Environmental Policy And The Law Of Unintended Consequences: Eight case studies from around the world

Well-meaning efforts by governments to protect the environment can backfire, resulting in severe harm to human beings and, in some instances, to the natural environment regulators sought to protect.
Published on May 31, 2010


Executive Summary

The “law of unintended consequences” describes the well-documented fact that actions often have adverse, unpredicted and even unpredictable consequences. Government actions are particularly prone to producing unintended consequences because they use relatively simple, bluntforce interventions to control hugely complicated social, economic or environmental systems. Because these systems are so complex, it is generally impossible to predict in advance how all of the actors contained within them will react to the new set of circumstances that they face as a result of the government’s intervention with a new rule, policy or regulation.
Even relatively simple regulatory interventions in complex social, economic and environmental systems will often create unintended consequences because governments cannot predict how everyone will react to the new set of circumstances they face. The unintended reactions of the various actors are often harmful, and in some cases result in outcomes that are the exact opposite of what the government sought to bring about through the intervention.
The law of unintended consequences can not be entirely circumvented by “smarter” government that tries to implement “smart regulation.” In many cases, the systems involved are so complicated that it is simply beyond the capacity of human intelligence and organizational capabilities to fully understand their workings and the likely consequences of an intervention. The law of unintended consequences will therefore always be with us, and will often frustrate the efforts of policymakers to achieve their objectives through regulation.
This paper examines a series of case studies drawn from around the world which demonstrate how the law of unintended consequences has often frustrated policymakers in the area of environmental policy. Specifically, these case studies will examine how well-meaning efforts by governments to protect the environment have backfired, resulting in severe harm to human beings and, in some instances, to the natural environment regulators sought to protect.
Sometimes, these consequences have been a distortion of economic incentives leading to lost economic production or wasted government resources. In other cases, the consequences were much more severe, leading to illness and death for thousands of human beings. By discussing the ways in which some past environmental protection measures backfired, this paper will illustrate the importance of the law of unintended consequences to the development of environmental policy, and demonstrate the need for humility and caution on the part of policymakers when they consider interventions in enormously complex social, economic and ecological systems for the sake of environmental protection.
This study will review eight case studies:
An environmental disaster on Macquarie Island
The Australian government’s effort to protect local vegetation by destroying the rabbit population on an island near Antarctica backfired terribly, bringing the island to the brink of an “ecosystem meltdown” and threatening local bird species with extinction.
The great golf cart boom of 2009
An American subsidy designed to promote the purchase of electric vehicles for the sake of energy conservation was exploited by clever golf cart salesmen who recognized that their products fit under the government’s definition of an electric car. The salesmen began to give away “free” golf carts to consumers, with the entire bill being passed along to the government.
Biofuel subsidies
The subsidization of biofuels such as ethanol have led to the destruction of rainforests, increases in greenhouse gas emissions, wasteful use of freshwater resources, and drastic increases in the price of food which have hurt the world’s poor.
How energy-efficiency appliance subsidies create GHG emissions
Rebates and subsidies that encourage the purchase of new, energy-efficient refrigerators often lead to increased energy consumption, as many consumers keep the older machine as a “beer fridge” and run two refrigerators in their homes rather than one.
The ban on DDT and the resurgence of malaria
A ban on DDT has had tragic unintended consequences in poor countries, leading to the resurgence of malaria and thousands of unnecessary deaths.
Perverse incentives and the Endangered Species Act
The presence of endangered animals on one’s property can greatly restrict an individual’s freedom to use that property for commercial purposes. Some landowners go to great lengths to prevent the animals from coming onto the property in the first place—including destroying any habitat that may be suitable for them.
How forest fire prevention policies backfired
Aggressive fire management policies in the United States led to the rapid buildup of “forest fuel,” causing bigger and more destructive forest fires.
Fuel economy standards, highway fatalities and increased driving
How fuel economy standards increased driving, created the SUV boom and killed thousands on our highways.

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