The Price of a Sustainable Environment

...More than that, we need passengers, lots of them, who are ecologically alert and morally engaged...

...But free-market environmentalism depends upon the market's ability to value the natural world in the right way...

...Markets merely divert water to the highest bidder...

...Impatient with the pace of federal action, Michigan has sought to establish intrastate trading schemes covering all of the half-dozen pollutants subject to national ambient air-quality standards...

...Mitigation requirements, another freemarket tool, force developers to consider the harms caused by destroying or consuming ecologically valuable lands...

...So too were the objections of large commercial farmers like the Lone Star Growers, who knew that unrestricted transfer rights meant top dollar in the market...

...The law gave polluters flexibility in how to go about achieving these reductions, and did not, as had prior laws, mandate the use of particular pollutioncontrol technology...

...Riding the Market Train In his short story "The Celestial Rail-road," Nathaniel Hawthorne challenged the technological optimism of his day by retelling John Bunyan's classic tale, Pilgrim's Progress...

...The problems with pollution trading are clearly revealed in a Communities for a Better Environment (CBE) suit in Los Angeles, challenging a market-based pollution measure implemented by the South Coast Air Quality Management District...

...How water is used and where it is used significantly affect the amount and timing of the return flow...

...For centuries Anglo-American law has imposed liability even on the unknowing possessor of stolen goods...

...Pumping permits in the Edwards Aquifer would largely go for irrigation, in recognition of historic water-use practices...

...In recent years, free-market environmentalism has gained considerable momentum, and in the movement's brief history no political victory stands taller than the 1990 revision of the Clean Air Act...

...How can it do this when so much of nature has little or no use value...

...Over the centuries, to be sure, America has had a dissenting tradition, one that has embraced nature as a whole and interpreted it intuitively and spiritually...

...To make good use of the market train, we need conductors with courage and moral depth...

...Pollution as a Marketable Right The hoopla surrounding water marketing builds upon a long and venerated American tradition...

...Colonial Americans began buying and selling nature practically from the first moment they stepped ashore...

...Good judgments come out of processes that are informed, deliberative, and morally challenging, that bring people together to reflect upon the common good and the long term...

...Similarly, environmental problems would end if we simply divided all of nature into privately owned shares, tradable on the market and securely protected by law...

...A market that can do these things, we're prone to assume, is a market that can provide us with everything...

...However effective economic incentives might be, they do not push people to look beyond their own self-interest, and land health will never come about so long as we each look out only for ourselves...

...The market as much as the railroad is a useful tool, but discipline is needed to use it well...

...Rights to use water must be understood as a form of stewardship, constrained by duties to use water in beneficial ways...

...Sloping lands are harvested with little concern for soil erosion and soil degradation, largely because the ill effects of soil loss are so delayed that managers today can ignore them...

...Markets of all types are notorious for their ruthless assignments of value...

...The EPA stumbled at its work, rarely pushing polluters as hard or as far as Congress originally intended...

...To do that, they first had to divide nature into pieces, into commodities like acres of land, iron-ore mines, and waterwheel sites...

...Even in cases like these, however, it is easy to exaggerate the benefits of markets...

...But the truth, in this setting and others, is much to the contrary The market has never given us a healthy land in which to live, and it is not on the verge of doing so today...

...For the most part, these savings were obtainable without creating a pollutionrights market...

...A small stream is affected more than a large river by the extraction of a given water flow or the addition of a quantity of pollution...

...When polluters are allowed to externalize their harmful wastes, their production costs are artificially lowered and they overproduce...

...In jointly filed comments, they asked the Aquifer Authority to ease transfer limits so that a true market in water rights could develop...

...It requires, in short, a view of the land that is moral and aesthetic, as well as economic...

...Still the goal was on the books—to do the best job possible...

...Not the least of the problems presented by markets are the many messages that they convey about the natural world, about how we ought to live in that world, and about how we relate to one another...

