This article examines the relationship between state economic policy and environmental performance. It tests the hypothesis that a greater reliance on free market policies leads to higher levels of resource use and pollution. This issue sits at the heart of much theoretical debate about the role of capitalism in environmental performance. The Economic Freedom Index is used as a measure of the degree to which states adhere to free market policies. Environmental performance is measured through the use of per capita ecological footprint, a measure that accounts for a broad range of resource use and pollution. Pooled time series analysis is used to examine economic policies and environmental performance in 110 countries from the years 1996 to 2003. The results indicate that free market policies are associated with greater ecological degradation, but that not all aspects of capitalism have this negative effect.