Protecting the environment? Use free markets!

Summary
A key lesson of the past century is that, where possible, the best way to protect and enhance the environment is to make use of free-market mechanisms to align commercial incentives with environmentally beneficial goals. Yet governments usually prefer to use command-and-control mechanisms to impose environmental targets for all environmental issues. Their reasoning is that most environmental problems are common-pool resource issues, so suffer from “tragedies of the commons” and therefore “market failure”. But as Ostrom showed ¹ ,common-pool resource problems can often be solved by voluntary or commercial collaboration. Government interventions in environmental policy suffer from the same
drawbacks as all central planning: they disperse accountability, distort incentives and end up being judged by their intentions and budgets rather than their results.

The evidence for this position comes in many shapes but I shall focus on five:

1. The communist record in environmental protection compared with free enterprise.
2. Pollution mitigation by emissions trading.
3. Marine conservation through individually transferable quotas.
4. Technical fixes, illustrated by the Great Ocean Cleanup.
5. Private-sector wildlife conservation case histories: Ducks Unlimited, salmon anglers, African trophy hunting, grouse moors.

The 1990s saw a high-water mark in attempting to use free-market mechanisms to improve the environment. Since then, green policies have generally retreated into various forms of central planning with even conservative parties making an exception to their preference for free enterprise when it comes to environmental policy. Reversing this trend would be beneficial.

Introduction

A founding tenet of the environmental movement in the 1970s was “IPAT”. This is the algebraic formula set out by the late Paul Ehrlich and John Holdren to explain why humanity was doomed if it continued to pursue innovation, economic growth and population expansion: Impact = Population x Affluence x Technology 2 . The more people, the more wealth and the more innovation, the worse the environmental impact. Therefore, restraint is necessary: on population, on economic growth and on technology. In fact, the very opposite is the case. The most densely populated, richest and most technologically advanced countries generally have better and improving environmental records. Poor countries are mostly seeing wildlife in retreat and air and water pollution causing severe problems.

For example, why are lions decreasing, wolves increasing and tigers holding their own? Because lions live in poor countries, wolves live in rich countries and tigers live in middle-income countries. The wealthier Africa becomes, the better the chance that lions will thrive.

Meanwhile, the invention of tractors, agricultural fertiliser and precision breeding has hugely increased agricultural yields, rapidly reducing the land needed to feed a given population and thus “sparing” a growing acreage of land for nature, amounting to several billion hectares. Thanks to technology, the world has passed peak farmland and is feeding a growing population from a shrinking acreage ³ . Likewise with energy production, industrialising economies consistently replace wood (beetle food) with coal, gas and oil (eaten by no animals) so that above a certain income level, countries are reforesting instead of deforesting: the world as a whole is now experiencing net increases in forest cover every year ⁴ thanks to the exploitation of fossil fuels which provide around 80% of world energy.

Examples of free-market conservation

Here are five arguments for the use of free enterprise in protecting the environment.

1. The communist world’s track record on environmental damage is significantly worse than the free-enterprise world’s 5 . Communist China oversaw policies of sparrow slaughter and currently experiences widespread toxic contamination from rare-earth mining while trafficking endangered wildlife such as rhino horn and pangolin scales. Soviet Russia drained the Aral Sea and leaked so much oil and chemicals into the Volga that it sometimes caught fire ⁶ . The reason for this failure is clear: in socialist systems industry and government have no accountability to the population through democratic means, or through the price mechanism. This makes them immune to protest, litigation, persuasion and the skin-in-the-game effect of private ownership. By contrast the cleaning up of European rivers after the 1960s was driven partly by legal pressure and lobbying from anglers and other users.

2. Using markets and prices to discover ways to improve environmental pollution has rarely been tried but where it has, it has mostly worked well. The best case is the 1990 Clean Air Act in America in which the government chose not to go down the conventional route of prescribing how power plants should reduce emissions of sulphur dioxide. Instead, as Sweeney et al (2012) relate, “with a phase-in beginning in
1995 and culminating in 2000, the statute capped aggregate SO2 emissions at the nation’s 3,200 coal plants and created a market for firms to buy and sell government-issued allowances to emit SO2. By 2007, annual emissions had declined below the programme’s nine million ton goal (a 43% reduction from 1990 levels), despite electricity generation from coal-fired power plants increasing more than 26%” ⁷ . This cap-and-trade mechanism was frequently urged on governments by economists for carbon dioxide emissions too, but carbon trading schemes were in practice badly designed, distorted by subsidies or price controls and failed to generate workable market incentives.