...But forests are valuable mostly for their trees, and efforts to enhance a forest's timber value can degrade its roles in protecting watersheds, cleaning air, and harboring wildlife...

...New today is the claim that markets are equally efficient in promoting far different goals: in reducing pollution and fostering sustainable resourceuse practices...

...A tax on pollution, a powerful if politically awkward tool, helps get prices right by correcting market distortions that arise when polluters can costlessly push harms on to outsiders...

...Pollution taxes, raw-materials fees, liability rules, volume-based pricing schemes— these all have the modest aim of getting exploiters of the land to pay for what they damage or consume...

...The market train, in truth, is less new and less powerful than we are told...

...Perhaps the most troubling message of the market arises from its very ability to give us so many things...

...Timber companies often clear-cut land with little regard for overall ecological impacts...

...To buy a product is inevitably to become tied to its past and its future...

...Faced with such a requirement, the developer is compelled to account for the ecological damage when deciding whether and where to develop...

...Species that cannot be put to direct human use are thoughtlessly pushed aside, however important they may be in sustaining ecosystems and providing a pleasing, diverse landscape...

...Properly functioning water markets can tell us how much water should remain in rivers to support crayfish and river rafters, and how much instead should bathe golf courses and computer chips...

...A developer who fills a wetland can be told to mitigate the harm by constructing nearby a similarly sized wetland...

...Nature is portrayed as a collection of resources, as parts and pieces available to buy and sell...

...A tax on the use of new raw materials can have a similar effect: it pushes users to take into account the adverse environmental impacts that inevitably arise when minerals are extracted or trees are cut...

...That aim, to be sure, is a worthy one, but it leaves exploiters free to degrade as much as they can afford...

...DISSENT / Spring 1998 • 43...

...Progress on environmental issues, then, will depend on our continued use of moral language and our continued reliance on deliberative processes to set overall goals...

...Long-term land health requires a concern about the land that extends beyond any single lifetime...

...Hawthorne's pilgrim Christian, shifted from Puritan England to America of the Industrial Revolution, chose to forgo his predecessor's arduous footpath toward the Celestial City, instead traveling in comfort by train...

...It wanted to know what people thought about proposed new rules governing withdrawals from the region's large aquifer...

...Free-market arguments are thick with exaggeration...

...A related market message, equally troubling, is the legitimacy that it grants to selfcentered behavior...

...To get the market train purring this well—to get the prices right, as the slogan goes—market proponents have assembled a large box of tools...

...So great are the market's virtues, according to ardent free-marketers, that the market can even tell us what level of environmental amenities we really want...

...If tuna is caught in a way that kills dolphins, the consumer is not to blame...

...Efficiency means low cost...

...The technological optimism of the nineteenth century finds its modern counterpart in the market enthusiasm of the late twentieth century...

...So vital was the issue that the president of the San Antonio Water System appeared at one hearing in person, pleading for rules that transformed groundwater into a marketable commodity...

...As proposed, the new rules placed significant limits on how much water farmers could sell and to whom, rules aimed chiefly at protecting rural economies and keeping out speculators...

...San Diego, desperate for water, wants to do something similar or, failing that, simply to buy up irrigated farmland, transfer the water, and leave the desert to reclaim its own...

...On the waterpollution front, several states are experimenting with schemes that allow factories and other "point source" polluters to avoid further pollution cutbacks if they can successfully pay farmers, timber harvesters, or other "nonpoint" polluters to reduce runoff pollution through better land-use practices...

...In the long term, it needs to press us toward a more generous embrace of the natural order...

...Utilities that did so could either save their unused allowances for later use or sell them for cash...

...Bureaucrats stifle technological ingenuity, raising pollution-control costs 38 n DISSENT / Spring 1998 in the process, when they tell companies how to cut back their pollution and by how much...

...Congress dealt with the 110 worst sulfuremitters in 1990 simply by ordering them to make prescribed reductions as a group...

...To make sense out of them, though, we need a tool of our own, a paring knife, to cut away the soft from the sound...

...Compliance flexibility arises when a polluter is given a range of options...

