The Return of Command and Control

I spoke earlier this week at a conference on markets and the environment at the R Street Institute (I spoke about prizes). Many of the speakers were Reagan era politicians and appointees who are proud of Reagan and Bush’s successful approach to the environment and decry the inability to make progress today.

Back then, Republican’s were willing to accept environmental goals so long as they were achieved efficiently using market means and Democrats were willing to accept markets means to achieve environmental goals. Today, the Republicans are no longer willing to accept the environmental goals regardless of the means. The result, however, hasn’t been the ending of the goals it’s been that Democrats no longer accept market means.

Jeffrey Frankel argues that the net effect has been a disastrous return to command and control.

In the United States, the highly successful cap-and-trade system for sulfur-dioxide emissions has effectively vanished. In Europe, the Emissions Trading System (ETS), the world’s largest market for carbon allowances, has become increasingly irrelevant as well. On both sides of the Atlantic, market-oriented environmental regulation has in effect been superseded over the last five years by older “command-and-control” approaches, by which the government dictates who should use which technologies, in what amounts, to reduce which emissions.

As recently as 2008, the Republican candidate for US president, Senator John McCain, had sponsored legislative proposals to use cap and trade to address emissions of carbon dioxide and other greenhouse gases.

But Republican politicians now seem to have forgotten that this approach was once their policy. In 2009, they worked to defeat climate-change legislation by relying on anti-regulation rhetoric that demonized their own creation. This left only less market-friendly alternatives – especially after court cases upheld the validity of the 1970 Clean Air Act. Though such alternatives are less efficient, they are again the operative regime.

…government attempts to address market failures can themselves fail. In the case of the environment, command-and-control regulation is inefficient, discourages innovation, and can have unintended consequences (like Europe’s growing reliance on coal).


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