National Policy Analysis Logo

 #241  

 April 1999




Government Hinders Environmental Progress, Free Market Advances It

by David Ridenour



The free market can be one of the most powerful forces for solving the nation's environment problems if government doesn't stand in the way.

Two cases in point are the experiences of Benjamin Cone of North Carolina and the Lexmark International Group, Inc. in Kentucky. Ben Cone did such a good job managing his land for the benefit of rare wildlife that federal government bureaucrats wanted to take over management of his property. Lexmark, which manufactures computer printers and supplies, did such a good job increasing the number of printer toner cartridges it received for recycling that competitors appealed to state governments to put a stop to Lexmark's recycling program. In both cases, people are being punished for activities for which they should have been rewarded.

The case of Lexmark is particularly interesting. In 1997, the company began selling toner cartridges at substantial savings - a 13% savings - to customers who promised they would not refill or remanufacture the cartridges through anyone other than Lexmark. Lexmark also continued to sell cartridges at full price without this restriction.

The idea of the up-front discount, which Lexmark calls a "Prebate," was to make it easier for customers to help the environment. Lexmark hoped that, by offering customers a hassle-free means of returning used cartridges, it would boost the number of cartridges it received for recycling. Unlike traditional rebate programs, Lexmark's Prebate only requires customers to drop their spent cartridges in prepaid return boxes supplied with each new cartridge. There are no forms to fill out and, since the discount is given up front, no wait for payment.

But other cartridge re-manufacturing companies - which depend on the customers of Lexmark and other cartridge manufacturers for their empty cartridge supplies - are outraged by the program. They claim the program not only constitutes a restraint of trade, but is harmful to the environment because the program bars re-manufacturing by other firms. Politicians, eager to show they care about preserving local jobs, have been quick to respond.

Last May, New York Assemblyman Joe Morelle introduced a bill that would have barred the state of New York from purchasing Lexmark Prebate cartridges. Although the bill has already been defeated once, Morelle has reintroduced his bill. Morelle's bill is now being used as a model for states like California, Texas, Pennsylvania, Connecticut, Missouri, Oklahoma and Minnesota that wish to protect their local re-manufacturing industry, even if it is at the expense of the environment.

Since Lexmark continues to sell toner cartridges with no restrictions whatsoever and because just 6.3% of all the cartridges re-manufactured nationally are for Lexmark printers, the claim that the Prebate program does any significant harm to competitors is absurd. Even more absurd, however, is the claim that the Prebate is anti-environment. Since Lexmark introduced the program, cartridge returns to the company for recycling and re-manufacturing have increased by 300%. The Prebate program has thus increased cartridge recycling.

For government bureaucrats who are used to doling out tons of money and getting nothing in return, these positive environmental results may seem counter-intuitive. Why would consumers voluntarily send cartridges in for recycling when they have already received payment for doing so?

The answer: For the same reason people fill out surveys they receive in the mail that have one or five dollar bills affixed to them. They feel obligated to do so. When consumers receive money in the mail to fill out surveys, many fill out the survey because their consciences won't allow them to keep money they didn't earn.

Benjamin Cone of Greenboro, North Carolina understands the kind of frustration Lexmark executives are experiencing. For years, Cone managed his timberland for the explicit purpose of making it suitable habitat for rare wildlife. To raise money to pay the bills for this wildlife paradise, Cone selectively harvested a limited amount of timber on his land, making special efforts to avoid disturbing wildlife. His management practices were so environmentally sound that 29 endangered Red Cockaded Woodpeckers established 12 active colonies on his land. The federal government repaid Cone's environmental stewardship by taking away his authority to manage a huge portion of his land. He was ordered to set aside 60 acres for every colony of woodpeckers found on his land at a personal cost to Cone of $1.4 million (based on the value of the timber that he would no longer be able to harvest). In the future, Cone will no doubt think twice before managing land to benefit wildlife and this represents a real setback for the environment.

There is virtually no limit to what free markets and free people can do to improve the environment. They just need to be free.


Footnotes

1 Mark Van Putten's testimony, U.S. Senate, Committee on Energy and Natural Resources, Aid to Offset Effects of Coastal Oil and Gas Drilling, January 27,1999 (Washington, D.C.: Federal Document Clearing House, Inc., 1999).

2 "Congress Should More Fully Fund Conservation Plan," The Houston Chronicle, March 19, 1999, p. 36.

3 Van Putten.

4 "Congress Should More Fully Fund Conservation Plan," p. 36.

5 Van Putten.

6 U.S. House of Representatives, Conservation and Reinvestment Act of 1999.

7 Don Young, "Offshore Oil Would Benefit Cities, Wildlife," Anchorage Daily News, March 27, 1999.

8 U.S. Congress, Conservation and Reinvestment Act of 1999.

9 "Transcript of Clinton, Gore Remarks at Announcement of Land Legacy," U.S. Newswire, January 12,

1999.

10 Ray Krieg's testimony, U.S. House of Representatives, Committee on Resources, March 31, 1999.


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David A. Ridenour is Vice President of The National Center for Public Policy Research, a Washington, D.C. think tank, where he oversees the group's environmental and regulatory program. Comments may be sent to [email protected].



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