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Free Market Environmentalism Is a Win-Win for Everyone

  • Terry Anderson
  • When Donald Leal and I wrote our book, Free Market Environmentalism, in 1991, a reviewer said “the title is an oxymoron and the authors are the moron part.” At the time, nearly everyone considered markets the enemy of the environment.

    But as Bob Dylan put it, “the times they are a-changing.” In the past decade free-market environmentalism has taken a prominent place on the policy stage. Today there is hardly an environmentalist who hasn’t heard of the concept and most embrace the idea, at least on a limited basis.

    So what is this new approach to solving environmental problems? In a nutshell, free-market environmentalism harnesses markets, contracts and property rights to turn the environment from a liability into an asset.

    Consider applying this to the Endangered Species Act, up for reauthorization by Congress. There are now more than 1,200 species listed as threatened or endangered, but only 15 have been delisted due to recovery. In addition to the bureaucratic incentives to keep species listed, the act has done little to provide incentives for land managers, public or private, to improve habitat.

    If an endangered species is found on public land, there will be a management gridlock. With the spotted owl, for example, millions of acres of timber in the Pacific Northwest were put off limits to loggers. Especially because forest fires have become more prevalent, few would argue that no management is good management.

    If endangered species put private land off limits to logging, the landowner can bear significant costs and therefore is likely to take evasive action. In the southeastern United States, the red-cockaded woodpecker is the endangered species that has become the enemy of the landowner who cannot cut his trees if the woodpecker is found on his property. The result is that timber is cut sooner than it otherwise would be just to make sure woodpeckers don’t take up residence. One study found that private land in the vicinity of abundant woodpecker colonies is harvested at 17 years of age compared to 57 years of age if there are no colonies in the vicinity. Because the woodpecker is a liability, landowners, like any rational investor, try to minimize them.

    Free-market environmentalism recognizes property rights as the key to resource stewardship. Rather than penalizing the landowner who promotes wildlife, this approach seeks to reward him. Colorado’s “ranching for wildlife” program is an excellent example. Under this program, landowners willing to work with wildlife officials to improve habitat can get special hunting permits that can be sold at the going market price. Not surprisingly, participants are eager to improve habitat and encourage hunting. As one rancher puts it, “If it pays, it stays.”

    In the case of red-cockaded woodpeckers, the federal government now allows landowners to receive tradeable credits for newly established woodpecker colonies. Hence, companies such as International Paper, one of the largest private landowners in the United States, manage its timber to encourage woodpeckers and sell the credits they receive for hundreds of thousands of dollars to landowners who want to develop their land and potentially destroy habitat in the process. As one author puts it, now there is “a bull market in woodpeckers.” Hopefully, this is the kind of innovative thinking that will be incorporated into revision of the ESA.

    Throughout the West, environmentalists wanting more water in streams for fish, wildlife and recreation are discovering the value of markets. Following the lead of the Oregon Water Trust, groups have formed in Washington and Montana for the purpose of purchasing or leasing water rights from farmers and leaving the water instream. Rather than trying to pass laws that require minimum flows and deprive farmers of their lifeblood, environmental entrepreneurs are becoming the “green thumb” of Adam Smith”s invisible hand.

    No one understood the importance of making the environment an asset rather than a liability better than the great conservation leader, Aldo Leopold. As he put it, “conservation will ultimately boil down to rewarding the private landowner who conserves the public interest.” Not only does free-market environmentalism work to preserve environmental assets, it reduces the wear and tear on the social fabric by substituting cooperation for acrimony. This is the future of environmentalism.

    This piece originally appeared in the Colorado Springs Gazette.

    Written By
    • Terry Anderson

      Terry L. Anderson is the former president and executive director of PERC, and the John and Jean De Nault Senior Fellow at the Hoover Institution, Stanford University.

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