3. Overfishing remains a chronic problem throughout the world’s oceans with tragedies of the commons driving many stocks to crash. This happened to cod off Newfoundland, herring in the North Sea, great whales in Antarctica and other stocks elsewhere. Draconian enforcement of regulations to limit catches or limit fishing effort can be successful but is hard to achieve. There is now known to be a better way that uses market mechanisms: the individually transferable quota. Under this system government decides the total allowable catch but each fisherman owns a set percentage of the total and can sell his share to others. This gives each quota owner an incentive to maximise the value of his quota by ensuring that the fishery is sustainable – encouraging restraint and policing of the activity of rivals. Such systems are therefore in theory self-governing. Among the best examples are fisheries of Icelandic capelin, Falkland squid, New Zealand orange roughy, Chilean jack mackerel and others. Although ITQ systems often still have significant problems, including barriers to entry, and are not always popular in the industry, they have generally worked and have tended to improve over time ⁸ . One study of two systems working alongside each other in the Gulf of Mexico, one managed by ITQs, the other regulated in the traditional, top-down way found that “the ITQ fishery generates substantially more resource rents than the traditionally managed fishery; the difference is a large fraction of revenue (~30%).” ⁹

4. Technical fixes. Environmental activists often dislike “technological fixes”, arguing that it is better to stop pollution or interference than to render it harmless through innovation. Yet, in the case of albatross kills caused by long-line fishing fleets, three relatively simple technological innovations have essentially solved the problem where implemented ¹⁰ . Another good example is plastic in the ocean, a nuisance that has turned into an existential threat to some forms of wildlife. Boyan Slat is a Dutch entrepreneur who set out to design methods of capturing plastic especially in rivers that discharge plastic into the ocean. He dropped out of university in Delft to found a non-profit business, The Ocean Cleanup, with $300 of his own money. After several years of experiments, he has achieved remarkable success. By 2026 his interceptors were preventing 97% of the plastic dumped in Guatemala’s Motagua river from reaching the sea ¹¹ . Slat’s team has raised $350 million and plans to target 300 rivers and 30 of the worst cities. They aim to stop one-third of plastic reaching the ocean by 2030. Although the business is a non-profit, he points out that to clean up a thousand rivers and prevent almost all plastic reaching the ocean would cost only about $100 million, which is one-fifth of Greenpeace’s annual budget. Yet Slat is heavily criticised by many environmentalists for making it plausible that one day plastic could be used without continuing environmental concern. Simply put, activists find emoting about the problem of ocean plastic to be more lucrative than seeking a solution.

5. Wildlife conservation. The continent of Africa offers a useful experiment in different ways to conserve wildlife, private enterprise versus government control.

– Kenya has chosen to ban hunting and rely on government enforcement to protect its elephants, lions and rhinos. The consequence has been the eradication of almost all wildlife outside national parks and nature reserves, and a continual struggle to protect these sanctuaries against encroachment by livestock and poachers. However, in Kenya private game ranches, offering more exclusive opportunities for photographic safaris, and riding or walking holidays, have since proliferated, showing that private enterprise can contribute.

– South Africa went down the opposite route, privatising wildlife outside national parks in the 1991 Game Theft Act. The consequence has been a rapid expansion of private wildlife preserves, paid for by hunters. In the 1970s, South Africa had about half a million wild game animals. Today it holds around 25 million: 85% of those animals live on private land and around 85% of that land is commercially managed for hunting. The profit motive is driving conservation.

– A third option, pursued by Botswana, Namibia, Zambia, Zimbabwe and Mozambique, is for public land to be managed for commercial hunting with the revenue going to local communities.

– Namibia’s community based natural resource management (CBNRM) program passes 100% of the hunting revenue to local communities, giving them a strong incentive to sustain wildlife populations at levels that can allow continuous hunting.

– In Mozambique, the Coutada 11 conservancy founded by Mark Haldane has turned a landscape devastated by civil war and almost devoid of wildlife in the Zambezi delta into a rich ecosystem with 25,000 buffalo, the largest concentration of sable antelope in Africa and a rehabilitated habitat larger than the Masai Mara ¹² .Hunting supports local communities with agricultural equipment, meat rations (10-15 pounds per household a week), honey and employment. This turns communities into allies against poaching in a way that national parks rarely achieve. Coutada 11 now houses over 100 lions, and the killing of each trophy lion earns $150,000 for lion conservation, a sum that dwarfs the contribution made by wildlife photographers.

– In Zimbabwe, the Save River Valley Conservancy now has 2,500 elephants on private land and is having to find ways to cull 500 to prevent destruction of habitat.

– In 2024 Botswana’s president threatened to send 20,000 elephants to Germany after the German government proposed to limit trophy hunting imports. Germans should “live together with the animals, in the way you are trying to tell us to”, he told Bild magazine ¹³ . The 150,000 elephants in Botswana mostly live on private land where hunting provides communities with a better return than farming.

