When California passed its landmark greenhouse gas reduction law in 2006, few people thought that the environmental community would become one of the most impassioned lobbies against the program. After all, by placing the first economy-wide cap on greenhouse gas emissions, California stepped out ahead of not only the rest of the United States, but indeed, much of the rest of the world in addressing the largest and most vexing environmental problem of our era.

Yet despite the undeniable environmental merit of the program as a whole, some environmentalists have ardently opposed one of its key components – the use of carbon offset credits as a means of satisfying a portion of the reductions mandated by the program.

In January, a state judge dismissed a lawsuit by an environmental group that challenged the state’s authority to include offsets as part of the cap-and-trade program. And in March, the international group Food & Water Watch published a report leveling criticism at the proposed inclusion of international forestry offset projects in the program.

The report, entitled Bad Trade: International Forest Offsets and the Carbon Market, is a good example of this perspective. It makes a number of arguments relating to the practicality of monitoring and ensuring these projects achieve real carbon reductions. But the report also goes beyond these pragmatic considerations. At a deeper level, the report reflects a fundamental mistrust of the use of market-based mechanisms for addressing environmental problems.

In the words of the authors, market-based schemes, such as offset trading, are leading to the “privatization and financialization of nature.” Report at 1. In particular, such programs “expose[] vital forest resources to financial markets that have no regard for the intrinsic value of biodiversity, conservation, sustainable management and the necessity for common resources to remain under public control.” Report at 2. In other words, carbon trading is wrong because it commoditizes nature – something with intrinsic value well beyond the capacity of any market to measure.

In my experience, I find that many environmentalists reflexively share this perspective. As an attorney who spent years litigating cases to protect threatened and endangered species, I have often felt this way myself. But I have come to believe that this viewpoint is counterproductive, and indeed, that environmental groups should support market-based mechanisms for achieving environmental goals.

John Muir and Nature’s Cathedrals

Perhaps the best-known proponent of the ethos underlying the Food & Water Watch report is John Muir. In the early 20th Century, John Muir fought to protect a picturesque valley known as Hetch Hetchy Valley, located in what is now Yosemite National Park. Considered equal to Yosemite Valley in beauty, Hetch Hetchy was being considered as the location for a dam that would bring drinking water to California’s rapidly growing population. Muir lays out his opposition in a beautiful essay published in 1908. The essay includes this passage on Hetch Hetchy’s majestic waterfalls (see inset photo courtesy of the Sierra Club):

“Imagine yourself in Hetch Hetchy on a sunny day in June, standing waist-deep in grass and flowers (as I have oftentimes stood), while the great pines sway dreamily with scarce perceptible motion. Looking northward across the Valley you see a plain, gray granite cliff rising abruptly out of the gardens and groves to a height of 1800 feet, and in front of it Tueeulala’s silvery scarf burning with irised sun-fire in every fiber. In the first white outburst of the stream at the head of the fall there is abundance of visible energy, but it is speedily hushed and concealed in divine repose, and its tranquil progress to the base of the cliff is like that of downy feathers in a still room. Now observe the fineness and marvelous distinctness of the various sun-illumined fabrics into which the water is woven; they sift and float from form to form down the face of that grand gray rock in so leisurely and unconfused a manner that you can examine their texture, and patterns and tones of color as you would a piece of embroidery held in the hand. Near the head of the fall you see groups of booming, comet-like masses, their solid, white heads separate, their tails like combed silk interlacing among delicate shadows, ever forming and dissolving, worn out by friction in their rush through the air. Most of these vanish a few hundred feet below the summit, changing to the varied forms of cloud-like drapery. Near the bottom the width of the fall has increased from about twenty-five to a hundred feet. Here it is composed of yet finer tissues, and is still without a trace of disorder — air, water and sunlight woven into stuff that spirits might wear.”

After laying out his response to all the various arguments advanced for creating the dam, in one of his clearest expressions of the inherent value of nature, Muir concludes:

“Dam Hetch-Hetchy! As well dam for water-tanks the people’s cathedrals and churches, for no holier temple has ever been consecrated by the heart of man.”

As an environmentalist, and indeed a human being, these words strike a deep chord in me. Many modern environmentalists have carried the religious metaphor into the carbon trading debate, likening carbon offsets to the old Catholic practice of purchasing indulgences to wipe away sin.

But even if Muir and his contemporary followers are correct on a philosophical or moral level, this will not significantly help us solve the climate crisis. Of course it would be preferable for all emitters of CO2 – and all consumers of products manufactured, shipped, and purchased through the use of fossil fuels – to wake up one day realizing that their actions are slowly destroying life on Earth as we know it. But this has not happened in the 100+ plus years since John Muir published his masterful arguments. In fact, since that time, global emissions of CO2 have increased by a factor of 16 (see chart courtesy of USEPA). Unfortunately, John Muir has not convinced the world of his position. And if John Muir couldn’t do it, I don’t believe anyone can.

