Woods, water and farmland protected by a paid conservation easement: nature kept through a contract and a price.
USDAgov, Conservation Easements (20201118-NRCS-LSC-0014), 2020EcoAxes / Included ideologies / Liberal, reformist and market environmentalism
Policy approachMarket Environmentalism
The approach that uses market tools to reach environmental goals at the lowest cost: tradeable permits, quotas, payments for ecosystem services, privatised water and carbon markets, all inside rules set by the state. It treats the market as the preferred instrument of environmental policy instead of its enemy. It rests on environmental economics, the discipline that puts prices on pollution and on ecosystem services. Its property-rights wing, free-market environmentalism, goes further and makes secure, tradeable rights the main tool in place of regulation.
- Key figures
- Tom Tietenberg, Robert Stavins, John Dales, Karen Bakker (as analyst and critic), Ronald Coase (antecedent)
Where it stands
- Environmental EthicsAnthropocentrismEcocentrism
- Economic PhilosophyGreen GrowthPost-Growth
- Resource OwnershipPrivate StewardshipCommons Governance
- Environmental AuthorityCentralized AuthorityLocal Autonomy
- Environmental JusticeAggregate OutcomesDistributive Justice
- Technological OutlookTechnological OptimismEcological Precaution
- Energy PhilosophyEnergy AbundanceEnergy Sufficiency
- Conservation StrategySustainable UseStrict Protection
- Global ResponsibilityNational SovereigntyInternational Ecological Obligation
- Ecological Political PriorityIncremental ReformTransformative Change
Market environmentalism is an instrument-focused position: firm on markets, prices and tradeable rights, and on reform; moderate on governance, since markets are created and policed by the state.
Definition
Market environmentalism makes market instruments the first choice for protecting the environment. They include emissions trading, fishing quotas that can be bought and sold, water markets, banking of wetland and biodiversity credits, payments for ecosystem services, carbon offsets, and handing environmental services such as water supply to private or commercial operators.
Unlike free-market environmentalism, it accepts and depends on a strong regulating state. The state defines the rights, sets the caps and polices the trades. The state sets the goals and the market is the means. Advocates use the term, and so do critics in geography and political ecology, who study it as the “neoliberalisation of nature”.
Historical development
The ideas go back to Ronald Coase (1960) and John Dales (1968). The practical breakthrough was the US Acid Rain Program, created under the 1990 amendments to the Clean Air Act. This cap-and-trade scheme for sulphur dioxide worked at low cost, and it made trading the model for climate policy.
The approach spread through the European Union Emissions Trading System (2005), the fishing quota systems of New Zealand and Iceland, Australia’s water markets, and the growth of carbon and biodiversity offsets under the Kyoto Protocol and national laws. Karen Bakker, studying the privatisation of water in England and Wales, named the approach “market environmentalism” and documented its limits.
Principal claims
- Politics should set environmental goals, and markets should meet them, because markets find the cheapest reductions.
- Tradeable rights give users a stake in a resource and a reason to conserve it.
- Prices on pollution and scarcity drive invention that regulation cannot foresee.
- Private and commercial provision of environmental services can be more efficient than public provision.
- Offsetting lets development and conservation go ahead together.
Policy implications
Market environmentalism supports cap-and-trade for emissions, catch shares in fisheries and water trading. It uses offsets for biodiversity, wetlands and carbon, and payments for protecting watersheds and storing carbon. It favours private or commercial utilities under public regulation.
Internal disagreements
Supporters disagree about how strict caps should be and how much offsets can be trusted. They differ on whether rights should be given free to existing users or auctioned, and on how to handle who gains and who loses, for instance when fishing quotas pile up in few hands or water moves out of farming. They also disagree about how far privatisation should go.
Criticisms and controversies
Critics have documented many offset schemes that failed to deliver real reductions, fishing quotas concentrated in few hands, poor people shut out of privatised water, and the turning of nature into a commodity that markets require. Environmental justice advocates point out that trading can concentrate pollution in poor communities. Ecocentrists object to treating species and habitats as interchangeable.
Supporters cite the cost savings and emission cuts of well-designed schemes.
Relationships to other traditions
Market environmentalism is the practical arm of environmental economics and part of green growth and ecological modernisation. It is the moderate neighbour of free-market environmentalism, which would take the state out of the picture. It is a main target of political ecology and environmental justice.
References and further reading
- Tietenberg, T. (2006). Emissions Trading: Principles and Practice, 2nd ed. Resources for the Future.
- Dales, J. H. (1968). Pollution, Property and Prices. University of Toronto Press.
- Bakker, K. (2005). “Neoliberalizing nature? Market environmentalism in water supply in England and Wales.” Annals of the Association of American Geographers 95(3), 542–565.
- Stavins, R. N. (1998). “What can we learn from the grand policy experiment? Lessons from SO2 allowance trading.” Journal of Economic Perspectives 12(3), 69–88.