...EFFICIENCY AGAINST THE DELIBERATIVE PROCESS...

...Other tools in the free-market box involve easing regulatory requirements so that regulated parties can select less costly compliance methods...

...And when it comes to the environment, proponents say, that's just what we need to be doing...

...Environmental degradation is in part the product of bad values, heightened by ecological ignoA SUSTAINABLE ENVIRONMENT rance...

...Markets make no such demands on people...

...Our environmental problems, market advocates claim, arise in large measure because pricing mechanisms are so badly skewed...

...In Nebraska, conservation interests are piecing together an imaginative plan to create a water-rights "bank" to protect Platte River waterfowl...

...In the cases of the Edwards Aquifer and electric-utility sulfur emissions, the goods being traded were largely fungible...

...But San Antonio couldn't simply enter a farming community, buy its water, and leave the place forever dry...

...By giving utilities tradable pollution rights (or "allowances," as the law termed them), the law created an incentive for utilities to reduce pollution more than the required amount...

...As San Antonio saw things, it needed water to keep expanding, and it could only get that water by buying rights from farmers and diverting the water to urban uses...

...When natural resources are untradable, they get stuck in low-valued uses, often wasteful and damaging uses...

...In practice, market mechanisms compete directly with other methods of communal decision making, particularly those in which citizens make collective plans for their shared landscapes...

...If we want to protect other species, we need the most efficient means...

...Smooth-it-away as his companion, the industrialage pilgrim quickly bypassed the moral trials and pitfalls that so troubled his pedestrian ancestor...

...So evident had the problem become that nearly everyone accepted the need both for pumping limits and for a permit system that allocated pumping rights...

...THE ASSUMPTION OF ACCURATE VALUATION...

...If the can is thrown into a leaky landfill, it is the landfill owner's fault, not the tuna eater's...

...Technology, it seemed, had obviated the need for him to steel his heart and contain his pride, just as it had softened the rigors of winter and the toils of long-distance travel...

...When Congress told the EPA to require specific technologies, the longterm goal was to find the technology that did the best job of protecting the environment...

...That decision requires a moral judgment...

...Regulations also drive up pollution-control costs when they require all polluters to cut back equally, ignoring the differing costs that companies face in reducing pollution...

...So long as buyers are disconnected, they will reward sellers who keep prices down by way of environmentally damaging shortcuts...

...To achieve a goal like that requires far greater engagement by us, individually and collectively...

...This improved air quality regionally and at lower cost, but it allowed airpollution "hotspots" around fuel terminals, to the disadvantage of nearby low-income communities...

...Many environmental groups support these water transfers, citing the environmental benefits that come from halting new reservoirs and diversion projects...

...But these examples are really marginal to free-market environmental thought...

...Similar objections have arisen recently concerning shoes and clothes made by children in unsafe factories...

...As consumers, interacting with one another through the market, we will probably decide to carve a regional wilderness into individual parcels for cabins and home sites...

...Secure private rights do indeed provide an incentive to care, compared with schemes where private rights are totally lacking or are so insecure that owners exploit resources quickly for fear of losing the chance...

...CBE expressed concern about the emission of air pollution—volatile organic compounds—in neighborhoods around marine fuel-transfer terminals...

...These are alluring claims, but they rest atop assumptions that are empirically weak and morally questionable...

...His new book, Bounded People, Boundless Land, will appear this fall...

...Less complicated are liability rules, common law and statutory, that require polluters to pay damages to those who are injured...

...The solution, freemarket advocates assert, is to divide the commons into private shares with an owner to care for each...

...So we overlook the ties that hold the pieces together, the known as well as the unknown connections...

...Costs of reduction have fallen far below the predicted costs of new scrubber technology...

...ENVIRONMENTAL POLICY needs to connect people, particularly prosperous people, with their ecological "footprints," making them aware of the harms inflicted to supply their abundant goods and whisk away their wastes...

