Free-Market Environmentalism: Theory and Practice

When the issue of climate change first received serious attention in the 1990s, for a time it looked set to establish common ground between environmentalists and libertarians. There was much interest in the concept of “free-market environmentalism” or FME, drawing upon the work of British economist Ronald Coase, who had suggested that environmental problems could be resolved through the proper allocation of property rights. Terry Anderson of Montana State University exercised a strong influence in these debates.

FME’s key proposal for addressing climate change was the creation of tradable emissions permits, a model that had been successfully deployed in the case of sulfur dioxide emissions. According to this view, a market in permits would supply incentives to find the most cost-effective path toward reducing emissions, as long as there were appropriate limits on the volume of permits.

Most environmental activists greeted the idea of “rights to pollute” with suspicion: they argued for more direct controls, as part of a broader shift away from mass consumerism. But many were won over by the prospect of forming an effective coalition to press for decarbonization. By the time of the Kyoto conference in 1997, support for carbon prices as the most cost-effective long-term solution, to be implemented through internationally tradable permits, had become the dominant view. Twenty years later, this vision is finally being realized in the European Union, where high permit prices are driving coal-fired power out of existence.

Trading Places

But a funny thing happened on the way to Kyoto. Propertarians, who had often been keen on tradable permits as long as environmentalists opposed them, now rejected the idea with near unanimity, along with the rest of the political right. Since then, we have faced a paradoxical situation where they consider any kind of market-based solution to climate change unacceptable. Why did this happen?

The problem was to some extent philosophical. Propertarian thought relies heavily upon the Lockean fiction that property rights arise naturally, before the emergence of a state (defined broadly to include any kind of authority within a group, tribe, or nation). Obviously, no such rights could have existed when it came to the atmosphere, so emissions permits would have to be the creation of national governments working through global agreements. Admitting that states define and enforce property rights was too big a pill for many propertarians to swallow.

But the cultural barriers standing in the way of free-market environmentalism were even greater. Affluent white men who don’t like being told what to do are by far the most important constituency for libertarianism. Such men would consider it a dreadful imposition to have to pay, whether directly or indirectly, for the right to drive a car or use air conditioning. Environmentalists who insist that untrammeled individualism of all kinds has malign consequences lie at the opposite cultural pole.

However, this created a dilemma for propertarians. Having rejected both state- and market-led solutions to climate change, their only remaining option was to deny that the problem existed at all. This required tremendous intellectual dishonesty, supplied in large measure by hired guns who had won their spurs in earlier fights over passive smoking and the ozone layer. This didn’t trouble the libertarian ground troops, who clung tenaciously to their baseless self-image as the smartest guys in the room. Lacking any scientific, economic, or statistical knowledge to back up their opinions, they seized upon the innumerable talking points that the denial industry churned out.

All-In for Trump

Then Trump came along. He grasped — indeed, embodied — the reality that abstract notions of personal liberty were not what really appealed to the conservative base. Rather, it was the conviction that well-off white men should be free to think, speak, and act as they pleased, while the state clamps down on everyone else when they step out of line.

At the same time, two decades of climate change denialism fostered a nihilistic and crudely partisan attitude toward basic questions of truth or falsehood among conservatives. Trump substituted barefaced lies for the ponderous apologetics of the intellectual right, starting with the claim that his inauguration crowd was bigger than Obama’s.

After Trump’s election, the “libertarian moment” so widely touted just a few years ago gave way to a sudden collapse, with most of the movement’s intellectual leadership shifting in the opposite direction. Republican politicians seen as potential leaders of the future, such as Rand Paul and Mike Lee, went all-in for Trump, along with advocacy groups like FreedomWorks and the Club for Growth. The only exception was Michigan’s Justin Amash, who quit the Republican Party in 2019 and now faces almost certain defeat, sharing the fate of a handful of state-level Republicans who departed to join the Libertarian Party.

The remnants, clustered around the much-diminished Cato Institute, have no obvious way forward. The institute finally abandoned climate denialism last year, but it still has no answer for the climate crisis. The last remaining cheerleader for the “libertarian moment,” Nick Gillespie, offered a rather slippery response to Tyler Cowen’s criticism:

Whatever your beliefs and preferences might be on a given issue, the scale (and cost) of addressing, say, climate change is massive compared to delivering basic education, and with the latter at least, there’s no reason to believe that more state control or dollars will create positive outcomes.

On close inspection, Gillespie is just restating the standard libertarian view on education, while saying nothing at all about climate change, other than to acknowledge that it is a massive problem. He neither denies that “more state control or dollars” are needed, nor offers any alternative.

Having abandoned intellectual credibility in the fight to stop climate action, libertarianism has no future as a movement. Trumpism will soon swallow up what’s left of its organizational structure. Individuals have a number of choices available, from Niskanen-style “liberaltarianism” to the fantasy of “going Galt.” But the libertarian moment is well and truly over.

Global warming is the ultimate refutation of Lockean propertarianism. No one can pump greenhouse gases into the atmosphere while leaving “enough and as good” for everyone else. It has taken thirty years, but this undeniable fact has finally killed the propertarian movement in the United States.