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December 31, 2009

To Save the Earth, Encourage Economic Freedom

By and

The best way to create sustainable environmental policies around the world is to increase economic growth and the standard of living.

A shadow hung over the Copenhagen conference. The credibility of sophiscated climate science has been tainted by allegations that key scientists and institutions manipulated data and access to publications to support the case for global warming. Still, many around the world would support sensible, cost-effective strategies to minimize the risk of man-made global climate change.

The inconvenient truth, however, is that the mammoth government regulatory schemes discussed at Copenhagen are both prohibitively expensive and unlikely to work -- the worst possible combination in any cost/benefit analysis.

There is a better way.

For 15 years, The Heritage Foundation and The Wall Street Journal have been measuring economic freedom in countries worldwide. Our historical evidence and volumes of supportive social science research demonstrate that economic freedom is good not only for individual economic advancement, but for the progressive values and public goods that people seek for society as a whole.

It's simply better to live in a free society. Higher levels of economic freedom lead to higher living standards and healthier human development. Greater economic freedom provides more choices and improves the quality of life by opening opportunities and promoting innovation.

The benefits of economic freedom also extend to environmental protection. Proponents of cap-and-trade schemes or other massive government regulatory interventions assert that only a strong government can protect the environment. In fact, the market forces unleashed in an economically free society are far more likely to drive economic results in the positive directions demanded by those concerned about the environment.

The most remarkable improvements in clean energy use and energy efficiency over the past decades haven't been as a result of government regulation. The most progress was driven by advances in economic freedom and freer trade. These unleash greater economic opportunity and increase prosperity, generating a virtuous cycle of investment, innovation, and dynamic economic growth.

The fundamental flaw of those who favor new government regulations is their belief that there is a trade-off between economic growth and environmental protection. They seem to think that to get more of one, you have to have less of the other. The truth is just the opposite: to get more environmental protection you need more growth, not less. And the surest path to economic growth is through greater economic freedom.

A recent study from the World Bank reports that freer trade is "a key factor in helping developing countries reduce their greenhouse gas emissions and adapt to climate change."

Other evidence abounds. The Environmental Performance Index (EPI), published by the World Economic Forum, the Center for International Earth Science Information Network (CIESIN), and the Yale Center for Environmental Law and Policy, provides "a composite index of current national environmental protection efforts." Levels of economic freedom and the EPI are positively correlated at a statistically significant level. The freer the economy, the higher -- and more sustainable -- the level of environmental protection.

Policy efforts aimed at imposing stricter environmental standards through a global regulatory body run great risk of being not only fruitless, but counterproductive as well. They undercut the economic growth necessary for greater efforts to protect the environment. Such regulations only serve as feel-good actions, without generating real "change" that could mitigate climate change and its possible negative impacts. Countries in general -- but developing countries in particular -- are able to protect their environment only if their economies prosper and the standard of living of their citizens improves.

The surest way to promote sustainable environmental policies around the world is to increase economic growth and the standard of living. Increased government regulation would stifle that growth. The compelling force of economic freedom, by contrast, has been proven over and over, in countries around the world, to empower people, create positive forces of opportunity and innovation, and nourish overall well-being, including through a cleaner environment.

Terry Miller, a former ambassador to the U.N. Economic and Social Council, is director of, and Anthony Kim is a Policy Analyst for the Center for International Trade and Economics at The Heritage Foundation.

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