...Finally, there is the new global-warming treaty, which calls for the creation of tradable pollution rights in carbon dioxide and other climate-changing gases...

...Flexibility arises precisely because polluters no longer have to shoot so high...

...To own a piece of land is not, as the market suggests, to own something discrete...

...Most active has been the Environmental Defense Fund, a veteran of DISSENT / Spring 1998 n 37 A SUSTAINABLE ENVIRONMENT water wars in the noisiest battleground, southern California...

...Pollution levels have diminished further than targeted reductions...

...An efficient market is one that supplies us with whatever goods we want at lowest cost, leaving us free to choose those goods—a land abounding in biological diversity, say, or chemically bathed bluegrass lawns...

...THE MARKET'S UNHELPFUL MESSAGES...

...When regulations are needed to deal with things like pollution, the market-oriented approach is simply to set specific pollution maximums, leaving it to polluters themselves to figure out the cheapest way to comply...

...Years of excessive pumping had seriously lowered groundwater tables, threatening the viability of farms, urban areas, and federally protected wildlife species...

...There are, however, deeper worries about the free-market approach, which have to do with the dangers posed by the free-market tools themselves, by the assumptions that underlie them, and by the messages that they convey...

...The tools are used, not to harness the market to achieve something good, but to restrain the market from producing so much bad...

...Like the railroad, the market is no panacea...

...Implicit in the freemarket emphasis on accurate pricing is the assertion that those who pay full value for a thing have adequately fulfilled their environmental duties, morally and legally...

...By all accounts, the sulfur-trading program set up in 1990 has been a big success...

...THE ASSUMPTION OF FUNGIBLE GOODS...

...For a market to function, whether in water rights or sulfur emissions, it needs fungible goods to move around from place to place and participant to participant...

...To create and promote regional (or even national) water markets is to diminish the power of local communities to make decisions about local waterways...

...0 NLY A FEW free-market tools really have much to do with using the market to achieve positive environmental gains...

...Water markets don't automatically lead to rivers that sustain aquatic life...

...Hawthorne's tale ends, predictably, with the train falling short of the Celestial City...

...When resources are unowned and anyone can use them, overuse often follows—hence the "tragedy" of the commons...

...We can use the market to help us, but we also need to work in very different ways...

...But the discipline of the market is by no means so strong that it ensures resource-use practices that sustain the health of the land...

...At the center is the tool among tools—the construction of actual markets in resources and environmental amenities, whether in water, pollution emissions, conservation easements, riverrafting rights, scenic views, free-flowing river segments, or migratory bird-nesting spots...

...For decades, California's thirsty coastal cities have turned longing eyes on the massive water flows that invigorate the nearby desert...

...If San Diego is going to get its water, come what may, it's better that the water come from efficiencies in irrigation than from pipelines snaking south from Oregon...

...Long-distance pumping causes problems by removing water from its home watershed, to the damage, sometimes great, of resident aquatic and human life...

...Air-quality managers, however, allowed fuel companies to forgo installing recovery systems if the companies instead purchased old, high-polluting cars and scrapped them...

...Each unloading oil tanker emitted six tons of dangerous vapors—easily controlled by installing vapor-recovery systems...

...But efficiency, standing alone or embedded in a market, cannot tell us whether species are worth saving...

...Recently, EDF helped facilitate a deal by which Los Angeles paid desert irrigators to implement water-conserving measures, with Los Angeles, in exchange, gaining rights to use the water saved...

...such permits, however useful and legally protected, must never give rise to anything like a right to pollute...

...If we instead came together as citizens, taking the time to consider the wilderness and how we might best use it, to reflect on the claims of future generations and other species, we might well decide to protect it as a nature preserve, using it for recreation but keeping roads few and cabins far away...

...The possession of a pollution permit does not mean that pollution is a good activity...

...Low cost means that we can afford more of what we want–including, if we choose, things like clean rivers, grizzly bears, and mature forests filled with birdsong...

...With technology carrying him onward and Mr...

