Friday, July 17, 2009

Many around the world believe the environment can be protected through regulation. Even the United States is going down this path now. Before it acts too swiftly, the United States might want to consider some of the lessons that we have learned the hard way in Europe.

As a member of the European Parliament, I have worked on environmental protection for years, particularly as rapporteur for the European Union’s Air Quality Directive that was successfully implemented last year.

This experience has taught me two key things:

(1) Economic growth is the base for the political and technological capacity necessary to make a clean environment possible. A dynamic economy is not inimical to a healthy environment; it is a prerequisite.

(2) Political leaders can achieve real results for the environment when they take a no-nonsense, pragmatic approach and work together.

Coming from East Germany, I saw firsthand how heavy-handed bureaucracy led to both poor economic performance and a poor environment. For decades, East Germany had among the worst environmental protection records in all of Europe.

Indeed, we are still paying a high environmental toll for the years of eschewing market forces while permitting the political class to make economic choices for the nation. Poverty is the planet’s real environmental crisis. So policymakers who care about a clean and healthy environment need to support policies that promote economic growth.

The United States is now considering legislating about greenhouse gases emitted from industrial activities. In its current form, this legislation will almost surely put a significant damper on economic growth and throw environmental protections into jeopardy.

Europe has already adopted a cap-and-trade regulatory apparatus similar to the one being debated in Washington. Europe’s experiment is called the Emissions Trading System (ETS), and it hasn’t worked very well. For starters, we agreed to give emission permits away for free, a political compromise required to get industrial groups onboard. This is something the current legislation in Washington does as well. This created a windfall for emitting industries and sowed confusion in the market. At the same time, it did little to place downward pressure on emissions.

As a result, permit prices have swung wildly, as much as 70 percent in a single day. They continue to fluctuate on average about 17 percent a month. This makes sensible, long-term industrial development much more costly and difficult. Besides, giving investment bankers another area where they can wildly speculate and create artificial bubbles paid for by the consumers is not the soundest of ideas.

There is a cautionary tale here — one way to reduce emissions is to weaken your economy. Such a goal is politically unacceptable, which is why policymakers on both sides of the Atlantic opt for the cap-and-trade systems that are too complex and notoriously opaque and difficult for the public to understand.

This is not to say there aren’t sensible and environmentally friendly ways of working on emissions reductions. For example, the United States and the European Union could work together to reach an agreement at COP 15 (the United Nations Climate Change Conference) in Copenhagen this December that allows for economic growth and technologically driven solutions to climate change.

This would encourage innovation and development of low or zero-emission technologies, and expand the range of options for addressing emissions and climate change to include geo-engineering and adaptation strategies.

This approach would also help create real jobs in green research and development rather than fake jobs in bureaucratic emissions trading.

Hasty government decisionmaking, particularly in pursuit of ideologically motivated goals, can do lasting harm. It is the experience of my former country of East Germany and of others that put utopian aims ahead of the concerns of citizens and the environment.

It would be a shame for Americans to overlook the lessons of recent history.

Holger Krahmer, German Liberal, is a member of the European Parliament’s environment committee and of the temporary committee on climate change.

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