legal order (hah!), then someone in Bangladesh could sue companies in developed nations if the productivity of their agricultural land was harmed.

 

The "let the courts sort it out" approach may be justified on pragmatic grounds, but I do not think it is grounded in property rights principles.

 

Jane S. Shaw: Some harms aren't actionable. If you build a supermarket next to my mom-and-pop grocery and my sales suffer, can I sue you for damages? No. You did something that harmed me, but you did nothing illegal. That's life. Is global warming necessarily different?

 

Adler: Yes, it is different insofar as there are physical changes to my land. If you fill a wetland upstream from me, and my land floods, that is actionable under the common law. If you live on "lower" land than I do and you remove lateral support from my land, that can be actionable. If your factory emits substances that harm my crops, that is actionable. Therefore, at least as an abstract matter (setting aside questions of jurisdiction, etc.), it would seem that insofar as climate change produces such effects in parts of the world-a likelihood that even most skeptics accept for some portions of the world-there should be a claim. In each of these examples, there is a property rights violation and there is harm. What I want to know is why global warming is any different.

 

Cordato: Jane, I think this is exactly why a property rights violation and not harm has to be the deciding factor. Harm is a necessary but not sufficient condition for compensation. In some sense we are all harmed in the marketplace when someone we would like to trade with decides that he is not willing to. Someone competes away our customers. Harm? Yes. Rights violation? No. Therefore, no compensation.

 

The key question is whether global warming entails a rights violation. That's why I suggest that if someone can make a case that is deemed courtworthy then he should go for it and let the common law process sort the issue out.

 

Adler: My question to Roy is this: Setting aside the pragmatic questions of how one would sue, do you believe a) that property rights would be violated if human contributions to climate change produce any negative effects for property owners in developing nations? and b) that injunctive relief should be as available here as in any other context? As a practical matter, filing such a suit would be tremendously difficult, but I never thought that such practical considerations would be dispositive of the normative concern. Indeed, I am surprised to hear defenders of property rights suggest that whether contemporary courts recognize the claim should settle the matter. After all, these are the same courts that long ago departed from common law principles and gutted the property rights protections written into the U.S. Constitution, yet property rights advocates rarely defend—let alone accept—either result.

 

Julian Morris: Roy's spot on. It's true that some harms are not actionable. But the law of nuisance at least traditionally was clear: Harms were actionable if damage was done either to property itself or to the enjoyment of that property. Notwithstanding the recent invasion of nuisance by negligence standards and a balancing test, this principle remains. The reason that a person with a grocery store can't sue someone who builds a bigger grocery store and takes its customers away is that there has been no objective harm done to the property or the enjoyment of that property.

 

It seems to me that the fundamental principle should remain that a person who has been harmed by a climate event (or series of events) should have an actionable claim against the person (or persons) who caused the event. Now, this might in fact be quite a simple process for climate events caused by an identifiable act or series of acts by a single party or small number of parties, the effect of which is quite immediate and follows directly from the action of the liable parties. This might apply, for example, to a rainstorm/ hailstorm that is caused (intentionally or otherwise) by someone seeding clouds and that results, say, in broken windows and damage to cars.

However, when it comes to global climate change a number of more substantial problems arise. First, if it turns out that emissions of greenhouse gases are the major source of change, the number of potentially liable parties would be very large indeed, making the apportionment of damages difficult and costly. Second, the events that caused the harm are likely to be separated from the actual harm by a very long period, leaving ample room for intervening acts to influence the effect of the act allegedly giving rise to liability.

Let me illustrate this point. Governments around the world currently prevent the creation of wealth and undermine technological progress on a grand scale, thus hindering adaptive responses to the consequences of climate change, whatever its cause. Such harmful government intervention is, I would argue, a form of novus actus interveniens and should be considered the primary cause of the harm that results to people affected by droughts, floods, storms, etc., both now and in the future, where there is no other direct and immediate cause.

Consider Bangladesh, which experiences frequent floods. In part these floods happen because Bangladesh is a massive delta, in part because its government prevents the people of Bangladesh from owning property and otherwise engaging in wealth-creating activities. Contrast Bangladesh with Holland, a country that is largely below sea level but rarely suffers from floods because the inhabitants have built systems of canals and dikes.

If climate change makes these regular inundations worse, the harm that results can largely be blamed on the Bangladeshi government. Why? Because if the government were to hinder entrepreneurial activities less, the people could become wealthy and would develop or purchase technologies that enabled them better to cope with the inundations in general, regardless of the frequency.

Cordato: Jonathan, my point to Jane was that I don't know to what extent a property rights violation is occurring. Isn't this part of the case that would have to be made? If it is determined that rights have been violated and if the proper causal relationship is established, given traditional standards of proof, then I think that at the very least compensation would be due. (By the way, I am not sure what it would mean to violate property rights in countries where there is no real private property rights protection in the first place. Their own states are the primary violators of rights. To what extent do meaningful property rights have to be in place before we talk about property rights violations?)

Attorneys general are currently suing electric utilities for contributing to global warming through emissions of carbon dioxide. Are they identifying specific victims in the here and now, not theoretically in the future, who have suffered harm from global warming? Can they show, using a preponderance of the evidence standard, that the marginal amount of warming that caused the harm was human-induced?

If all this is the case then I think a suit is in order, but it should be pursued by the victims, not the state. I also think it would be well within the rights of gas station owners, charcoal producers, electricity generators and all other producers of greenhouse-gas-emitting products to refuse to sell to the plaintiffs. If the plaintiffs are going to complain about the effects of the emissions then they should be happy to live without the services provided by the offending products. I think that this is the kind of dynamic that a free society would generate.

Kenneth W. Chilton: Jonathan, when will the developing nations compensate the developed nations for "free-riding" on their tremendous contributions in the area of medicine and agriculture? What is an extra ten years of life, or a far healthier life, worth to residents of these nations? The value of these innovations certainly isn't captured in the subsidized prices that poor countries pay for them.

Adler: I believe this is a relevant issue from a net-total-welfare standpoint, but it doesn't address the property rights question. I benefit from having rich neighbors- wealthy neighborhoods often have less crime, better schools, more amenities, etc.-but such benefits neither entitle my neighbors to a) charge me for the benefits I receive, nor b) pollute my land. All their wealth entitles them to is a greater opportunity to seek to purchase the right to use my land for their purposes, and perhaps some consideration from me as to whether I would rather vindicate my property rights or continue to have wealthy neighbors.

To put it another way, if a factory causes significant physical changes to my land to which I object, it does not matter if the factory is providing other benefits to me or the community at large. I have a right not to be subject to such impacts and I am entitled to a remedy. This is so even if the costs to me of the factory's pollution are significantly less than the benefits that the factory provides to my community and even to me. My question is this: Why don't we apply this framework to global warming—at least as a theoretical matter—when thinking about the "first-best" approach to the issue? Would this mean that developing countries should stop all of their greenhouse gas emissions forthwith? Not necessarily. It might suggest that indemnification -guaranteed compensation for actual harm caused- is a sounder and morally preferable strategy to prevention. Perhaps it would be better for industrialized nations to help Bangladesh build dikes than to sign emission-reduction treaties. My point is that we can't know what approach is most consistent with a property rights framework until we ask the question.

Editor's note: The FME Roundtable list-serve accepts serious individuals who value free markets and are concerned about environmental issues. Contact Colleen Lane at perc@perc.org.
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