Global Business Environment - Literature review Example

Global Business Environment Table of Contents Table of Contents 2 Introduction 3 Characteristics of Market Based Instruments 3 Different types of Market Mechanism 4 Pollution Charged System 5 Tradable Permits 5 Eliminating Government Subsidies 7 Providing Public Information 7 Challenges of Market Based Environmental Polices 8 Conclusion 9 References 11 Introduction In the modern scenario, due to globalization and advent of technology, the market environmental laws and policies are playing a significant role. The market based environmental policies are identified as policy instruments, which are mainly used for reducing the several perils of a business. Contextually, the market based environmental laws and policies are a kind of regulation based on which market behaviour is maintained in terms of pollution control methods or level. These market policies and regulations encourage the behaviour of the marketers or the market players by providing the right market signals to all the firms (UNEP, 2004). The market polices such as tradable permits or pollutions charges sometimes works as ‘harnessing market forces’ for every firm. The main purpose of describing the market policies as ‘harnessing market forces’ is that these policies are implemented as well as designed properly in a firm that will be a good influencer for a firm to control pollution and achieve the desired market goals. The market based policies work as a command and control regulation for all the firms by providing them right guidance (Fischer & et. al., 2002; Stavins, 2001). Correspondingly, the objective of the essay is to describe the main features of the market based policies or instruments. The study elaborates on several types of market mechanisms, which are implemented in global business environment. In addition, numerous challenges are discussed which are faced at the time of the implementations of market-based environmental policies. Characteristics of Market Based Instruments The market-based environmental policies are important for firms operating in market segments in terms of implementing well-designed policies as well as regulations with the assistance of which firms are able to conduct their operations with better efforts towards pollution control. The instruments are helpful for every firm for their growth and sustainability. There are several important features or characteristics of market-based policy instruments. The primary advantage of the market-based instruments or polices is that it is very cost effective in nature over the command-and-control approach that has been implemented traditionally. In addition, the instruments are also identified to be effective for providing active encouragement for technology innovation and diffusion. The market-based instruments assist authorized firms for adopting the pollution clean-up measurements in their operational level and provide the advantages of performing operations in a cost effective way (Stavins, 1998). The market-based instruments lead to active encouragements for the firms for reducing the pollution level in an environment. The command-and-control regulations in market-based instruments are very proficient in ensuring that all the firms adopt the improved and economical pollution control technologies in their operational activities. In this regard, corrective taxes are needed to be charged, so that market-based instruments financially support the firms to clean up pollution by applying low- cost method and for better internalizing environmental considerations. The market-based environmental instruments help the firms to eliminate several risks arising due to pollution and emission of harmful gases among others (Stavins, 1998). Different types of Market Mechanism The market-based policies are having different types of mechanism. Market-based instruments are especially used in environmental programs. The market-based instruments are identified to be segregated in six categories. These six categories include pollution charged system, tradable permits, deposit- refund system, reducing market barriers, eliminating government subsidies and public information (Dziobek, 1998). Pollution Charged System The pollution charged system is a unique mechanism of the market-based instruments. The pollution charged system is introduced for reducing pollution level from the environment. The pollution charged system is introduced for eliminating pollution charged activities from environment. The amount collected from pollution charged system is used for adopting several preventive measures with the aim of ensuring that firms conduct their operations in an environmental friendly manner. In this process, the policymakers are recognised to charge an amount, which is a taxable amount that forms are needed to pay as an incentive towards environmental protection initiative. The prepared tax amount is compulsory for each firm to pay, as it is useful for minimising emission of carbon or pollution-control activity in a firm (Stavins & Whitehead, 1997). Tradable Permits The pollution charges and tradable permits system is a similar kind of market-based environment policies. A tradable permit is identified as a policy form where a firm is has an allocated extent of pollution. The tradable permits are provided with the aim of avoiding the challenges of production. Under the tradable permits, the policymakers initially set a target level of pollution, which will be allowed to a firm. A tradable permit mainly explains about the several guidelines relevant to the pollution level in an industry. In this regard, tradable permits are recognised as policies based on which firms are able to have an understanding about the pollution limits. This mechanism is mainly works as a preventive guideline for each firm. This mechanism mainly describes that lower emission level of pollution helps the firms to generate higher profitability. The tradable permits are important policies for the acid rain provisions. It is a part of the Clean Air Act Amendments of 1990. This law is mainly developed for the purpose of reducing the level of emission of sulphur dioxide (SO2) and nitrogen oxides (NOx) from any industry. It has been also described that the tradable permits provide the electric utility companies a certain allowances in terms of emission of sulphur amount. In this regard, it has been identified that approximately 350 companies of Southern California are actively participating in tradable permit for reducing the increasing amount of nitrogen oxides and sulphur dioxide from the region of Los Angeles (Stavins & Whitehead, 1997). Deposit Refund System The deposit refund system is a part of the market-based environmental policies. The deposit refund system is mainly implemented at the time of purchasing potentially polluted products. At the time of purchasing potentially polluted products, the customers have to pay some amount as surcharge and the customers will be refunded with the surplus amount at the time of providing the products for disposal or recycle purpose. This surcharge amount and the surplus amount are mainly termed as deposit amount and the refund amount is also known as deposits refund system. There are several examples of the deposits refund system, for instance, the submission of the beverage containers is one of the most common example of deposits refund system. The submission of the lead acid batteries is a one of the most innovative and new policies of the deposit refund system. In the US, the consumers are required to submit the lead acid batteries for recycling the product (Stavins & Whitehead, 1997). Reducing the Market Barriers The reduction in the market barriers is one of the most useful mechanisms of the market-based environmental policies. It is mainly useful for controlling and curbing pollution. Reducing