Few people doubt the reality of anthropogenic climate change. The scientific community agrees overwhelmingly that mankind has at least a role in increasing greenhouse gas emissions since the Industrial Revolution, resulting in increasing average temperatures, rising sea levels, and more destructive weather events across the globe. American citizens disagree in ascertaining which actor more effectively mitigates climate change, the government or free market.
One approach asserts that government environmental regulations are the best solution for this grave issue. After all, governments are formed to solve problems which require collective action. However, the government has proven that its environmental policy fails to achieve progress towards a sustainable planet. Instead, the future lies in free markets, entrepreneurial individuals, and bold ideas.
Recently, American citizens have seen that the federal government fails to act effectively on environmental issues. The recent Paris Agreement, largely seen as a landmark consensus on the issue of climate change, inherently contradicts international law in several aspects. Most of the Paris Agreement’s major provisions, including the widely-praised emissions targets, are non-binding. This means that states can choose whether or not to apply them to their policy.
Furthermore, the Paris Agreement also seeks to establish a “climate finance“ regime that mobilizes funds from a variety of sources, including individuals, endowments, and other private parties. The sources of climate finance may indeed be more diverse after Paris. Yet government agencies still distribute the funds, and in the process, fail to consider incentive structures for other states.
In short, many of the goals set forth by parties to the agreement are too ambitious. Weaker parties in the negotiation, most prominently members of the Alliance of Small Island States, pushed for standards which their smaller nations could easily meet. Ultimately, major powers like the U.S. and China conceded to these terms. It is a byword for nations as well as individuals that great ambitions can lead to great failures. The parties to the Paris Agreement will realize this once they attempt to comply with the terms and observe the devastating impact on their economies.
The greatest success of the Paris Agreement was there was one at all. Gathering to discuss essentially unenforceable environmental regulation is not sufficient proof of government’s success in addressing climate change, an issue which is vital to our future.
Carbon taxes are a common example of government mobilization to regulate climate change. Under the guise of a free market approach, pro-regulation environmentalists point to carbon taxes as a solution to climate change. They argue that attaching an additional cost to carbon-producing activities, like travel, agriculture, and manufacturing, will have influence the entire economy to shift toward more environmentally friendly practices, such as solar power for energy generation.
Yet carbon taxes can fail for several reasons. Price signals take a long time to change behavior on a large scale, and demand for activities that increase carbon emissions, like energy production, is inelastic in the short term. Even relatively high carbon tax rates take a decade or more to change behavior, as evidenced in countries that have implemented them.
Furthermore, the international community as a whole must adopt such proposals if they are to be effective. Carbon taxes reduce the economic competitiveness of the regulated country. If one state has a higher carbon tax rate than its neighboring countries, then polluting activities will simply relocate to more tax-friendly regions. International uniformity in energy production also brings its own set of problems concerning feasibility and infringements on state sovereignty.
Carbon taxes are only one example of the failure of government regulation to effectively address climate change. As an example, however, it highlights many of the contingencies which obstruct top-down solutions to this problem.
Additionally, in any situation government action can carry unintended consequences that prove destructive to the desired outcomes. Cap and trade, a hopeful proposal supposedly modeled on the patterns of the free market, has the perverse effect of increasing emissions because of its effect on electricity prices. Today, the plummeting price of oil ensures that pollutant-rich methods of energy production, even after the caps on emissions, are cheaper than investing in cleaner methods.
In strong contrast, free market actors have strong incentives to reduce climate change. Maintaining clearly defined rights for private property allows its owners to care for it as a personal responsibility. If the owner of such property derives profit from the environment, pollution and other undesired environmental outcomes will negatively affect their profits over the long term.
As a result, private parties with vested interests in property outcomes have an incentive to conserve their portion of the environment. If we view the planet as the sum of all property, then assigning property rights to private parties is an effective way to mitigate climate change, abiding by the Coase theorem. Corporations retain vast incentives to preserve their property through sustainability. These measures for sustainability cut costs, reduce risk by stabilizing energy prices and minimizing uncertainty in supply markets, and boost the corporation’s competitiveness. Instead of perceiving corporate actors as necessarily harmful to the natural environment, granting them greater property rights contributes significantly to the mitigation of climate change.
Creating a sustainable environment is a concern for all who live on this planet. We must assume that those employed in environmental policy, whether as government agents or private consultants, have a genuine concern for humanity’s well-being.
History tells us, however, that government solutions fail to effectively solve the problem of environmental degradation which is facing our society. We must look to the principles of the free market for solutions — to ideals that have furthered human flourishing since their conception.
—Brennan Mancil is a junior studying political science and international affairs. He is a guest contributor to THE ARCH CONSERVATIVE.
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