Climate Change As If Property Rights Mattered

Reason Roundtable

Climate Change As If Property Rights Mattered

Individuals should be compensated by those whose actions create environmental problems that produce provable damages to their property

For most libertarians the best thing that policy makers can do to advance environmental values is to protect property rights from both government and private harm. Landowners should be free to make productive use of their property so long as they do not unduly infringe upon the rights of their neighbors. Government regulations should not restrain private landowners from engaging in non-harmful land uses, but legal recourse should be available to those whose property is actually damaged by industrial or other activity.

The strength of such an approach is that it makes environmental protection part and parcel of protecting individual rights. On the one hand, it makes addressing environmental side-effects that harm someone’s property a matter of justice – anchoring environmental goals in far stronger normative grounds than those offered by the modern-day environmental movement. On the other, it allows for the maximum possible exercise of an individual’s property rights consistent with others’ use of theirs. By emphasizing property rights, this approach, called Free Market Environmentalism or FME, produces the most optimal balance between economic activity and environmental protection, maximizing human welfare. Yet its ultimate commitment is not to utilitarian outcomes – but to property rights properly enforced.

FME theorists, such as Terry Anderson, Donald Leal, Fred L. Smith, Jr., R.J. Smith, and Richard Stroup, believe that most environmental problems can be solved through the recognition and protection of property rights in natural resources. When property rights are transferable and protected by law, individual property owners can make voluntary agreements to transfer resources to their most valued uses, as well as to protect shared resources and resolve conflicts between neighboring land uses. Such “private ordering” or arrangements allow for the evolution and emergence of non-governmental approaches to conservation. Because a system of property rights and market exchange makes it possible to take advantage of dispersed economic and ecological knowledge possessed by individuals about their own circumstances and subjective value preferences, as well as the relative scarcity of given resources, it offers a far more effective way of environmental conservation than contemporary command-and-control environmental regulations and ecological central-planning.

Property-rights-based institutions have outperformed prescriptive regulations in addressing many environmental concerns, from over-fishing and species preservation to water scarcity and pollution control. Take fishing, for example. Whereas open-access fisheries fall prey to the “tragedy of the commons,” and regulatory prescriptions encourage wasteful practices, the adoption of private fishing rights or “IFQs” (individual fishing quotas) has encouraged greater stewardship of ocean fisheries by giving fishermen a stake in the health of the underlying resource, as demonstrated by successful rights-based fishery management in Iceland, New Zealand, and British Columbia, among other places.

Developing property rights-based solutions for problems such as air pollution may be particularly difficult because it is harder to trace whose emissions are responsible for how much harm and to whom. Nevertheless, there is a broad libertarian consensus that individuals should be compensated by those whose actions create environmental problems that produce provable damages to their property (broadly understood as not just as their homes or physical assets but their body and health as well). Or so it seems save one glaring exception: Global Warming.

While there is still a robust debate over many aspects of climate change, there is a fairly broad consensus that human activity is contributing to a gradual warming of the global atmosphere. Experts continue to debate the nature and extent of humanity’s contribution, but even most so-called “skeptics” accept the likelihood of a human impact on the climate system. Predictions of an impending greenhouse catastrophe might be questionable, but it is reasonable to expect that global warming will have some deleterious effects including flooding from rising sea levels. Further, such negative consequences won’t be felt uniformly. While wealthy, temperate nations may actually benefit from a modest warming, poorer nations in tropical regions will bear its brunt, even though they have not contributed to the warming in any significant way.

Most libertarians and conservatives argue that the best response to the risk of climate change is to do little or nothing at all. Some adopt this position because they do not believe that anthropogenic emissions are likely to have a significant effect on the global climate. Many others admit that human activity is contributing to climate change, but believe the costs of climate change policy outweigh the risks of climate change itself.

These concerns are valid but they hardly justify taking concerns about the property right implications of global warming completely off the table. A commitment to property rights in fact requires a more proactive policy approach.

