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Table of Contents
Introduction................................................................................. 3
Government Interventions and their Limitations: Methods and
Approaches.................................................................................. 4
Impacts of Government Interventions...................................................4
Expectation from the Government........................................................4
Government Interventions...................................................................5
Government Regulations..................................................................................... 6
Taxes.................................................................................................................... 6
Subsidies............................................................................................................. 7
Reason for Government Failures....................................................7
Nature of government......................................................................................... 8
Poor Value for Money........................................................................................... 9
Government outlook is short-term.......................................................................9
Tax Evasion and Tax Avoidance............................................................................9
The Law of Unintended Consequences................................................................9
Conclusion and Recommendations...............................................11
References.................................................................................12

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Introduction
This paper will be discussing the role of the government in addressing environmental problems.

There are those who have the view that it is the market that must address environmental

problems because any government intervention would only result to inefficiencies and would

only hamper growth. On the other end, there are those who say that the government must take a

proactive role in solving environmental problems.

The focus of this paper is to discuss government failures. The first part of this paper will

discuss the role of the government in addressing environmental problems as well as the

limitations of these approach. Second, there will a discussion of the problems faced by the

government resulting to failures in addressing the problem. Lastly, there will be a discussion of

some recommendations on how to best address environmental problems by using free market

approach and the government intervention

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Government Interventions and their Limitations: Methods
and Approaches
Impacts of Government Interventions
There is no doubt that environmental problems cannot be single handedly addressed by the free-

market. Government intervention is needed to fully address the issues or shortcoming of the free

market approach. First and foremost, the government can regulate the market which the free

market cannot do so on its own. Most governments also have the resources to take far reaching

actions that participants in the market cannot do so on their own. Lessons from the past shows

that government intervention fills the gaps of the free market but this must be taken with caution.

The amount of government intervention for any particular problem must be commensurate to the

nature of the environmental problem. It must be just enough to solve the problem at hand without

spending too much in using valuable resources (Hepburn, 2010).

Expectation from the Government

In the analysis of what the government can do to address environmental problems one must first

consider the things that the government cannot do. It is already accepted that the market is not a

perfect allocator of resources and the same can be said of the government, it is not perfect in

planning. This fact is one of the reason by government intervention some fails. The government,

just the like the market, may have information gap. As much as there is a desire to get all the

information, the cost involved might justify the benefits to be obtained. Second, is that the

government is a consensus among individuals and there is a possibility that policy decisions are

shaped by a single person or small group of persons that have the influence to affect the

decisions of others (Hepburn, 2010).

Government Interventions
The current situation of the environment is at an unprecedented level. The effects of climate

change are being felt almost anywhere in the world. Although there are some who argues that

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climate change is a hoax or an exaggerated matter they cannot be deny that weather conditions

around the world is much different than what it was several years ago. Erratic weather conditions

have not only affected humans but also the flora and fauna around the world on land and on sea.

Long droughts in Africa have killed thousands of animals. The melting of the ice in the arctic

have caused ocean acidification that is posed to kills animals in the sea. As early as 2008, the

Organization for Economic Cooperation and Development (OECD) have already raised the red

light about the ill effects of climate change (OECD environmental outlook to 2030, 2008).

The problem is enormous that it requires government intervention at some point. Although,

proponents of the free market argue that government intervention in the market will only lead to

inefficiencies there are still several reasons why the government need to step-up its roles in

crafting environmental policies. First and foremost, it must be emphasized that the problem of

climate change is wide scale and its affects the entire populace not just one company or one

community but an entire country or all people around the world.

Some of the things that the government can do in protecting the environment are the following

methods:

Government Regulations

The government exercise control over how things are managed in a particular country. It dictates

the policies and steers the country to the direction it wants to go. As such, the government has the

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power to regulate, through laws, how companies should treat the environment and make

regulations that must be followed by companies under the pain of sanctions and penalties. There

are several good benefits on this. For example, in some other countries their government have

passed laws that aims to given its citizen clean water to drink and clear air to breathe.

Nonetheless, it also has some negative effects. For one, too much government regulation can

deter progress and make companies inefficient. Environmental regulation may require companies

to change some of their processes and buy expensive machines and equipment to be fully

compliant with what the government wants. As a result of this, companies are required to recover

their investments by increasing the prices of their products thereby affecting consumers

(Sosnader, 2017).

Taxes

Another method that can be used by the government is its taxing power. Taxation is an inherent

power of the government to get the share of the public to defray its government expenses. Aside

from raising revenues, the taxing power of the government can also be used to regulate a certain

industry. The main purpose of tax as a government measure in environmental protection is to

ensure that the sources of pollutions are taxed and they bear or internalized the cost involved

rather than passing it to other people who have no connection at all with the pollution. By

internalizing the costs of pollution, the market will then include these items in coming up with

business decisions. This approach is also called make the polluter pay. Proponents also gives

advise that revenues collected from this approach be used to mitigate the effects of climate

change. For example, taxes collected from vehicles like congestion charges be used to uplift and

improve mass transport services (Potter, 2004).

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Subsidies

This is another approach that is widely used by governments around the world. Instead of taxing

polluters or putting heavy regulations on the market, this approach gives incentives to companies

that meet certain standards. These incentive is market based approach. Government will give

incentives in monetary and non-monetary forms to induce reduction of pollutants. Government

may lend money to companies at low interest to make their production at par with environmental

standards or give financial incentives and awards. As long as the incentives are economically

feasible, companies will always try to comply. The success of this approach would definitely

depend on the ability of the government to fund subsidies or budget is much needed in another

aspect of the policy-making (Epa.gov, 2017).

