Rescuing the environment – How Market forces could prove the environment's best friend
Far-reaching changes are under way in the management of the world's natural resources - changes that add up to a different kind of green revolution with the most promising aspect being the innovative use of market based instruments within emissions trading.
"Mandate, regulate, litigate" has so far been the green mantra which explains the world's top-down, command-and-control approach to environmental policymaking. Slowly, this is changing towards market based approaches. The key lies in the assignment of property rights over "commons", such as the fisheries, that are abused because they belong at once to everyone and no one. Where tradable fishing quotas have been issued, the result has been a drop in over-fishing. The same result is seen within emission trading. America led the way with its sulphur-dioxide trading scheme, and today EU is pioneering carbon-dioxide trading with the goal of slowing down climate change.
These, however, are obvious targets. What is really intriguing are efforts to value previously ignored "ecological commodities", such as clean water, flood prevention and luxuries such as preserving wildlife. If advances in environmental science are making those valuations more accurate, then market mechanisms can be employed to achieve these goals at the lowest cost. However, if this new green revolution is to succeed, three things must happen:
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Prices must be set correctly. The best way to do this is through liquid markets where politics merely sets the goal. How that goal is achieved is up to the traders.
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Proper information must be available. Thanks to technologies such as satellite observation, remote sensing, computing and the internet, green accounting is getting cheaper and easier.
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Cost-Benefit analysis must be applied to reduce nature to dollars and cents. Some things in nature are irreplaceable and therefore literally priceless – others not. It is essential to consider trade-offs when analyzing almost all green problems. The marginal cost of removing the last 5% of a given pollution is often far higher than removing the first 5% or even 50%.
If governments invest seriously in green data acquisition and analytically based policies rather than pious appeals to "save the planet", the world may shift in paradigm from clumsy, costly, command-and-control driven regulations towards an age of informed, innovative and incentive based decisions.
OSIS supports this shift in paradigm by developing a technology that can acquire and transform real time environmental data into information and distribute the information to the relevant parties for use in their environmental cost benefit analyses and prioritising process.
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