Many proposed solutions for a cleaner, healthier environment have centered around top-down interventions such as mandates, heavy-handed regulation, and preferential treatment toward specific technologies. A newly released report, however, shows that free economies are clean economies and that economic freedom provides a more cost-effective, efficient alternative to these government-centric approaches.
In its second annual report, Free Economies are Clean Economies, C3 Solutions explores the many ways in which economic freedom creates cleaner environments and more prosperous societies. The report correlates data from The Heritage Foundation’s Index of Economic Freedom and Yale University’s Environmental Performance Index (EPI) and finds, “a strong, positive relationship between economically free economies and clean economies.”
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The Heritage Foundation defines economic freedom as “the fundamental right of every human to control his or her own labor and property.” The Index of Economic Freedom measures a country’s economic freedom score based on rule of law, government size, regulatory efficiency, and market openness. Produced every other year, Yale’s EPI scores a country on a 0-100 scale based on 40 environmental factors that fall into three broader categories consisting of climate change mitigation, environmental health, and ecosystem vitality.
This release of the report comes at an especially crucial time in the climate discussion. In the past year, the impacts of bad climate policies, especially in Europe, have driven energy prices higher and made energy less secure. Russia’s invasion of Ukraine exacerbated the problems caused by the government. Many of these policies forced a transformation of energy systems before the market was ready to make the shift, which compromised the energy security of many countries and led to costly inflation and record energy costs. These regressive policies have put climate ahead of people, and as a result, consumers around the world are suffering.
Economic freedom offers an alternative approach that raises levels of human prosperity and creates environmental and societal benefits. As Nick Loris, Vice President of Public Policy at C3 Solutions and author of the report, notes:
One of the most important ways in which economic freedom drives environmental progress is by generating upward mobility. As societies become wealthier and able to meet their basic needs, they are able to dedicate more resources toward pollution control, more resilient infrastructure, and cleaner energy technologies. As the Free Economies report states:
Another key component of economic freedom is market openness, or the ability to trade, invest, and innovate freely. This is especially important given the economic nature of addressing climate change; individuals and societies will transition to cleaner technologies and greener alternatives when it is in their best economic interest to do so. The ability to innovate and lower the price of these cleaner alternatives is “arguably the most effective way” to bend emissions curves.
One real-world example of this is the fracking revolution in the United States. Catalyzed by the private sector, in partnership with the US Department of Energy, the increased production of natural gas brought a cheaper and cleaner energy source to the market. Seeing it as economically advantageous, utilities and consumers adopted natural gas which led to a market-led reduction of coal, resulting in America becoming a global leader in emissions reductions.
In the same way that economic self-interest creates innovation, property ownership and property rights incentivize environmental stewardship. People are more willing to care for the property they own, instead of property that is owned by the state, because it is in their best interest to do so.
Strong property rights protections, a key tenet of economic freedom, play a critical role in bolstering the environmental performance of a country. As the report finds, “Well-defined and legally enforced property rights have prevented overgrazing, overfishing, deforestation, and animal poaching. Countries with protected property rights have more access to clean drinking water, sanitation systems, and less poverty.” Much like economic freedom, a strong, positive correlation exists between property rights and environmental outcomes.
Addressing climate change and protecting the environment are extremely important issues, but the policy cure cannot be worse than the disease. Policymakers can meaningfully reduce climate risk without sacrificing personal freedoms or economic prosperity. Solutions rooted in the principles of economic freedom will improve the well-being of people, societies, and the planet. As the Free Economies report concludes, “free economies will provide the surest route to higher levels of human welfare and global environmental stewardship.”
Read the full report here.