The modern-day environmental movement has been dominated by complex, top-down regulatory schemes such as the Clean Air Act, the Endangered Species Act, and the Resource Conservation and Recovery Act. The advocates of these programs have claimed that pollution is a “market failure” that can only be controlled through governmental intervention. While it’s certainly true that some environmental benefits have been realized through regulation, it has come at a much higher cost than would have been the case if market-based techniques had been used.

Moreover, command-and-control schemes are frequently arbitrary in the way they are applied, and therefore create classes of legislatively-chosen winners and losers. Many people, and in some cases entire communities, have been devastated through the harsh application of the Endangered Species Act and the federal Superfund law; and in some cases pollution has actually worsened as a result.

In the days when pollution was rampant, one arguably could justify regulations because even the most ill-considered government program was likely to do some good in a target-rich environment. But now that every major pollution source is regulated and millions of smaller sources have been cleaned up as well, the costs of preventing the last increments of pollution will be very high. This challenge requires that we rely much more on incentives than regulation.

Fortunately, during the 1980s the concept of free-market environmentalism emerged, primarily through the work of the Property and Environment Research Center in Bozeman, Montana. That work demonstrated that property rights, markets and incentives could be used to achieve environmental objectives, while also promoting economic opportunity and wealth creation. Free-market environmentalism, or FME, is now gaining credibility as a legitimate alternative to regulation.