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Free-market environmentalism is the political position that argues that the free market, property rights, and tort law provide the best means of preserving the environment, internalising pollution costs, and conserving resources.
While environmental problems may be viewed as market failures, free market environmentalists argue that environmental problems arise because:
- The state encodes, provides and enforces laws which override or obscure property rights and thus fail to protect them adequately.
- Laws governing class or individual tort claims provide polluters with immunity from tort claims, or interfere with those claims in such a way as to make it difficult to legally sustain them.
Free-market environmentalists therefore argue that the best way to protect the environment is to use tort and contract laws governing and protecting property rights and tort claims to protect the environment. They believe that if affected parties can compel polluters to compensate them they will reduce or eliminate the externality. Market proponents advocate changes to the legal system that empower affected parties to obtain such compensation. They further claim that governments have limited affected parties' ability to do so by complicating the tort system to benefit producers over others.
Some economists argue from the Coase Theorem that, if industries internalized the costs of negative externalities they would face an incentive to reduce them, perhaps even becoming enthusiastic about taking advantage of opportunities to improve profitability through lower costs. Moreover, economists claim this would lead to the optimal balance between the marginal benefits of pursuing an activity and the marginal cost of its environmental consequences. One well-known means of internalizing a negative consequence is to establish a property right over some phenomenon formerly in the public domain. This requires a little abstract thinking in the case of environmental problems as these Coasians are talking about a grant to pollute or to exploit some limited natural phenomenon. This is a sophisticated variant of the polluter pays principle. However, critics have charged that the "theorem" attributed to Coase is of extremely limited practicability because of assumptions, including that it was theorized to account for adjacent effects where transaction costs for bargaining agents are typically small, but is ill-suited to real world externalities which have high bargaining costs due to many factors.
A number of libertarians, such as geo-libertarians, reject the Coasian solution in favor of Land Value Taxation and Pigouvian taxation. They argue that when land is monopolized, it encourages sprawl and waste in violation of the Lockean proviso and the Law of equal liberty. They argue that rectifying this injustice requires that landholders pay for the value of land that they use, to discourage excluding others from the Commons. The revenue could be used for a Citizen's Dividend. 
Rothbardians also reject the proposed Coasian solution as making invalid assumptions about the purely subjective notion of costs being measurable in monetary terms, and also of making unexamined and invalid value judgments (i.e., ethical judgments). ( PDF) The Rothbardians' solution is to recognize individuals' Lockean property rights, of which the Rothbardians maintain that Wertfreiheit (i.e., value-free) economic analysis demonstrates that this arrangement necessarily maximizes social utility. ( PDF)
Proponents of free-market environmentalism use the example of the recent destruction of the once prosperous Grand Banks fishery off Newfoundland. Once one of the world's most abundant fisheries, it has been almost completely depleted of fish. Those primarily responsible were large "factory-fishing" enterprises driven by the imperative to realize profits in a competitive global market. It is contended that if the fishery had been owned by a single entity, the owner would have had an interest in keeping a renewable supply of fish to maintain profits over the long term. The owner would thus have charged high fees to fish in the area, sharply reducing how many fish were caught. The owner also would have closely enforced rules on not catching young fish. Instead commercial ships from around the world raced to get the fish out of the water before competitors could, including catching fish that had not yet reproduced.
Another example is in the 19th century early gold miners in California developed a trade in rights to draw from water courses based on the doctrine of prior appropriation. This was curtailed in 1902 by the Newlands Reclamation Act which introduced subsidies for irrigation projects. This had the effect of sending a signal to farmers that water was inexpensive and abundant, leading to uneconomic use of a scarce resource. Increasing difficulties in meeting demand for water in the western United States have been blamed on the continuing establishment of governmental control and a return to tradable property rights has been proposed.
According to Richard L. Stroup, markets in the environmental field, in order to function well, require "3-D" property rights to each important resource — i.e., rights that are clearly defined, easily defended against invasion, and divestible (transferable) by owners on terms agreeable to buyer and seller. The first two rights prevent property owners from being forced to accept pollution, and the third right provides an incentive for owners to be good stewards.
Notable free-market environmentalists
- Jonathan H. Adler
- John Baden
- Roger Bate
- Daniel Cohn-Bendit
- Ralph Borsodi
- Bolton Hall
- Rodney Hide
- Laura Jones (Fraser Institute)
- Preston Manning
- Julian Morris
- Julian Lincoln Simon
- Fred L. Smith
- Bruce Yandle
- Terry L. Anderson
Notable free-market environmentalist groups
Political parties that have supported free-market environmentalism:
- Liberal Democratic Party (Australia)
- Libertarian Party (United Kingdom)
- Libertarian Party (United States)
Some critics argue that free-market environmentalists have no method of dealing with collective problems like environmental degradation and natural resource depletion because of their rejection of collective regulation and control. They see natural resources as too difficult to privatize, as well as legal responsibility for pollution and degrading biodiversity as too hard to trace.
