Third Wave Environmentalism

I was out camping last month with my buddy Tom. I was unpacking our basic necessities when he exclaimed, "Jess, your toilet paper isn't recycled! How could you buy that stuff?" "C'mon, the recycled stuff costs more and it's a pain in the butt to find," I replied. Tom sneered disdainfully, "And you call yourself an environmentalist?" "Well, I'm not that kind of environmentalist."

Tom's kind of environmentalists do things because it's the right thing to do, because they love nature, and they aim to get everyone else to agree that nature should be protected for its own sake. The other kind of environmentalists do things because they make economic sense, and they aim to change the rules of society so that doing things that make environmental sense also make economic sense. I'll call Tom's philosophy "Second Wave Environmentalism," which was dominant from the 1960s until the 1980s. The "First Wave" was Teddy Roosevelt's style of Conservationism; it got us lots of National Parks but isn't so relevant anymore to public policy, so I won't discuss it further. I'll call today's other philosophy "Third Wave Environmentalism," which is what's taught here at the Kennedy School. It represent a growing trend in the environmental movement and, I think, will be the dominant force of future environmentalism.

Second Wave Environmentalism is based on morality. The underlying philosophy is, "Everything is connected to everything else, so when we hurt the Earth we're hurting ourselves." The policy prescription is to use "command and control" methods for ordering and enforcing environmental protection in an ongoing struggle against economic development. The means of controlling air pollution, for example, is to legislate that industry must use smokestack scrubbers, or some other technology determined by a central agency.

Third Wave Environmentalism is based on economics. The underlying philosophy is, "internalize the external costs." The policy prescription is to use market incentives and economic instruments to simultaneously achieve environmental and developmental goals. The means of controlling air pollution, for example, is to tax emissions to pay for the damage caused, or to require the purchase of "emission permits," so that industry will have an incentive to reduce pollution in a cost-effective manner.

The Second Wave culminated with the "UN Conference on the Human Environment" in 1972. The Stockholm Declaration, the list of principles that resulted from that Conference, states as its first principle a moral imperative: "Man has a solemn responsibility to protect and improve the environment." The Third Wave came of age with the "UN Conference on Environment and Development" in 1992. The Rio Declaration, UNCED's list of principles, defines in its first principle the economic concept of "sustainable development," which says that natural resources should be treated as "environmental capital." We may sustainably spend the growth, but we may not sustainably spend the capital itself -- our natural endowment should be treated like Harvard's endowment, where we spend the interest, but only convert the principal from one form of capital asset to another. The Third Wave view means that natural resources may be "sustainably" depleted to the extent that they are converted into other long-term capital resources. The Second Wave view is that non-renewable resources cannot be used sustainably at all, since they are inherently finite.

Second Wave environmentalists have big fights with Third Wave environmentalists over the idea of monetizing the environment. "Agenda 21," the detailed policy book that resulted from the 1992 UNCED Conference, devotes an entire chapter to the proper ways to assign prices to environmental amenities. That topic occupies the bulk of K-School ENR classes: environmental taxes to correct for externalities, tradable air pollution emission permits, and the like.

In contrast, the US Green Party, a staunch Second Wave group, says in its 1991 Congress Platform, "We strongly oppose the idea of air pollution emission 'rights,' which we see as an unjustifiable commodification of this public natural resource and a recognition of a fallacious 'right to pollute.'" I don't like polluters either, but I recognize that right now, everyone has the right to emit as much CO2 as they want, for example, despite the potential damage of Global Warming. Without pricing environmental amenities, the price is implicitly set at zero. And with a price tag that says "free," the environment gets overused, just like people overuse anything that they don't pay for. The current system of "free" use of environmental amenities encourages environmental degradation and the over-depletion of natural resources. Second Wave environmentalists would restrain the free use of environmental amenities by coercive enforcement of laws. Third Wave environmentalists would restrain the free use of environmental amenities by charging for the amount of use, at a price equal to the damage caused by the degradation.

The 1972 Stockholm Declaration has only one mention of prices, and that's to encourage price stability for primary commodities, a concern for developing countries. The 1972 Principles focused on creating national institutions for environmental planning. The US EPA, and many other national Environmental Ministries, were created in response. The 1992 Rio Principles, in contrast, are directed at Finance Ministries, Trade Ministries, and Tax Authorities. They're the agencies who would administer environmental economic instruments, who would reduce environmentally destructive subsidies, and who would collect user fees from applying the "Polluter Pays Principle" and so on. Al Gore earns his place as a Third Wave environmentalist by including as an Action Item in the National Performance Review, that a reinvented government should "encourage market-based approaches to reduce pollution." Gore also devoted a chapter in his 1990 book, "Earth in the Balance," to describing how to correct the calculation of GNP to reflect the depletion of environmental capital, a hot topic in the UN System of National Accounting.

So does that mean that the environmentalists of the 1990s and beyond are going to be accountants and financiers, concerned with a different kind of green than the Green Party? No, not quite, because inside every Third Wave environmentalist is a Second Wave environmentalist and a First Wave environmentalist, too. I believe just as strongly in the morals that the Green Party espouses as the most ardent Greenie, and perhaps mine are more strongly held because I hold them as a personal philosophy rather than as one which I must proselytize to persuade others. And my toilet paper conversation with Tom took place in the Wilderness Area of the White Mountain National Forest, which I'll fight to preserve along with the most conservationist-minded Sierra Club member. But I don't have to convince Green Party or Sierra Club members -- they're already on my side. I do have to convince people in the Republican Party and the 700 Club. They're not going to be convinced by my morals any more than I'll be convinced by theirs -- but I might persuade them with economics. The value of environmental economics is that it puts the issue into terms that both sides can agree upon -- dollars and cents -- instead of leaving me and my opponents with irreconcilable moral differences. Third Wave environmentalists will never achieve an ultimate moral victory, but maybe instead we'll win the battle to save the Earth.

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