In an era marked by growing concerns about climate change, the role of government in addressing environmental issues has become increasingly prominent. However, as billions of dollars are poured into climate change programs and regulations, it is essential to critically examine the true impact and costs of these initiatives. 

This article delves into the complex relationship between government intervention, market forces, and environmental stewardship, shedding light on the unintended consequences and potential alternatives to current approaches.

Assessing government climate spending and its impact

In 2018, the Office of Management and Budget reported that the United States had spent over $154 billion on climate change programs since 1993. Environmental Protection Agency (EPA) budget spending increased by over 69 percent from 1990 to 2021. Nonetheless, greenhouse gas emissions have stayed largely consistent across measured sectors during the same timeframe. 

Of course the EPA has more duties assigned to its agency than merely decreasing the level of greenhouse gas emissions, but the prevailing consensus driving government action does overwhelmingly emphasize greenhouse gas emissions as the single most significant threat to the climate. 

The state has a unique ability to increase its operating budget despite failures and inefficiency. A prominent example of this phenomenon is education. Public K-12 schools around the country produce increasingly unacceptable test results while simultaneously rewarding administrations with large budget increases. 

This ability stems from several factors: the lack of serious accountability within government agencies, powerful advocacy groups, and the clear preference the state gives its own services. Funding for climate-related programs, regardless of efficiency, has exploded for these reasons — despite their consistent failure to improve on the metrics they are designed to address.

Climate regulations are notoriously expensive to enforce (note the EPA’s ballooning budget). Moreover, they are also socially expensive. Businesses and consumers have to pay for every new regulation put into place.

To cite one example, the U.S. Securities and Exchange Commission (SEC) reported that businesses would have to pay between $90,000-$124,000 per year in reaction to the Sarbanes-Oxley Act of 2002. Even if a less extensive carbon tax were to replace current regulations, it would likely pose great financial burdens on consumers and producers.

Markets and incentives

Markets encourage competitors to become lean, invest wisely, seek ways of improving efficiency, and reject unnecessary spending. Behind almost every instance of bloated spending, extreme price increases, or lack of market competition lie state subsidies, barriers to entry, easy money schemes, or government-created bubbles. This is not to say that successful businesses have only succeeded because of these factors, but the worst culprit for driving inefficiency will always be the state.

Consumers and investors reward companies whose behavior or products they like by patronizing those companies. This sometimes occurs without customers consciously realizing it. Agreement with a company’s statements or mission, with the price at which a product or service is offered, or with the quality of said product or service are examples of this. Prices are signals to customers, just as a customer’s willingness to purchase an item at different price points is a signal to producers.

This all relates back to government climate spending in a few important ways. Signals that voters can give governments are often unclear, lacking consensus, and are less explicit. Even if a president receives a majority of votes in the electoral college, this does not necessarily mean that he has blanket approval from most Americans to pursue his agenda. Additionally, tax dollars are spent without explicit consent, and many agencies of the managerial state exist without popular approval through a public vote.

But these crucial market signals cannot exist within government agencies, especially when it comes to agencies which either provide or defend products that are considered public goods. One example of this type of good is the environment. The air we breathe, and the earth we live on will always be de facto accessible by those on the planet. However, there are some ways to mitigate the tragedy of the commons in this situation.

One way to mitigate the tragedy of the commons is to have private ownership of these resources, with reasonable public access. For instance, Iceland’s fishing waters are mostly privately owned, with no fish and game wardens, but instead a requirement to obtain permission from the owner. 

The land/waterway owner has a vested interest in ensuring that his property is kept pristine for paying tourists and commercial use. If overfishing or water pollution occurred, the owner could look at records of use and potentially sue the violators of his property. This is harder to enforce when it comes to air pollution, but not a hypothetically impossible task.

Why economic progress provides the best solution

Economists regularly observe that advanced and free economies are significantly better stewards of the environment. This is because landowners have a clear financial interest in protecting their land, while the public does not have that same, immediate interest. 

Human flourishing has occurred in large part due to free societies leading technological advancement. This is aided by fossil fuels, which still have no like-for-like competition in the energy market (and will not for the foreseeable future). Therefore, human ingenuity is crucial in being able to mitigate the negative effects of fossil fuels or other pollutants.

Conclusion

The argument here is not that the owners of resources aren’t occasionally inefficient or even greedy at times, but that state actors also have self-interest. But state actors, especially those in unelected agency positions, face far less accountability and competition. 

Even basic KPIs are not as effective in government agencies, because there is typically not a market standard for comparison. If members of the public are serious about fighting for better environmental outcomes, they should support legislation which allows for greater private ownership and innovation. Simply increasing the budgets of already bloated federal agencies is a sure way to increase inefficiency and ultimately hinder the pursuit of optimal solutions.

Further reading

For further reading on topics related to the environment, be sure to check out the content below:

What is free-market environmentalism?

The tragedy of the commons explained

How sustainable farming is paying off for Australian farmers

Why innovation is the solution to the carbon crisis

How markets can save rhinos from extinction

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