The lack of regulations in favor of a purely reactive form of environmentalism results in situations where, when the true scope of environmental damage goes undetected for generations, as is often the case, it becomes impossible to trace its causes back to the responsible parties, and even a successful lawsuit cannot fully encompass the long-term or permanent damages or harm done to those affected.
- Enviro-Capitalists: Doing Good While Doing Well
- Foundation for Research on Economics and the Environment
- Green anarchism
- Green libertarianism
- Green syndicalism
- Natural capitalism
- Property and Environment Research Center
- Waterkeeper Alliance
- Wise use
- Mamlyuk, Boris. Analyzing the Polluter Pays Principle Through Law and Economics.
- David Estlund (19 July 2012). The Oxford Handbook of Political Philosophy. Oxford University Press. p. 164. ISBN 978-0-19-537669-2.
- Stroup, Richard L. (2008). "Free-Market Environmentalism". In David R. Henderson (ed.). Concise Encyclopedia of Economics (2nd ed.). Indianapolis: Library of Economics and Liberty. ISBN 978-0865976658. OCLC 237794267. Also available at: Stroup, Richard. Free-Market Environmentalism. The Library of Economics and Liberty.
- Environment – Liberal Democratic Party. Retrieved 24 August 2013.
- "Libertarian Party 2010 Platform". May 2010. Retrieved 23 April 2011
- Friedman, Jeffrey, "Politics or Scholarship?", Critical Review, Vol. 6, No. 2-3, 1993. pp. 429–45.
- Partridge, Ernest. "With Liberty and Justice for Some." Environmental Philosophy edited by Michael Zimmerman, Baird Callicott, Karen Warren, Irene Klaver, and John Clark, 2004. 
- Anderson, T L & Leal, D R (1991) Free-market environmentalism ISBN 0-8133-1101-2
- Grundfest, J.A. (1992). "The limited future of unlimited liability: a capital markets perspective". Yale Law Journal (The Yale Law Journal, Vol. 102, No. 2) 102 (2): 387–425. doi:10.2307/796841. JSTOR 796841.
- Hahnel, R. (2005). Economic Justice And Democracy: From Competition To Cooperation. Routledge. ISBN 0-415-93345-5.
- Hansmann, H. & Kraakman, R. (1991). "Toward unlimited shareholder liability for corporate torts". Yale Law Journal (The Yale Law Journal, Vol. 100, No. 7) 100 (7): 1879–1934. doi:10.2307/796812. JSTOR 796812.
- Stroup, Richard L. (2003) Eco-nomics: What Everyone Should Know About Economics and the Environment ISBN 1-930865-44-9
- Krugman, Paul (1999) "Earth in the balance sheet: economists go for the green" and "Taxes and traffic jams" reprinted in The Accidental Theorist ISBN 0-14-028686-1
- Ridley, M & Low, B S (1993) "Can selfishness save the environment?", The Atlantic Monthly vol. 272, pp. 76–86
- Simon, Julian (1998) The Ultimate Resource 2 ISBN 0-691-00381-5
- "Plants, Animals and Climate Change: Some Ruminations on the Environment," 199.16 KB PDF Joe Peacott, "Libertarian Alliance", Scientific Notes No. 15 (2006), pp. 1–7.
- Walter Block – Free Market Economics and the Environment: A Reconciliation
- Tony Smith – The Case Against Free Market Environmentalism
- "Law, Property Rights, and Air Pollution," 1.8 MB PDF Murray N. Rothbard, Cato Journal, Vol. 2, No. 1 (Spring 1982), pp. 55–100.
- "Resolving the Tragedy of the Commons by Creating Private Property Rights in Wildlife," Robert J. Smith, Cato Journal, Vol. 1, No. 2 (Fall 1981), pp. 439–468.
- "Environmentalism, Free-Market," Richard L. Stroup, The Concise Encyclopedia of Economics: Library of Economics and Liberty
- A Hayekian Defense of Free-Market Environmentalism
- The sale of trees for profit, Trees Instead
- The Thoreau Institute – a pro-free market environmentalism group
- The Nature Conservancy has posted much information on conservation easements and other tools pertaining to free-market environmentalism
- Association of Environmental and Resource Economists (AERE).
- JEEM: Journal of Environmental Economics and Management (AERE's official "technical" journal).
- REEP: Review of Environmental Economics and Policy (AERE's official "accessible" journal).
- free-market Environmentalism Bibliography on The Commons Blog