Under the common law principles endorsed by most FME proponents, the consequences of anthropogenic warming could constitute actionable nuisances – just like activities that, say, cause downstream flooding, alter the “natural” flow of waterways depriving existing users, or otherwise interfere with a neighboring landowner’s “quiet enjoyment” of her land. FME proponents would recognize these infringements even if legal remedies were unavailable.

It is a well recognized principle of common law that if company A is flooding the land of person B, it is irrelevant whether company A generates lots of economic prosperity for the local community (including B). A’s action would still violate B’s property rights, and B would be entitled to enforce his rights. This does not mean that A’s activity would have to cease for good. A and B could reach an out-of-court settlement allowing A’s action to continue in return for compensation. If A’s activity truly benefits B, then such a deal is likely. If not, B’s property rights should be respected. In short, the existence of positive pecuniary externalities does not excuse the imposition of affirmative harms – especially not without compensation.

By the same token, if the land of a farmer in Bangladesh is flooded, due in measurable and provable part to human-induced climate change, why would he be any less entitled to redress than a farmer who has his land flooded by his neighbor’s land-use changes? Nor does it matter that Bangladesh might stand to benefit from industrial development: If one’s normative baseline includes a commitment to property rights, then aggregate welfare maximization is secondary – if not irrelevant.

The whole point of protecting property rights is to ensure that property owners control exercise of their own rights. If a property owner wishes to accept another’s waste in return for compensation, that should be her choice. If not, then her right to refuse ought to be protected. Individual property rights should not be put up for a community vote or sacrificed as part of some utilitarian calculus. Libertarians readily accept this principle when government planners violate property rights in the name of economic development (think of the Supreme Court’s landmark eminent domain decision, Kelo v. New London). Yet they seem to abandon their commitment to property rights when it comes to global warming.

From an FME perspective, in a perfect world there would be some legal mechanism whereby those harmed by global warming could seek redress from those most responsible for the harm. In theory, some international tribunal or other institutional mechanism could arbitrate and enforce cross-national property rights violations stemming from a negative global “externality” such as global warming. Yet no such institution exists. What’s more, any institution capable of administering cross-national claims of this sort could itself be a threat to individual liberty. In order to effectively enforce judgments across countries, such a tribunal would need extraordinary powers over sovereign nations and their territory. Yet it is hard to imagine how one would hold such an institution accountable and ensure that it exercises its powers in an honest manner and handle claims in a just and efficient way. Even reaching consensus across so many diverse cultures as to what constitutes acceptable standards of evidence and burdens of proof would seem impossible. The record of existing multinational organizations, such as the United Nations, does not give much hope.

For these reasons, libertarians would be entirely justified in concluding that international climate change agreements and regulatory institutions would be pointless, ineffectual, or positively harmful. After all, just because there is a problem does not mean there is a practical, worthwhile solution. But at least the problem should be acknowledged. Given both the number of emitters and affected nations involved as well as the near-impossibility of meaningful short-term mitigation measures, there may be nothing approaching a perfect, “first-best” FME approach to climate change. Even a “tenth” or “twentieth-best” approach may be beyond our reach. Nonetheless, consideration of FME first principles can provide a metric against which competing policy proposals could be judged.

Given the potential impact of climate change on property rights, we ought to at least start thinking about policy measures that compensate affected parties without themselves posing a risk to individual liberty. Further, if the U.S. government is going to be in the business of handing development assistance, it could make mitigating the effects of U.S. contributions to climate change the guiding principle of its aid. Government-to-government wealth transfers are almost always a waste, but direct investment in local infrastructure, disaster preparedness and the like might not be. Also, industrialized nations could reform their immigration policies to accept climate “refugees.”

Reasonable people will disagree about specific policy measures and the principled compromises that need to be made to address the effects of global climate change. The point here is not necessarily to lay out a fully worked out proposal. Rather the point is to try and identify the normative principles that ought to guide any such proposal. At the very least, this thought experiment should suggest that there are policies more consistent with FME than acceptance of the status quo and advocating doing nothing at all.