Hunting offers a way to conserve wildlife on a much larger scale than other forms of tourism. By definition, two people cannot hunt the same lion, but 20 people can and frequently do photograph the same lion. Out of every 100 people who go on wildlife safaris in Africa, 95 go to just three places: the Serengeti/Mara system in Tanzania and Kenya, the Okavango delta in Botswana and the Kruger National Park in South Africa. That leaves the rest of Africa’s national parks fighting over the remaining 5% of photographic safari revenue – a model that cannot work outside limited honeypots. Sustainable-use areas – mostly for hunting – now cover 1.5 million square kilometres or twice as much land in Africa as all national parks ¹⁴ .

Surprisingly, America, pursues a much more socialist approach to wildlife. It bans the sale of game meat and strictly limits the number of animals each hunter may kill, making the operation of private game reserves much harder to achieve. Wildlife conservation is a largely nationalised activity, funded by hefty hunting fees and public subsidies of rangers. (In Texas, non-native species hunting preserves are a way to get round this restriction.) Bison herds exist inside national parks or as farmed animals but not elsewhere – a landowner would not be allowed by law to manage land for free-ranging wild bison and fund it by the sale of hunting permits. Although private outfitters exist to guide hunters to elk, duck or quail, much of the revenue is captured by state and federal wildlife bureaus, leaving private landowners with almost no skin in the game: no incentive to manage for wildlife. None the less, private enterprise has found ways to intervene even here. Ducks Unlimited is an organisation that funnels funds from duck hunters to match federal and state funds for the protection and improvement of breeding habitat for ducks on their breeding grounds. It claims to have “conserved” 19 million acres: set aside, rewetted or cleaned up ¹⁵ .

In this respect Britain has been much more like southern Africa than America, with a tradition of treating wildlife as the private property of the landowner, to be monetised through managed hunting (shooting) or fishing. This has resulted in some successful examples of private conservation. The chalk streams of southern England are privately managed for dry-fly fishing for trout, an elite and expensive hobby, the riparian owners being fervent campaigners against water pollution. Likewise, the salmon rivers of Scotland can yield significant income and again their owners invest heavily in habitat protection and improvement – though the migratory nature of salmon makes it harder to control what happens to the fish. (Iceland’s salmon rivers resemble Mozambique’s game preserves, with local communities benefiting from income from fishermen.)

Two further British examples are red deer and red grouse. Both have been managed for profit by landowners, with conservation benefits, and grouse have become spectacularly abundant in appropriate habitats, enabling landowners to resist the temptation to intensify the farming of rare and precious heather moorland ecosystems – found almost exclusively in the British Isles — either through sheep or through commercial forestry. Indeed, the four most environmentally damaging things done to moorland in the past century were all done by government incentives: subsidised commercial planting with sitka spruce trees; subsidised overgrazing with sheep; subsidised peatland drainage; and subsidised wind farms.

The owners of grouse moors have not only achieved the remarkable feat of making the British Isles’s only endemic species of bird highly abundant but have also protected thriving populations of birds that are not hunted but are in steep decline in other habitats: such as merlin, curlew and black grouse. America’s sage grouse is similar to the red grouse in depending on one species of plant (sage instead of heather) but is in decline and the burden of conserving it falls largely on the taxpayer. Not so the red grouse, which effectively pays for its own management and that of its ecosystem. Grouse moors also provide youth employment and vital business for local pubs, hotels and other businesses. In effect they are a thriving export industry with hunters paying to come from many different countries. This is an example of privately funded conservation on a landscape scale that would otherwise cost the taxpayer £190 million a year ¹⁶ .

Yet the very success of this model has created jealousy among conservationists resentful at its success and the high value it places on land. The British government, under pressure from these environmental activist organisations, has consistently tried to make it harder for grouse moor owners to achieve their results, imposing ever more prescriptive regulations about what they can and cannot do and a creeping nationalisation is under way. Scotland has now brought in a system of licensing of grouse moors, and England is planning to follow suit. For those who manage the land, this government prescription feels like restaurant owners being told by bureaucrats how to serve meals that customers want.

Conclusion

Many policy makers on the political right are keen to pursue free-market policies in economic sectors but turn to socialism in ecological sectors. This is unwarranted. Environmental entrepreneurs are solving conservation challenges by private initiatives all over the world and only the widespread assumption that they cannot do so stands in the way of more such cases. Numerous examples suggest that an intelligent analysis of how to harness potential private incentives can lead to environmental protection and enhancement policies that work through market mechanisms. These can be sustainable and self-financing and can work on a much larger scale than government interventions such as national parks. True, these solutions will only work if governments establish the framework in which innovation and entrepreneurship will flourish. And true, also, environmental NGOs will often fight against such policies for the simple reason that economic solutions reduce the need for lucrative political lobbying, making their own business models redundant. But policy makers need to learn that free markets can be designed and encouraged in ecological policy as well as economic policy.

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