Energy and Environment

The hidden cost of environmental scares


Monetary Policy
Tax and Fiscal Policy
Environmental scares have a long history. At the end of the 18th century, Thomas Malthus predicted that rapid population growth would lead to war, pestilence and famine. Almost 200 years later, the 1972 Club of Rome report, The Limits to Growth, pointed to similar consequences due to rising populations, pollution and the exploitation of finite natural resources.

But the disasters failed to materialise. In flexible market economies the price mechanism incentivised consumers to use scarce resources more efficiently. Entrepreneurs found lower-cost substitutes and developed new technologies to improve productivity, for example through the new crop varieties that facilitated the green revolution. Nevertheless, the ideological climate created by The Limits to Growth contributed to the implementation of some unpleasant sterilisation programmes in developing countries in an attempt to reduce birth rates.

These consequences were relatively minor compared with the effects of Rachel Carson’s 1962 book Silent Spring. The resulting assault on pesticides lead to the banning of DDT in the USA and the steering of foreign aid to prevent its use in tropical countries. As revealed in Malaria and the DDT Story, this green crusade contributed to the death of up to 100 million people, as efforts to eradicate the disease were hampered by controls on spraying.

The world is now gripped by another environmental issue: climate change. The latest IEA monograph, Climate Change Policy: Challenging the Activists, describes how the policy agenda has been captured by quasi-religious ‘global salvationists’. Even more than in previous green campaigns, dissent has been ruthlessly suppressed. Organisations like the Intergovernmental Panel on Climate Change (IPCC) are dominated by ‘true believers’ and the political process is noticeably biased towards socialist-style initiatives based around central planning and detailed regulation.

In the worst case scenario, global warming will provide a rationale for state officials to increase dramatically their control over households and businesses, in terms of their freedom of movement, housing choices and energy consumption. Entrepreneurship and innovation will suffer and economic growth rates will fall. Intrusive bureaucracy will thrive. This will cause discomfort in the West, but it will be disastrous for developing countries. Even a small cut in their growth rates will condemn millions more to poverty and disease.

As the authors of the book explain, climate change can be addressed by relatively low cost policies that reduce emissions without significantly reducing the dynamism and flexibility of market economies. The ability of individuals, businesses, communities to innovate and adapt can be retained. Accordingly, calls for central planning and heavy regulation should be strongly resisted.

Deputy Research Director & Head of Transport

Richard Wellings was formerly Deputy Research Director at the Institute of Economic Affairs. He was educated at Oxford and the London School of Economics, completing a PhD on transport and environmental policy at the latter in 2004. He joined the Institute in 2006 as Deputy Editorial Director. Richard is the author, co-author or editor of several papers, books and reports, including Towards Better Transport (Policy Exchange, 2008), A Beginner’s Guide to Liberty (Adam Smith Institute, 2009), High Speed 2: The Next Government Project Disaster? (IEA , 2011) and Which Road Ahead - Government or Market? (IEA, 2012). He is a Senior Fellow of the Cobden Centre and the Economic Policy Centre.