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With the existence of market failure it becomes necessary for the government to intervene.  We have seen some examples of this already in our discussion.

License Arrangements

It is necessary to gain a license in Australia for a variety of activities that will have an environmental impact.  This is true of fishing (as we have already seen), and also for hunting.  For example, each year in the wetlands of Victoria there are people who enjoy the sport of duck hunting.  To participate, they must first purchase a license.

It is also necessary to purchase a license if you would like to own an animal as a pet.  For example, domestic cats do a great deal of environmental damage when they are allowed to roam unchecked.  Forcing owners to have license means that the number of cats can be regulated, and oversize populations in certain areas can be avoided.

Excises

An excise is a type of tax which has been placed on a product that we might like to buy.  That charge is paid by the consumer, and it is generally an attempt by the government to raise revenue to solve the problems associated with the use of that item.  Hopefully it will also help to reduce the demand for that item.  For example, cigarettes, alcohol and petrol are all subject to excises.  It will not surprise you to realise that these are all products with easily identifiable negative externalities.

Recently there has been a lot of discussion about the possible introduction of a carbon tax.  This tax is effectively the result of the realisation that many of the things that we do, such as driving cars, results in carbon based pollution.  Although the exact format of this tax has not been finalised, one possible format will see it implemented in a manner similar to an excise.

Subsidies

A subsidy can be used to encourage the production or consumption of goods and services which are good for the environment.  For example, the government has offered to subsidise the purchase of water tanks in individual homes.  This reduces the pressure on Melbourne’s dams, and as a result the water resource is used in a more sustainable way.

The government has also offered to subsidise the installation of solar panels so that homes can be heated without the need to draw on the electricity grid.  This scheme will almost certainly be expanded in years to come.

National Parks

The government is also able to control the use of environmental resources by denying us access to them.  Some areas of land have been listed as national parks, and as a result they can not be used for economic profit by individuals or businesses – they are to be left as they are for future generations to enjoy.

For example, Kakadu National Park in the Northern Territory is a very large area of Australia, and it remains largely untouched.  Those businesses which have been able to mine in this area have done so under strict conditions, including returning the land to the pre-mined state after the term of the mining license has expired.

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