September 18, 2009

In a speech last week to the Empire Club of Canada, Preston Manning addressed looming water shortages in southern Alberta. He called for “a provincial policy requiring Albertans to meter and measure the use of every drop of water consumed in the province and the attachment of a price to that water to conserve and allocate it efficiently.”

He explained, “if you want a clear and comprehensive signal with respect to the value and environmental costs of using and sustaining water resources to be sent to every water consumer, every day, dozens of times a day, every time any one of us turns on a tap or any business or industry sticks a pipe into a river or a reservoir, there is absolutely no substitute for communicating these messages through a properly established pricing system.”

Mr. Manning’s larger message was that we must harness not only on government regulation but also markets in pursuing environmental sustainability. Politicians, he noted, tend to rely primarily on the former. Regulation “is the automatic response of a lawmaker to any societal problem attributable in whole or in part to the actions of individuals, companies, and the private sector. If in doubt, regulate. If in doubt, legislate. At least you will appear to be doing something, and it is something that you as a legislator are in a position to do.”

But regulation, while an important tool, has its limits. Markets are also necessary. Markets serve two important functions: “At the core of harnessing markets to environmental conservation is the task of attaching a price to those outputs of our extraction/production/distribution processes which have negative environmental effects – a price that reflects the cost of eliminating or mitigating those effects and that ensures that those costs are included in the price of the good or service being produced…. Also at the core of harnessing markets to environmental conservation is the task of attaching a price to the ecological goods and services delivered by ecosystems such as watersheds – goods and services that are currently under-priced or not priced at all.”