Todd Wynn
Cascade Commentary

Worried About Climate Change? Promote Free Markets!

by Todd Wynn

Every day more and more Americans are growing skeptical of the climate change doomsday claims and plans to ration energy through cap-and-trade type proposals. Despite this, many environmentalists still claim that far-reaching government intervention is needed to achieve greater energy efficiency and lower greenhouse gas emissions to reduce the threat of global warming. Although there has been no statistically significant global warming since at least 1995, the same groups often claim economic growth and lack of comprehensive environmental regulations have created a society that wastes energy and pays no regard to greenhouse gas emissions. But what if less energy use and lower greenhouse gas emissions are a byproduct of limited government and economic freedom? What if environmentalists’ goals can be reached by freer markets and prosperity? Recent Cascade Policy Institute research shows that very phenomenon.

Cascade Policy Institute has found that economic freedom and limited government lead to greater energy efficiency and lesser amounts of emissions. What’s more, advocating for more government control of the economy very well may lead to a less efficient and more greenhouse gas intense economy.

Your browser may not support display of this image. Economic freedom is known to have a profound effect on the efficient allocation of resources. Without subsidies, tariffs, and other government interventions, economic activity operates in the most efficient manner because of competitive pressures to produce more with fewer inputs. This means that energy use per unit of production is decreased with the presence of free markets. Although there is no intrinsic profit incentive for decreasing greenhouse gas emissions, the push to lower energy costs leads to lower amounts of greenhouse gas emissions per dollar of gross domestic product. This is because of the close relationship between energy intensity and greenhouse gas intensity.

Cascade Policy Institute’s (CPI) study reveals an interesting relationship between greenhouse gas emissions, energy efficiency and economic freedom.

Beginning in 1995, The Wall Street Journal and the Heritage Foundation have tracked economic freedom of countries around the world. The index contains ten benchmarks that gauge economic freedoms of countries across the world along with an overall freedom score, which represents the average. Benchmarks are graded on a 0-100 scale with 100 being the most free and 0 being the least free.

Your browser may not support display of this image. When this data was combined with other economic and energy variables, some remarkable relationships were discovered. Analyzing 165 countries over a ten-year period (1995-2004), CPI found that higher levels of economic freedom lead to higher levels of energy efficiency and lower levels of greenhouse gas emissions per dollar of gross domestic product.

In addition to having lower energy and greenhouse gas intensity overall, the more economically free countries have experienced declines in carbon and energy intensity over time, while countries with less economic freedom actually increased their carbon and energy intensity levels over the ten-year range.

Average Annual Energy Intensity

Average Annual CO2 Intensity

Also, the analysis found that one additional freedom score point would increase a country’s energy efficiency by 0.82%. With regard to greenhouse gases, one additional freedom score point would decrease the country’s greenhouse gases per dollar of GDP by 1.01%

Thus, a country’s level of economic freedom is a significant and negative factor in determining the amount of energy used and the amount of emissions produced per dollar of GDP. This conclusion contradicts the perceived notion that top-down government regulation is the only way to foster energy efficiency and lower greenhouse gas intensity. Therefore, by advocating for more government intervention into various aspects of the economy, one is essentially advocating for a less energy efficient and more greenhouse gas intense economy.

At the same time most Americans are realizing that the alarmist climate change rhetoric is exaggerated nonsense, overly anxious environmentalists need to take a second look at the merits of free markets and economic prosperity as a potential no-regrets strategy for reducing carbon emissions and energy use.

Click here for the new printer-friendly pdf version of this commentary.

Todd Wynn is Vice President at Cascade Policy Institute, Oregon’s free market public policy research organization. He was formerly Climate Change and Energy Policy Analyst at Cascade.

3 thoughts on “Worried About Climate Change? Promote Free Markets!

