Energy and Environment

Government climate-change policy confused, counter-productive and economically damaging


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New IEA research released

New research released by the Institute of Economic Affairs today finds that government environmental policy has done little to solve environmental problems, and has come at great economic cost.

Vested interests driving environmental policy

  • Vast sums of taxpayer money made available for ‘green initiatives’ present bureaucrats with numerous opportunities to expand budgets and initiate policies which bring with them new responsibilities and grand titles.

  • Small, concentrated interest groups are more likely to engage in lobbying. The government’s search for ‘green initiatives’ in which to invest public money has led these groups to indulge in ‘rent-seeking’ behaviour – urging government to redistribute resources to them, taking it from dispersed groups such as taxpayers.

  • Similar groups exist in the business world and often lobby successfully to capture the policy initiative. Policies have therefore been pursued by government which do little to mitigate environmental problems but instead serve to protect vested interests from competition.

Climate change policies increasing emissions

  • International climate change agreements have failed to achieve their targets and instead have often served to increase emissions.

  • Under carbon trading agreements, companies in the developed world are encouraged to divert resources into financing ‘clean’ factories and methods of production in the developing world.

    • However, without such government interference, these factories – ‘clean’ or not – might well not have come into existence of their own accord. Thus a developing nation’s carbon emissions can actually increase

  • Further, as reward for diverting resources in this manner, businesses are granted ‘credits’ which allow them to emit more carbon – again increasing overall emissions levels.

Stronger enforcement of property rights needed

  • Markets are capable of solving environmental problems by using dispersed knowledge held by individuals in a way which no government agency can, but a market can only operate where private property rights are adequately protected

  • Therefore any efficient solution to environmental problems must involve government upholding strong private property rights

  • However, most state-led, centralised policies erode property rights and free markets and thus threaten to crowd out private solutions to environmental problems

Dr Richard Wellings, Deputy Editorial Director of the IEA and guest editor of the latest issue of Economic Affairs, says:

“Environmental policy is increasingly being driven by vested interests. This is worrying as it is leading to policy which is often formulated for the monetary or resource benefit of those doing the lobbying, rather than any tangible environmental gain. Indeed global climate change agreements are currently so misguided that they are often having the perverse effect of increasing emissions.

“What government needs to do is to uphold private property rights, under which conditions a free-market can thrive. Solutions to environmental problems are far more likely to come into being through private-sector entrepreneurship rather than through state-led centralised diktat. Governments must do all they can to avoid stifling and crowding out such innovation.”

Notes to editors

To arrange an interview with Dr Richard Wellings, IEA Deputy Editorial Director, please contact Stephanie Lis, Communications Officer, 020 7799 8900, [email protected].

Copies of the report can be obtained by contacting Stephanie Lis, Communications Officer, [email protected].

The mission of the Institute of Economic Affairs is to improve understanding of the fundamental institutions of a free society by analysing and expounding the role of markets in solving economic and social problems.

The IEA is a registered educational charity and independent of all political parties.