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April 28, 2010


Rick Lowe

Thanks Larry.
I'm not sure why your belief is so strong that government subsidies will make conservation or green energy work, particularly as you lay out where it's failing here at home.
Often we look to government to solve the problem, when 1, citizens can do so themselves, and 2. Government solutions usually make things worse.
I like to see things like environmentalists like Sam Duncombe selling solar panels for example. Human action at its best.
And if there is merit/value in what she is doing, people will buy it.
As Laura points out, creating an economic environment where ideas can flourish without an over burdensome regulatory apparatus is key to improving a societies wealth, which will improve our desire for a cleaner environment.

larry smith

That's the point I was trying to make - I don't have a "belief" in one approach over the other.

Further, incentives do not necessarily mean subsidies. Yet we are already subsidizing fossil fuel industries - the object is to level the playing field to support a desirable outcome.

Rick Lowe

You are predisposed to a position on this subject, not unlike the rest of us.
The difficulty with giving someone a break on import taxes (incentive) is that someone else is denied.
I do not think we should be subsidizing fossil fuels if that's the case.
Care to detail that please?

larry smith

But I don't run ideological litmus tests on every idea that comes my way. If catch shares work - fine with me.

Governments around the world are spending half a trillion dollars a year subsidizing fossil fuel industries according to a study by the International Institute for Sustainable Development.

In many countries fossil fuel subsidies outweigh renewable energy subsidies.

Between 2002 and 2008 the United States spent $72 billion on fossil fuel subsidies, but only 29 billion dollars on renewable energy resources—nearly $17 billion of which went to corn-based ethanol, a crop which has been linked to deforestation and food crises.

The US also does not tax fossil fuels at the level needed to offset the costs of burning them - the externalities I mentioned in my article.

The more that consumers pay the full price for burning fossil fuel—a price that reflects the true cost to the economy and the environment—the easier it will be for market forces to encourage more secure and cleaner energy supplies.

These external costs include human health problems caused by air pollution; damage to land from coal mining and to miners from black lung disease; environmental degradation; and national security costs, such as protecting foreign sources of oil.

Subsidies to the US oil industry include:

# Construction bonds at low interest rates or tax-free
# Research-and-development programmes at low cost
# Government assuming the legal risks of exploration and development
# Below-cost loans with lenient repayment conditions
# Income tax and sales tax breaks
# Funding institutions like US Export-Import Bank to encourage oil production internationally
# The US Strategic Petroleum Reserve
# Construction and protection of the nation's highway system
# Allowing the industry to pollute
# Relaxing the amount of royalties to be paid

What would oil cost if the industry had to pay to protect its shipments, and clean up its spills? If the environmental impact of burning petroleum were considered a cost? Or if it were held responsible for the particulate matter in people's lungs, in liability similar to that being asserted in the tobacco industry?

Rick Lowe

Maybe you don't "run ideological litmus tests" but your solutions and recommendations tend to fall with a certain ideological leaning.
Unintended consequences maybe?
One excellent point Mrs. Huggins made is there is obviously a market for green products, so why don't entrepreneurs invest in what they believe in, like many of them do, and slowly build the market rather than want other taxpayers to make their entry easier.
Or is the sky really falling so urgent action is necessary?

Laura Huggins

Mr. Smith seems to be suffering from a slight case of dementia. At first he fully understands how market systems work to avoid “tragedy of the commons” scenarios (collapse of the sponge fishery) and to improve environmental quality. As Smith explains in his excellent description of rights-based management systems, allocating exclusive “catch shares” to fishers to be bought and sold works well for fishers and fish populations. To elaborate, in the 5 years after catch share implementation in the U.S., per boat revenues increased an average of 80 percent. Today, catch shares have been implemented in more than 300 fisheries around the world from New Zealand to Namibia, in fisheries large and small. I have even heard that Cuba is exploring the option of catch share systems.

So why does Smith then do an about-face and seem to argue that this type of system would not be feasible in the Bahamas? Is your government so big that you can’t see beyond an old school regulatory approach? It is time to move fisheries management (and energy, forestry, waste, etc.) in the Bahamas into the 21st century.

As Rick Lowe pointed out, there is a market for green products with environmental entrepreneurs ready to invest in them. But with government trying to clumsily perform these tasks at the taxpayers expense “enviropreneurs” get crowded out.

Elinor Ostrom won the 2009 Nobel Prize in economics for her work recognizing the role that local entrepreneurs play in eliminating the tragedy of the commons. Whether it is fisheries, forests, oil fields, or irrigation systems she provides plenty of examples.

Smith argues that “externalities” are a justification for government. To entrepreneurs there are not environmental problems caused by externalities, but environmental opportunities enhanced by strong property rights and markets. Indeed, entrepreneurs thrive in the space where there are impacts not accounted for in market transactions. The more they can replace externalities with entrepreneurship, the more we will see conflict replaced with cooperation and environmental rhetoric (yes that includes “claims about overpopulation threatening humanity) replaced with real environmental improvement.

The first Earth Day (22 April 1970) was organized by Democrat congressman Gaylord Nelson. It was set upon the 100th birthday of Vladimir Lenin, who led the Communist Revolution in 1917. I bring this up as it serves as a yearly reminder that the world’s biggest environmental catastrophes took place in the USSR and many environmental problems can be seen in North Korea today. I too want workable solutions for real problems and that is why the Property and Environment Research Center works with groups such as the Nature Conservancy, Environmental Defense Fund, and even the World Bank and that is also why we take no government money and why we don’t look to government to solve environmental problems.

With that said, I hope Mr. Smith authors more books such as /The Bahamas: Portrait of an Archipelago./ It serves as a beautiful introduction to the treasure of natural resources found in the Bahamas.


Great points on both sides! I attended the meeting and though I didn't agree with many of Ms. Huggins points, it was interesting and I'm glad to have heard them. It is always valuable reexamine our beliefs and why we hold them.

The best approach is most likely a combination of both views... we need market pressures for sure, but in their absence, government regulations can play an important role in safeguarding the environment and sustaining natural resources. That said, I am increasingly disillusioned with the ability of our government to be proactive and effective, and so we really do need to act for ourselves here more than in most places.

Thanks to the Nassau Institute for opening this dialogue and Larry for expanding upon it!

larry smith

I am glad to hear that the scale of my dementia is limited.

As I said earlier, I have no ideological presets in these matters. If catch shares work - fine with me. I do not need a lecture on communism to persuade me.

Neither was I arguing against catch shares - just raising questions that need to be addressed in the local context.

I am not sure how you could exclude Bahamian fishermen from fishing in Bahamian waters. But perhaps there is an entrepeneur out there with the answer.

larry smith

I agree Chandra - a combination of approaches would be most effective.

amy core

How about putting solar panels on Government House to provide the power for air conditioning and its electrical needs?
Amy Core

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