Protecting the Environment Through the Ownership Society — Part I

Energy and Natural Resources | Policy Reports

No. 282
Wednesday, January 25, 2006
by H. Sterling Burnett, Ph.D.

Executive Summary

President George W. Bush has promoted the "Ownership Society" as a solution to a variety of public policy issues including health care, housing and retirement. The idea is that the welfare of individuals (and thus the nation) is best served by and directly related to, the ability of people to control their own lives and chart their own course toward goals they have chosen. This concept can be extended to environmental issues.

Americans traditionally relied on the common law to defend themselves, their property and the surrounding environment. But in the modern age we have substituted collective decision-making for individual decision-making with respect to many environmental issues. This change in turn has created perverse incentives that (ironically) have led to environmental harm. When land and resources are owned in common, everyone bears the cost of their abuse, not just those who cause the harm. Conversely, those who conserve resources reap only a small portion of the benefits of their action, while making more resources available to those who abuse them. The source of these perverse incentives is lack of ownership. Resources that have no owner have no protector or defender. As a result, self-interested behavior may reduce its value. Government programs and policies — some begun over a century ago, and more recently in the 1960s and 1970s — create these perverse incentives. Among them are subsidies to agriculture, subsidies to development and the Endangered Species Act.

There are many opportunities to combine individual ownership with good incentives and achieve environmental goals that are not being met under the current system. Establishing individual ownership of and responsibility for natural resources would empower individual decision-makers by allowing them to reap the benefits and forcing them to bear the costs of their decisions.

Farm Subsidies. Agricultural subsidy programs include direct payments to farmers for crop production, subsidized crop and disaster insurance, conservation programs and so forth. In the last decade (1995 to 2004), the federal government spent more than $143.8 billion on these programs. Subsidies give farmers financial incentives to plant more crops, regardless of market conditions. In order to produce more, farmers convert wetlands and wildlands to agriculture, intensively use fertilizers and pesticides, and divert water from rivers and streams. For example:

  • Roughly half of U.S. wetlands lost from 1986 to 1997, more than 300,000 acres, were converted to agricultural use, according to the U.S. Department of the Interior and the U.S. Fish and Wildlife Service (USFWS).
  • Fertilizer and pesticide runoff from farmlands contribute to destructive algal blooms and the 7,000-square-mile dead zone that appears every summer in the Gulf of Mexico off the coasts of Louisiana and Texas .
  • Water diversion for irrigation in California has contributed to a 60 percent to 80 percent decline in fish populations in the Trinity River and record low numbers for many species in the San Francisco Bay-Delta ecosystem.

Bringing the ownership society idea to farm policy could reduce these environmental harms. Over perhaps a 10-year period we could simultaneously end all direct and indirect agricultural payments, end subsidized water delivery, remove tariffs and end federal mandates or limits on the amount of acreage that can be used and types and amount of crops that can be grown. Each farmer currently receiving crop payments would receive a flat but declining grant of money each year. Water prices would be gradually increased to market levels and import tariffs and export subsidies would be phased out.

Development Subsidies. The National Flood Insurance Program (NFIP) and U.S. Army Corps of Engineers' flood control and beach restoration projects subsidize and encourage coastal development. They do so by shifting the cost of insurance and physical protection against floods from property owners to taxpayers. From 1928 through 2001, the Corps spent $123 billion (adjusted for inflation) on flood control projects nationwide. The Corps must spend about $1 million a mile every four years to maintain a mile of sandy beach. These subsidies encourage building on coastal wetlands and beaches. The disruption of wildlife habitat and pollution from these developments have contributed to the decline in oyster beds, sea grasses and other flora and fauna. For instance, coastal development and its associated pollution in the three-state Chesapeake Bay region has resulted in:

  • A loss of 58 percent of its historic wetlands,
  • A loss of 88 percent of its historic underwater grasslands,
  • A historic low in the Bay's crab harvest and in crab reproductive rates, and
  • A 98 percent decline in Bay oyster production.

The best way to protect coastal resources is to end all subsidies that encourage human occupation. Ending the NFIP and Corps flood control and beach erosion programs would still allow the owners of the property to develop as they choose. But ending these programs would ensure that property owners, rather then the general public, bear the full cost of those development decisions. Since in many cases the costs are substantial, reestablishing the link between ownership and responsibility should result in fewer environmentally harmful decisions — especially in areas at high risk of flooding and erosion.

Endangered Species Act Regulations. More than 75 percent of endangered species depend on privately-owned land for all or part of their habitat. The Endangered Species Act (ESA) allows the federal government to control private lands where listed species are found by preventing development or use of the land. Perversely, this gives landowners an incentive to destroy species and habitat in order to avoid onerous restrictions. ESA activities cost the federal government more than $2.4 billion in 2000 alone, but property owners have lost much more.

When individuals own and control property, they have an incentive to use it in a sustainable manner because they can then reap the benefits. History provides numerous examples of individuals and private groups who have protected species through private initiatives — sometimes even while governments were contributing to the species decline. For example,

  • When state governments were awarding bounties for killing birds of prey, a concerned citizen helped found the private Hawk Mountain Sanctuary in eastern Pennsylvania to prevent the slaughter of thousands of hawks, falcons, ospreys, eagles, owls and other endangered birds.
  • When state governments were awarding bounties for killing seals and sea lions, a for-profit corporation protected the only mainland breeding area for the endangered Steller sea lion.
  • While the federal government owns only 4.7 million acres of wetlands and has encouraged the destruction of private wetlands, about 11,000 private duck clubs have managed to protect five to seven million acres of wetlands from destruction.

Expanding the benefits of ownership to the preservation of endangered species habitat could encourage more private conservation efforts. For example, government could offer tax incentives or credits to landowners who create habitat for endangered species on their land. Or, the government could pay bounties to people for every breeding pair of endangered species found to inhabit their property for all or part (in the case of migratory species) of the year.

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