No matter where you are on the political spectrum, odds are that as a Canadian you have an opinion on what steps need to be taken to salvage our environment. Some of you feel that government is long overdue in taking steps to reduce this country's carbon emissions. Corporate Knights Editor Toby Heaps has argued for a carbon tax and an overall investment of $100 billion dollars. Others out there say that the free market economy will provide the means to this much needed end.

"Free-Market Environmentalism," as it is called, offers that the free market is best able to respond to the new demands of an environmentally aware marketplace.

My experience suggests that like many complex issues the truth lies somewhere between the two polemics. Free markets are able to move far more quickly than government in certain areas. Governments can establish regulatory frameworks supported by law. Without the two working symbiotically we are bound to fail.

Look at the corrosive expansion of the GTA's suburbs for an example of what economists call negative externalities in the free market system.

For a whole host of reasons many suburbs are unsustainable: they destroy Ontario's food-producing lands; they virtually demand that households require two cars because essential amenities are not within walking distance; they assume cheap, abundant energy; they overload the region's road networks; they don't pay their share of infrastructure costs; they promote over-consumption; and so on . . .

The free market drove this cancerous growth because externalities were not required to be paid for in the sale costs of those houses. In other words, the costs mentioned above were not part of the financial equation. If they were other types of housing that took external costs into account would have been developed.

Clearly, government was complicit in this regulatory (...read more...)