  1. As I look out my window, here in beautiful Arizona, it is snowing on April 29th, 2010. I have lived in Arizona for 33 years and I HAVE NEVER SEEN IT SNOW THIS LATE. I saw Vermont got two foot of snow on Wednesday (again the old-timers said they had never seen that much snow, that late in the year) they are opening the ski resort at Stowe for the weekend…thank GOD we have 338 ppm of C02 in the atmosphere or we’d all be waist deep in snow.
    So much for the Theory of Anthropogenic Global warming…no wonder they changed the name to Global Climate Change. Now whether it gets hotter or colder the alarmist watermelons (green on the outside and red on the inside) can claim it is the fault of the plant food trace gas we call C02. Even though C02 is only 2% of the Earth’s atmosphere and anthropogenic C02 is only2% of that the alarmists still claim we have to move back to the Stone Age. Please regard these two numbers for a second .02 x .02 = .004 of the atmosphere is C02 or inversely 99.96% of the atmosphere is NOT C02. Yet the alarmists still claim we have to move back into the Stone Age visa-via energy use that is C02 producing…we also cannot build nuclear power plants that make lots of electricity and no C02.
    So the alarmists will never admit that the entire AGW Theory is a scam, never. So we are stuck we having to disprove their gimcrack theory by empirical observable facts and then go after every individual part of their efforts to stop energy production and show, as Todd has done an excellent job of here, that even the effort to move backwards on economic and energy intensity causes a negative outcome in terms of total C02 impact. As I always tell my students “The road to Hell is paved with good intentions.” Or as Dr. Milton Friedman used to say: “There is nothing more dangerous than a bureaucrat with good intentions.” Or “Hell hath no fury like a bureaucrat scorned.” The law of unintended consequences is a tough mistress and when you try to force Rube Goldberg theories on her-she pushes back hard!
    When I was a kid growing-up in Montana we used to drive back and forth from Missoula to Great Falls (to visit my Grandpa and Grandma) and every trip we would pass an old U.S. Forest Service Sign designating the U.S. Continental Cold Spot, in 1954 the Mercury dropped to -76 degrees Fahrenheit. I always loved that old sign. We would stop there, about 100 foot from the top of Rogers Pass, and eat lunch or just have a snack. I can’t remember how many times I read that sign, but it was in the hundreds of times. Every time I read it I thought about how resilient our planet was & is and how tough our species was to carve a life out of this wilderness. Decades later I taught at the University of Alaska at Anchorage and was even more shocked by how the native arctic peoples were and how God forsaken their niche was. I would listen to these outsiders who droning on and on about how we were hanging on by a thread to our niche, in this rare ecosystem and I thought “Are we looking at the same place?”
    When I flew into the bush and stayed with the Eskimo or the Inuit or the Tlingit I was always left speechless by how tough they were and how for thousands of years they had not only survived, but thrived in arguably the harshest climate on earth. I just never bought the human caused- C02 is destroying the earth theory-Occam’s Razor=>”it’s the Sun stupid”. 100 million years after we are all just a speck of color in a stratum of sedimentary rock the Earth will still be just fine. We, all of us, all mankind will be long dead and gone just another evolutionary dead end. But whatever amount of C02 we either emitted or abated will matter not a whit. Still and all, great work Todd!

  2. This is hardly a new concept for those of us who care about the environment, but are intellectually honest enough to look at the actual data. But it does provide yet another a clear documentation that statist collectivism has always led to a degradation of the environment, just as it massively degrades all other components of human life, and especially human freedom. The problem in the USA now is that, as Enron, Fannie Mae and Freddie Mac, the Obama “stimulus”, and now Goldman Sachs have shown, the crony capitalism (economic policies identical to those of fascism) which our economic system has evolved into no longer even remotely resembles a free market. That the very perpetrators of this degradation are trumpeting the “environment” as an excuse to vastly increase the massive levels of influence that they already have to peddle is particularly obscene.

    From Bismarck, through Teddy Roosevelt, Woodrow Wilson, Mussolini, Hitler, Stalin, FDR, LBJ, Nixon, and now, especially, Obama, the primary driving motivation is, and always has been to maximize their political power so as to maximize the influence they have to peddle. (Just as Woodrow Wilson explicitly lamented the end of WWI for its diminution of his political power, the Obama administration celebrates the massive recession that statist government policies have created by ” not letting the crisis go to waste” politically.) Despite variations in other aspects of these political approaches, the maximization of political power at the expense of individual freedom is the common thread because it is the underlying motivation. And the force of that motivation is so powerful that, despite its unparalleled legacy for creating human misery, the drive towards statist collectivism, while clearly deserving of its proper place in the dustbin of history, is not only alive, but ascendant today.

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