...Pollutiontrading rights can have the same good result, at least when pollution-reduction goals are ambitiously set...

...It requires a discount rate for future harm much lower than the rates used by businesses and financial planners...

...Groundwater extractions in one place were functionally similar to extractions from elsewhere in the aquifer...

...But the dominant intellectual strand has been decidedly utilitarian and individualistic, particularly in frontier regions: nature conceived as a storehouse of resources, a collection of parts, gaining value mostly through human use...

...Most annoying, as market advocates see things, is the massive "command-and-control" bureaucracy that has arisen to address environmental messes...

...From comfortable cars to supersonic jets to bone-rattling home theaters, the market's accomplishments are impressive...

...Deregulated railroads upgraded their services, leading to significant drops in coal-shipping costs and hence in coal prices...

...In the era of flexible compliance, that goal has largely disappeared...

...In southeastern Utah, Micron Technology arranged a water-rights swap with the Bureau of Reclamation to gain access to the water it needed (two million gallons per day) to clean and cool its silicon chips...

...The market "cleanses" all transactions...

...If speculators wanted to make money trading water, stimulating a more active market, that too would be fine...

...Ecological communities like mature forests do have market value, and the market does supply an incentive to keep them productive...

...For generations enthusiasts have touted the market as an efficient mechanism for exploiting America's lands and waters...

...Agricultural water could be used only on farms, not held for speculation or diverted to golf courses and suburban lawns...

...The standard story told about environmental degradation portrays the market largely as villain, rewarding polluters for externalizing their costs and providing incentives for clearcutting forests and depleting fisheries...

...The Market•Makers' Toolbox The aim of free-market environmentalism is to structure resource-use decision making so that decisions respond, not to bureaucratic mandates, but to the more disciplined signals of the market...

...Resistance to tighter pollution limits largely arises from concerns over cost, and the cheaper we can make pollution reduction, the more of it we are likely to buy...

...Water markets have that good outcome when they keep dams from being built...

...If we would only hop aboard the market train, it would carry us to a healthy land...

...But what we choose as consumers is often quite different from what we might choose as citizens and community members...

...Pollutiontrading schemes can tell us whether the ill effects of nutrient-laden rivers are more or less tolerable, in dollar-cost terms, than the price tags for new sewage-treatment facilities...

...Paring the Claims These claims need to be considered seriously, given that their advertised benefits are so alluring...

...Reasons to Be Wary Proponents of any policy approach are prone to exaggeration, so it is only a mild rebuke of free-market advocates to point out that they overplay their hands...

...Efficiency, the market's most exalted prom42 n DISSENT / Spring 1998 ise, is a desirable quality of the means we use to achieve an end...

...Before that, tradable pollution rights were used only occasionally, in the phase-outs of leaded gasoline and ozone-depleting chlorofluorocarbons...

...It does not obviate the need to reshape our values and visions, individually and collectively...

...The more efficient approach, proponents say, is to discard regulations like these and unleash the powerful market...

...What wasn't accepted, and what the hearings came to focus on, were the terms of the pumping rights that water users would acquire...

...In the 1990 law, Congress took its most forceful step toward the use of market forces to control industrial pollution...

...Industrial technology, it turns out, provides only a facade of moral progress, however useful it is in satisfying more mundane needs...

...Water marketing has gained popularity these days as a means of shifting water from low-valued uses like irrigated farming to highvalued uses, including ski resorts (to make snow) and vineyards (to protect against frost...

...As it turns out, most of the free-marketers' tools are premised, however quietly, on the truth of DISSENT / Spring 1998 n 39 A SUSTAINABLE ENVIRONMENT this indictment...

...Fundamentally, the market is about cutting deals...

...Flush with this success, market proponents are now pushing for similar trading schemes for other air pollutants, A SUSTAINABLE ENVIRONMENT like nitrogen oxide, a precursor to ground-level ozone formation...

...The growing demand for water, though, lay in the region's urban areas, particularly San Antonio...

