Between climate alarmism and political complacency lies an alternative: market environmentalism. Kai Weiss and Christopher Barnard joined me to discuss how innovation, entrepreneurship, and economic freedom can address environmental challenges while preserving prosperity and human flourishing.
About the Guests
Kai Weiss is a board member of the Hayek Institut, and Christopher Barnard is the president of the American Conservation Coalition. They are the editors of Green Market Revolution.
Interview
Simon Sarevski: What is Market Environmentalism?
Kai Weiss: We need to fight global warming, but panic, the destruction of the economy, and the erosion of our freedoms are not the right methods. On the contrary, the principles of private property, the market economy, free trade, and the rule of law are better tools for solving environmental problems. The best way to preserve nature is by encouraging private ownership, internalizing negative environmental impacts, and prioritizing a local approach instead of political centralization. Humanity is part of nature, not its intruder. We can solve these problems only through cooperation and innovation, with a healthy dose of optimism. This vision, which we call market environmentalism, is not an oxymoron.
It is often said that “we need to do something” about climate change. Could a carbon tax perhaps be that something? More importantly, in what way should the state be involved?
Christopher Barnard: Our views on this issue differ. I believe that free market transactions can function only if they are fair, and that means taking into account their potential negative externalities. In other words, if an economic transaction pollutes the atmosphere and does not include those pollution costs in its overall cost, then it represents an unfair economic transaction.
Today, carbon dioxide represents the biggest negative externality when it comes to pollution, while also having the largest impact on the rest of the world, so it is fair that those who pollute should pay for that pollution. When it comes to public policy, I see a carbon tax as an opportunity to reduce other taxes. In that way, the new tax would not merely serve as a tool for additional government revenue and spending. At the same time, it would also represent an opportunity to reduce many forms of regulation that make it harder for the business sector to function.
Kai Weiss: I agree with Chris on the theoretical foundation of a carbon tax. Of course, costs can be internalized through taxation, but at the same time, we would face many practical problems. To begin with, it is extremely difficult to determine the correct level of the tax. Depending on the model you use and the way you measure the cost, the price ranges anywhere between twenty and two hundred dollars per ton of carbon dioxide. Although the correct number remains unclear, it is obvious that the decision-making process becomes part of politics. That represents political environmentalism, not market environmentalism.
Indeed, there is a market failure that the state is supposed to correct, but as with everything else, there is also a great potential for government failure. I would say the greater risk is that politicians will use this tax however they wish. The likelihood that a fair system would emerge from a carbon tax is not very high.
And finally, there is an extremely important distinction between trying to solve these challenges by punishing those who pollute and encouraging good behavior. I would prefer tax reductions for environmental investments that would encourage entrepreneurs to do environmental good instead of extracting wealth from the economy through taxation. Barriers should always be reduced first, rather than introducing new taxes.
If we assume that solving climate problems is expensive, how much can we actually spend in order to solve them?
Kai Weiss: The main point is that the choice should not be between a better environment and economic growth. We can have both at the same time. That is a very important point because ideologies that criticize economic growth often argue that everything would be fine if we returned to a hunter-gatherer society. But when you actually look at economic growth, you can see that it also brings a cleaner environment with it.
If you look at the Environmental Performance Index, which measures how green and clean countries around the world are, and compare it with the Heritage Foundation’s Index of Economic Freedom, you will notice that freer economies, which are also wealthier, tend to have cleaner environments and better environmental performance, unlike poorer despotic regimes. The supposed choice between ecology and economic growth does not really exist. They can go hand in hand without sacrificing one for the other.
Should we perhaps focus more on clean and sustainable energy? Could subsidizing it be the answer we need?
Christopher Barnard: If you look throughout history at subsidization policies, you will notice that subsidies have not achieved much in terms of reducing emissions.
On the other hand, if you look at the parts of the world with the greatest degree of competition and energy choice, you will see that they decarbonize faster while also maintaining low energy prices. Subsidies are not the right approach because they create a tendency to favor already existing energy producers and discourage innovation. A competitive energy market forces participants to innovate and develop better and more efficient technologies, while at the same time keeping prices low in order to attract new consumers.
When we compare green and sustainable energy with coal, natural gas, and nuclear power, can we find a real choice for the future?
Christopher Barnard: It is difficult to calculate precisely because fossil fuels have received trillions in subsidies over the past few decades, which has essentially distorted the market entirely.
In Before the Flood, Leonardo DiCaprio showed us how heavily meat production pollutes the environment. Could lab-grown meat perhaps be the next major innovation that solves climate change?
Kai Weiss: I do not know the exact details regarding meat production, but the example of lab-grown meat is an excellent illustration of how innovation can and indeed will help. When a problem exists, there is usually a way for some entrepreneur or innovator to solve it. In fact, every day we can see innovations and creative ideas solving environmental problems.
When it comes to lab-grown meat, it may take another decade or two before it becomes mainstream, which would bring us closer to a cleaner environment.
The Green Market Revolution focused on the United States, Great Britain, Europe, and Austria. Do environmental solutions leave room for small countries, or do economies of scale play such a large role that only major countries can contribute to solving the problem?
Christopher Barnard: Nothing prevents small countries from developing potential innovations that can change the world. Israel, although a small country, has produced many innovations. So there is definitely an opportunity for smaller countries to come up with solutions, especially when it comes to environmental issues.
Of course, decarbonizing the United States is more important than decarbonizing Austria because the U.S. is a much larger country and has a far greater share in global pollution. That is precisely why the idea of competition among states to decarbonize as quickly as possible is so important. Competition makes it possible to arrive at better universal solutions, but at the same time also enables better local solutions, because countries are ultimately different from one another.
What about the major polluting countries such as China and India?
Christopher Barnard: It is interesting to note that Russia and China are trying to become world leaders in nuclear energy. Of course, there are security concerns when it comes to nuclear production in Africa. I sincerely hope they understand their responsibility. Unfortunately, China is still opening new coal plants.
At the same time, however, I believe that countries such as the United States, Israel, Britain, and Europe can develop innovations that are efficient and can then be shared with or sold to China. I hope China adopts those innovations and applies them within its economy, thereby reducing its emissions.
Surrounded by ideas of “impending doom,” is there still room for optimism?
Kai Weiss: That is a very important point from the market perspective. Entrepreneurs, inventors, creative minds, and philanthropists can truly make a difference if we provide the conditions necessary for finding solutions, which can then be multiplied further.
When you look at the world today, not only is it wealthier, but it is also cleaner. To produce the same output today, we need only one-third of the resources that were required a hundred years ago. As Julian Simon would say, the ultimate resource is the human mind. We have more and more people confronting these problems, which means more and more opportunities to create real change, and because of that I do not doubt at all that we will succeed in facing them.
Lastly, how do we find freedom in an unfree world?
Christopher Barnard: I think the legendary Rob Daugherty is right when he says that many people look at the world and project the world onto themselves. We should remember that we are individuals — people with our own reason, families, and communities — and that we should not be pulled into the drama and pessimism of the rest of the world. We must remember that we need to take responsibility and live life freely. Life is not only politics or some other external issue.
Kai Weiss: To some extent, I would agree with Chris. It is better to seek freedom and fight for it in the small things. At the local level, we can accomplish much more instead of making grand plans about changing the entire world. That is always unrealistic. So we should focus on what is close to us and create the conditions for change to happen. The greatest opportunities for freedom are hidden precisely in the small things.
This interview first appeared in Libertania.