the market barrier policy is implemented on the basis of three market reduction barriers that include market creation, liability rule and information programs. Market creation is a policy with the assistance of which water rights are exchanged. The reduction in the market barriers promote or create awareness of the sustainable uses of water and also allocates water more efficiently for reducing the scarcity of the water supply process. By the implementation of this market-based environment polices, several companies are having a drastic improvement in the water allocation process. The reduction in the market barriers has created the water rights, which has improved the water allocation condition in firms (Stavins, 2001). Eliminating Government Subsidies Eliminating government subsidiaries are important mechanisms of market-based environmental policies. The elimination of the government subsidies is helpful for businesses to conduct their operations in a cost effective manner. The withdrawal of the government subsidies will be helpful for the efficient and effective resources allocation. This market-based environmental instrument promotes the use the environmentally sound resources for better economic growth. Withdrawal of the government subsidies facilitates framers as well as industrialists to use natural resources such as water and energy in an efficient manner. This mechanism mainly encourages waste management process in an industry. It is also be helpful for protecting the environment from industrial pollution (Rademaekers & et. al., 2011). Providing Public Information Providing public information is a part of market-based environmental instruments. This process is mainly used for creating awareness among the people. This policy is adopted for the purpose of creating awareness among the customers regarding the purchase of the environmental friendly products. This policy will also lead companies to focus on the environment friendly products. The Toxic Release Inventory works as a powerful tools for a company to limits emission of harmful gases and minimises pollution (Rademaekers & et. al., 2011). Challenges of Market Based Environmental Polices The market-based environmental policies are vital factors for improving the condition of an environment. These market-based environment laws are useful for reduction of the toxic level from the environment. To reduce the pollution level from the environment, the policymakers have prepared few measures. There are several challenges, which have been faced during the implementation of these polices. It has been also observed that the market mechanism is least successful at the time of applying in practical market. The main challenge in the implementation of market-based environmental laws and policies is that there is absence of new environmental regulation in the society. It has been also identified that there are very few Acts on the environmental regulation which include Clean Air Act and Safe Drinking Water Act. These two Acts are the major environmental regulation, which have been reauthorized in the year 1990. There is another problem in application of the market-based instruments, which is related to the excessive application of energy tax, as it can hamper international competitiveness and accordingly, creates a risk for the international business (European Environment Agency, 2005). The political barrier is a major concern for the application of the market-based environmental policies. It has been also observed that the political factor highly affected the application of the several mechanisms in the market level and industrial level. The political factor has been a barrier owing to the fact that there are several environmental organisations, which are inflexible to switch to the market-based instrumental regulations. This is a vital factor, which has been stated as one of the challenges in the implementation of the market-based environmental policies. It has been also identified that few groups commented on the adoption of the market-based environmental law, but faced complexities in making an effective comparison amid the environmental policies that are to be implemented. It has been also observed that the political and the economic condition of a society also made a negative impact on the implementation of the market-based instruments for creating an effective environmental law. The limited use of economic encouragement among the market players and industries is another main reasons or challenges of implementation of the market-based environmental policies (Portney, 2003). Conclusion From the above discussion, it can be comprehended that globalisation and advent of technology are few of the factors that are accountable for change in the market and business scenario. In the period of the globalization, the consciousness over the environment has increased in a rapid manner. In this regard, every company is becoming more concern regarding the adoption of the environmental rules and regulations. Subsequently, the policymakers are identified to framing few measurements regarding the application of the environmental policies in the business environment. The market based environment law is an important environmental protection regulation for the reduction of toxic emission from firms. It has been also observed that the customers are becoming more careful regarding the adoption of eco-friendly products. Customers are now paying more attention towards these companies who are producing eco-friendly products. Contextually, for having higher attention from the customers, several firms are becoming more careful in adopting sustainability in products. From the study, it can be also concluded that the adoption of the market-based environmental law in the business process will be effective for the businesses as well as for environment. In this respect, market-based instruments are implemented with the aim of ascertaining that the environmental policies adopted by firms, so that pollution and emission of harmful gases can be minimised. However, it has also observed that the three are certain barriers in the implementation of the market-based instruments. There are several barriers such as political and social factors, which are affecting the sound application of the market-based environmental law for ineffective application of environmental policies. Another problem that has been observed is a huge lack in updating the environmental regulation. In addition, challenges are faced in the implementation of the market-based environmental policies is due to complexities faced by policymakers in making comparison of the policies. In this context, the challenges are to be mitigated with the aim of implementing market-based instruments, as these policies are very useful for protecting the environment. References Dziobek, C., 1998. Market Based Policy Instruments for Systematic Bank Restructuring. International Monitory Fund, pp.1-36. European Environment Agency, 2005. Market-based instruments for Environmental policy in Europe. EEA Technical Report, pp. 1-155. Fischer, C. & et. al., 2002. Multilateral Trade Agreements and Market-Based Environmental Policies. Discussion Papers, pp. 1-25. Portney, P. R., 2003. Market-Based Approaches to Environmental Policy. A “Refresher” Course, pp. 15-18. Rademaekers, K. & et. al., 2011. The Role of Market-Based Instruments in Achieving a Resource Efficient Economy. Final Report, pp. 1-294. Stavins, R. N., 2001. Experience with Market-Based Environmental Policy Instruments. Discussion Paper, pp.1–58. Stavins, R. & Whitehead, B., 1997. Market Based Environment Polices. Thinking Ecologically, the Next Generation of Environmental Policy, pp. 106-116. UNEP, 2004. The Use of Economic Instruments in Environmental Policy: Opportunities and Challenges. 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