...Civilized nations for generations have objected to the production of goods using slave labor, and have viewed such goods as tainted in a way that the market cannot cleanse...

...All other things equal, laws ought to allow as much flexibility as possible...

...if top bidders want to drain a river dry, watering lawns and golf courses, the market is quick to comply...

...In the end, market-based tools must fit into a larger scheme of environmental policy that has as its principal aim not the promotion of markets, but the achievement and maintenance of a healthy land...

...San Antonio's objections to transfer restrictions were easy enough to understand...

...Sulfur emissions have impacts that are more widespread than local...

...Most water is extracted from rivers, and the impacts of withdrawing and using water vary dramatically from place to place...

...Owning land must come to entail belonging to a natural community, with obligations to respect the integrity and fertility of that community...

...To allow polluters to sell pollution rights, free of local restrictions, is similarly to sap the power of local communities to make decisions about the kind of air quality they want...

...Someone who buys a can of tuna has no moral connecDISSENT / Spring 1998 n 41 A SUSTAINABLE ENVIRONMENT tion to the catching and processing of the tuna...

...it is to own a piece of something larger, and to become involved in and responsible for the plight of that larger thing...

...Would the region, in short, buy a ticket on the market train, to journey toward its water-use future...

...In the case of the sulfur-emissions program, the cost-savings had little to do with the trading system itself...

...The dangers are most evident when the case for markets is presented in its strongest form, when we're told that a well-functioning market can supply sufficient incentives for land conservation, including the conservation of endangered species, while remedying pollution and other harmful externalities...

...they are free to act in haste and to think only of themselves...

...Having pared things down, we are left with a small but nonetheless valuable core...

...But in the case of environmental laws, the advent of flexibility has come from a weakening of the original vision...

...The empirical truth is that private owners, responding only to the market and their own desires, do not always take care of what they own...

...Volume-based garbage-hauling schemes, which require garbage generators to pay by the bag, yield more sensitive price signals and provide incremental incentives to reduce waste...

...The 1990 act gave the technique its most challenging trial run—to bring about lowcost reductions in the emission of sulfur dioxide by coal-burning electric utilities...

...If he also pays full price for garbage collection, he need not worry about the empty can once the garbage truck pulls away...

...TAKING CARE OF OUR OWN...

...But in the ranks of the objectors were the Environmental Defense Fund (EDF) and the Sierra Club...

...Performance goals are more modest, capable of being satisfied with lesser pollution-reduction methods, some more expensive than others...

...In addition, the law allowed individual polluters to overpollute, so long as they bought rights to do so from other utilities...

...As a short-term tactic, environmental policy can take advantage of individual greed...

...Too often environmental regulations compel polluters to employ particular, expensive technologies, usually end-of-the-pipe technologies, when cheaper reduction methods are available...

...Out of our deliberations on environmental goals should come new understandings of what it means to be a good citizen...

...Would a regional market develop in these rights, shifting water flows invisibly to their highest-priced uses...

...A farmer who conserved water by irrigating more efficiently could sell the water saved...

...The pilgrim must retrace his route and undergo the same moral challenges as his predecessor...

...If cities wanted to buy and farmers wanted to sell, argued the environmental groups, the sales should go through...

...Gains came from the 40 n DISSENT / Spring 1998 law's flexible compliance element, which allowed utilities to shift to low-sulfur coal rather than install new scrubbers...

...ERIC T. FREYFOGLE teaches at the University of Illinois College of Law...

...Markets mean efficiency...

...Related to problems of market valuation is the questionable free-market claim that owners of land are prompted by market forces to take care of what they own...

...THE MARKETS POWER TO CLEANSE...

...Nature as a whole has no value because the market cannot deal with it as a whole...

...A SUSTAINABLE ENVIRONMENT In the case of many environmental problems, however, local conditions and impacts are far more important, so much so that goods are not fungible, and shifts from seller A to buyer B have grave impacts that the market is prone to ignore...

...But market morality is not so simple...

...Would these rights be tradable commodities, bought and sold in the market...