Reason for Government Failures

Any government can make use of the three approaches that we have discussed above or just

allow the market to self-regulate. There is really no fast and hard rule with dealing with the

environment. Each approach has far-reaching consequences that must be considered in coming

up with policies.

Although the government has the power, coupled with the will, to make positive changes in the

government albeit it can also worsen the environmental problems if it is too much. Some of the

reasons why government fails in protecting the environment includes the following:

Nature of government

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Any government is not composed of a single individual. It is run by a group of people that

collectively runs the government. As a result of these collective efforts, there is a possibility that

there are different perspectives on how to deal with a single problem or interest that must be

protected. In some governments, government lobbying is so prevalent that private sectors may

sometime shape how a certain policy is to be drafted by lobbying with lawmakers through legal

and illegal means. Politicians also tends to consult public consensus in their districts especially

during election times.

Some government regulators may also tend to favor certain corporations over others and this can

defeat the whole purpose of government regulation. Too much bureaucracy or red tape within the

government can also hamper business operations and make only matters worse instead of

addressing core problems in the government.

There is also a possibility that one government policy may run in contravention with another

government policy. This will only result to confusion and possible legal problems. The

government may tend to create a certain policy without really getting the whole picture of the

problem because of imperfect information.

The budget of the government allocated to environmental protection may also hamper

government efforts. Some countries do not have enough budget allocated to the environmental

because of the fact that they are short with funding and there are much more needed projects for

example in health, defense or education (tutor2u, 2017).

Poor Value for Money

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As discussed earlier, too much government intervention can increase production costs and this

will boil down to higher products and it is the end-consumer who will feel the burden instead of

the polluters.

Government outlook is short-term

Most often government intervention is myopic. Instead of solving the whole problem

government have the tendency to given short-term fixes. Put it another away, governments tend

to give band aid solutions instead of addressing the root cause of the problem. This stems from

the fact that the government needs to handle a lot of aspect in the society and not just the

environment (Sihag, 2009).

Tax Evasion and Tax Avoidance

Although the government may levy a tax, polluters may always find a way to evade these taxes

by bribing government officials or by evading the payment of taxes. Taxpayers can also get away

with it by smuggling goods that did not meet environmental standards and sell these items in the

grey market. There are also legal ways to address taxes by what is called as tax avoidance. This

is perfectly legal and involves finding ways to fully optimize the tax liabilities and exposures of

the corporation.

The Law of Unintended Consequences

As discuss previously, any policy decision must make sure that it addresses everything and does

not create another problem. It must be ensured that everything has been considered. Most often

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government intervention fails because something came up that was not anticipated or was not

properly addressed because of poor planning and execution.

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Conclusion and Recommendations

There is really no hard and fast rule in addressing environmental problems. Too much reliance on

the market alone may not give socially optimal results and the same can be said about

government interventions. As a general proposition, it appears that the best approach would be to

in between these two extremes. For example, the government may set standards or regulations

that concerns the environment and just allow the market to adopt and meet these standards on

their own. There must not be too much of a regulation that would result to the slackening of the

human economy. The creation of these regulations is also a recognition of the fact that

corporations in the market cannot set goals or policy directions. It does not have these powers. It

is the government that has the power to set policy directions and impose penalties for those who

do not comply with it. Any government intervention must also be commensurate to the problem

being addressed. Smaller problems must not be overblown and bigger problems must be

emphasized and addressed more rigorously. It is also suggested that the government have open

communications with the environmental stakeholders so that all those concerned can come up

with win-win solutions. It is through open discussions with all stakeholders that a certain

problem is analyzed and dissected to its full extent so that all factors are considered and

symptoms properly addressed. Problems within the government like red tape, too much

bureaucracy and corruption must also be addressed by the government to reduce the possibility

of government failures.

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References

Bowen, A. and Stern, N. (2010). Environmental policy and the economic downturn. Oxford
Review of Economic Policy, 26(2), pp.137-163.
Epa.gov. (2017). Economic Incentives | Environmental Economics | US EPA. [online] Available
at: https://www.epa.gov/environmental-economics/economic-incentives [Accessed 5 Apr.
2017].
Hepburn, C. (2010). Environmental policy, government, and the market. Oxford Review of
Economic Policy, 26, pp.117-136.

OECD environmental outlook to 2030. (2008). 1st ed. Paris: OECD/IFT.

Potter, S. (2004). Transport Tax Reform and the Environment. Energy & Environment, 15(6),
pp.1093-1098.
Sihag, B. (2009). Kaut ilya on Moral, Market, and Government Failures.International Journal of
Hindu Studies, 13(1), pp.83-102.
Sosnader, A. (2017). CI3: Environmental Regulation and The Environmental Protection Agency.
[online] Sites.psu.edu. Available at: https://sites.psu.edu/aps5458/2015/02/04/ci3-
environmental-regulation-and-the-environmental-protection-agency/ [Accessed 5 Apr.
2017].
tutor2u. (2017). Government Failure. [online] Available at:
https://www.tutor2u.net/economics/reference/government-failure [Accessed 5 Apr. 2017].

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