The “Bulldog” of Environmental Laws

Modern environmentalists may argue we are making progress in this direction. Since Muir’s time, we have witnessed the first Earth Day celebration, the passage of sweeping environmental laws, and a rising consumer awareness of the need to consider environmental impacts in the products we buy. But if you look deeper, in almost every area where real change has occurred, those changes have come about as the result of balancing economic and environmental concerns.

For example, many environmentalists point to the passage of the Endangered Species Act in 1973 as a triumph of environmental purism. In the famous case of TVA v. Hill, the United States Supreme Court called the law the “most comprehensive legislation for the preservation of endangered species ever enacted by any nation.” In the case, the Court ruled that the completion of the Tellico Dam on the Little Tennessee River could not proceed because it would eradicate a small, three-inch fish called the snail darter. The Court halted the project despite the fact that the dam was already half built at a cost of over $100 million and had the full weight of the federal government behind it.

But while this case has become a David and Goliath parable that seemed to value a tiny fish above a $100 million project, the Court’s reasoning demonstrates that economic concerns actually supported the result. In discussing the legislative history of the law in Congress, the Court noted that the legislative history was full of references to the economic value of biological diversity, including this statement from a House Committee report:

“From the most narrow possible point of view, it is in the best interests of mankind to minimize the losses of genetic variations. The reason is simple: they are potential resources. They are keys to puzzles which we cannot solve, and may provide answers to questions which we have not yet learned to ask. . . . Who knows, or can say, what potential cures for cancer or other scourges, present or future, may lie locked up in the structures of plants which may yet be undiscovered, much less analyzed? . . . Sheer self-interest impels us to be cautious.”

And this presents the question – would the authors of the Food & Water Watch report condemn the Endangered Species Act as being based in part on economic considerations? Would they seriously doubt that the cause of environmental protection is better served with this law than without it? If not, then they should stop condemning climate change laws that seek to minimize the economic impacts of regulation through market-based mechanisms like carbon offsets. As a practical matter, such programs are the best we have ever been able to get.

And if this seems like too much to sacrifice, I would suggest sitting in on a hearing before the California ARB to listen to the concerns being expressed on the other side of the table. I have heard speeches by groups like the California Manufacturers & Technology Association that vociferously oppose the “job killing” effects of California’s cap-and-trade program. Indeed, the numbers show that the costs imposed on California’s manufacturing segment cannot be gainsaid. At the current price of $12.22 per carbon allowance, a mid-size emitter of around 100,000 tons per year is incurring an annual compliance cost of $1.22 million. And there are hundreds of entities subject to the program, including some with compliance bills that approach $50 million a year on the highest end. Clearly, the regulated community is not exactly declaring victory here.

The Eco-Economy Principle

To provide one more example, in his 2001 book Eco-Economy, Lester R. Brown of the Earth Policy Institute posed the intriguing question: Is the environment part of the economy or is the economy part of the environment? By this question, he meant to break down the assumption made by many in our society that the environment can be seen as subordinate to the primary imperative of economic vitality. Instead, he argues that the equation should be flipped, since without healthy soils there are no crops, without healthy oceans there are no fish to harvest, without limits on greenhouse gas emissions there will be increasing destabilization of nature, with the myriad economic effects that come along with it.

Yet even Brown is no environmental purist. While arguing that the environment is paramount, he recognizes that economic vitality is also an important objective. He ably discusses economic theory and the need for a vital economy to sustain a quality standard of living for the world’s people. And when it comes to specific policies seeking to protect the environment, Brown points to a number of market-based programs as examples to be emulated.

For example, Brown points to the permit trading program used by the US Environmental Protection Agency to reduce the sulfur dioxide emissions from coal-fired power plants in the 1990s. EPA set a target of reducing sulfur dioxide emissions by half between 1990 and 2000, and issued emissions permits set to achieve this goal to some 263 electric generating units operated by 61 utilities. As noted by Brown, the program achieved its goal by 1995 — five years ahead of schedule.

Final Thoughts

This article was intended to refute the thinking by some environmentalists that market-based programs like cap-and-trade are bad because they “commoditize” nature. At bottom, the problem with this view is it is simply impractical. The rest of the world does not see things the way John Muir did. The rest of the world sees the environment, but it also sees dollars and cents. As much as we may try, we will not change people’s behavior by beating them over the head with guilt for seeing things differently from us. If we want to change people’s behaviors, we need to understand what motivates them and then engage with them on those terms. Pretending that the world shares our motivations is folly.

This is not to say we should not try to change the way the world sees. We should continue teaching our children to appreciate the joys of nature. Take them on walks through the woods, on rafting trips down rivers, to the tops of mountains where they can see majestic birds soaring above the treetops. But if we want to make sure these places still exist for our children and our children’s children to enjoy, we cannot afford to make the mistake of confusing what is for what ought to be.

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