Market Based Environmental Protection

In Brian Easton’s draft from his new book (he’s posting it on the internet for everyone to look at), he spends time talking about a Market Based system of Environmental Protection. The system would involve everyone’s rights becoming defined. An example given is if a group wants to build a new Airport. If the Airport is more economically valuable it will buy the property from its noise complaining neighbours. If peace and quiet is more valuable, its neighbours will buy the Airport to shut it down. At first read a market based system for environmental protection seems ideology gone wrong. But because Brian Easton is a truly sensible economist who has a heart, I am trying to grapple with the suggestion.

One example of market based environmental protection is the idea of selling water rights to users of the Waitaki River in New Zealand’s South Island. If recreational fishermen get part of the allocation I will be happy. Also wanting their share is Meridian for a hydro electric power scheme and farmers wanting irrigation water. With a system of water rights, to use so many litres or percentage of total water in a year, then if one user \tries to pollute the water, downstream water users could block the polluter.

New Zealand's chief environmental legislation is the Resource Management Act (RMA). It is similar to laws in other countries such as the US National Environmental Policy Act in that it requires an Assessment of Environmental Effects. Its a good idea to make people look at an action's effects before they do it, just a shame that lawyers become the judges rather than someone who understands the physical / biological side of what is going on. The way the RMA works within a market model is if developers know who is going to object to their proposal, they can go to potential objectors and pay them money equivalent to the objectors resource rights. Then the Resource Consent Application will run so much smoother. Thus buying off objectors becomes a sign of health in a market based environmental protection system.

To me a market based system of environmental protection is totally different from what New Zealand’s right wing political parties want. These parties sound like they want a reduction in peoples rights, rather than a market based system that gives everyone defined rights which they can then exercise to stop plans they object to. As to whether or not a market based system would produce environmental results that I am happy about, I do not know. And hence whether it is just something okay in theory but dismal in practice is also a big unknown.