Government, Business, and Environment, Essay Example

Negative externalities are negative consequences of an economic activity that are experienced by third parties (Investopedia) and include environmental pollution caused by businesses. Thus, the government should require business generating the pollution to take steps to minimize the impact of their operations on the general public. The government can achieve its objective in several ways that include regulations and financial incentives.

The governments should require businesses to pay for the pollution they generate through pollution tax or through measures such as cap-and-trade that will motivate the businesses to pursue more sustainable business practices. Such a strategy will also ensure that businesses take more responsibility for externalities which are costs unfairly imposed on the society (The Brookings Institution, 2011). Governments are often majors buyers in several industries and should help environmentally-friendly products and services achieve deep market penetration. Similarly, the government may also encourage businesses to reduce the environmental impact of their operations by requiring certain sustainability standards (Sustainable Scale Project). The government may also announce incentives such as tax deductions for investments in environmentally friendly facilities.

The companies are also answerable to the communities in which they exist and the government has a responsibility to ensure that companies take their ethical obligations seriously. In order to encourage companies to adopt environmentally responsible behavior, the government can employ both regulations as well as financial incentives.

References

Investopedia. (n.d.). Externality. Retrieved December 2, 2012, from http://www.investopedia.com/terms/e/externality.asp#axzz2DskSHZy8

Sustainable Scale Project. (n.d.). Sustainable Business Practices. Retrieved December 2, 2012, from http://www.sustainablescale.org/AttractiveSolutions/SustainableBusinessPractices.aspx

The Brookings Institution. (2011, Winter). Pricing Pollution. Retrieved from http://www.brookings.edu/research/articles/2011/01/pricing-pollution-gayer