Free Market Would Do More to Protect California’s Environment Than State Regulation

Free Market Would Do More to Protect California’s Environment Than State Regulation

California is home to six of the 10 cities with the worst air pollution in the country. This seems inconceivable, given that the state has the strictest environmental rules in the nation. Clearly, policymakers have been making the wrong choices.

Of course, there’s little chance they’ll admit error. Their response is more likely to simply double-down on their blunders and make the rules even tougher, repeating their most recent mistake, Senate Bill 32.

But there is another way. And it won’t require expensive regulations that will add costs to owning a car, require industry to avoid economic losses by passing on price hikes to consumers, and force gardeners to throw away perfectly good gas-powered blowers.

Free-market environmentalism is not a contradiction of terms. A free market and a clean environment unsurprisingly go together. The true enemy of the environment is not open commerce but often government itself. Compare the former East and West Germanies. The East, with its centrally-planned economy, was far dirtier than the West, which didn’t have a fully free market, but it was certainly freer than the East.

This disparity also exists between developed and developing economies. Prosperous countries – which become rich only through capitalism – have cleaner environments than countries where the economy slogs along under government domination. There’s no greater example than the stark differences between the United States and China. Undeveloped and developing economies are by nature dirty because they cannot afford to be clean, while the West, as George Mason University economist Donald Boudreaux often says, has been “cleaned by capitalism.”

No, America isn’t squeaky clean. Neither is California, despite its reputation as a “leader” in government-imposed environmental controls. Bakersfield (first), Visalia (second), Fresno (third), Modesto (fourth), San Francisco (sixth) and Los Angeles (ninth) are among the 10 cities with the dirtiest air in the country, says the American Lung Association.

But none of these cities in one of the wealthiest states in the world’s richest nation has air quality nearly as poor as that found where free-market economies don’t exist, from Bamenda, Cameroon, to Baoding, China, to Xingtai, China – cities with some of the worst air on the planet – to just about any mid- to large-size city in a mixed economy like Mexico’s. In fact, our air keeps getting better.

“Air quality has been improving dramatically in the last 100 years,” Reed Watson, executive director of the Property and Environment Research Center says, and not because of the diktats of the Clean Air Acts of 1963 and 1970, and the regulatory regime they spun off. The greatest improvements in air quality were achieved before the laws and rules were in place, he said.

A 2010 Pacific Institute Research report confirms this.

“Most reports on air quality trends typically begin with 1970, with the passage of the first Clean Air Act and the beginning of systematic monitoring of emissions and ambient levels of air pollution. Data from early monitors and evidence from air quality models, however, show that many forms of air pollution started to decline – in some cases rapidly – before the Clean Air Act of 1970,” PRI senior fellow Steven Hayward wrote.

So how would free-market, or supply-side, environmentalism work in California? One possibility is altering the tax regime to incentivize industries that pollute, or make polluting products such as cars, to clean up their operations and the goods they produce.

For example, rather than enforce bureaucratically created automobile fuel-economy standards, those standards would be targets that automakers would have to meet if they were to receive tax advantages.

The advantages would be in the form of lower capital gains taxes on the stocks and bonds the companies issue, making those assets more valuable to investors and pumping more capital into those companies. In the R Street Institute policy report “Replacing Fuel-Economy Rules With Clean Tax Cuts,” Ian Adams explained in greater detail how this form of tax relief “provides incentives for investment in more fuel-efficient firms.” These tax incentives – California, by the way, has the second highest capital gains taxes in the world, according to the Tax Foundation – would work in any industry.

In any event, more regulation won’t clean California’s air. It would, however, cost jobs. Ford CEO Mark Fields said current fuel efficiency standards put a million jobs nationally at risk if they’re not aligned with “market reality.” It could also inhibit the economic growth that’s produced the wealth that’s allowed California, and the nation, to be able to afford a cleaner environment. Rather than stacking up more harmful regulation, Sacramento should try something new.

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Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.