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How have government policies aimed to promote environmental sustainability?

Environmental sustainability is about protecting and enhancing the natural environment, ensuring the
suitable use of renewable and non-renewable resources, and minimizing the negative environmental
consequences of economic activity. Moreover, many issues preside within our current context, in particular
the issues of pollution, climate change and the depletion of resources. Thus, both macroeconomic and
microeconomic policies can be used to counter such apprehensions.
Macroeconomic is use of fiscal and monetary to alter economic activity in the economy. However,
regarding environmental sustainability, the government primarily uses fiscal policy, which is through
altering the annual government budget spending alters demand in the economy. Aims to correct market

failure i.e. incorrect pricing of goods and services due to the price mechanisms inability to
consider social costs of production.
The government can increase expenditure to subsidise the promotion of environmental sustainability.

Subsidy graph

As demonstrated by the graph, supply increases, therefore lowering price and increasing demand.
Furthermore, subsidies also creative positive externalities as demonstrated through the graph.

Positive externality graph

A positive externality is where there is an unintended increase is socially optimum quantity as deter
states by the graph above.
E.g. the Clean Energy Finance Corporation will provide up to $10 billions in loans and investment for
renewable energy. Moreover create a more renewable and environmentally sound economy, of which is
social accessible.
Moreover, the government can also tax irresponsible environmental practice, hence increasing revenue.

Tax graph

As demonstrated by the graph, price increase, therefore lowering supply and demand. Taxes internalise

negative externalities into the price of goods and services increases their price, making such
goods uncompetitive

Negative externality graph

Negative externalities there is an unintended negative social cost as private cost does not consider this
in its mechanism. Hence taxes internalise this E.g. petrol is taxed at 38% per litre in order to promote the
use of alternative method of fuel, ones that are more sustainable and environmentally sound. Such as
electricity and bio-fuel. Moreover, providing effective as many petrol stations are shriving to

provide bio-fuel and electric cars are on the rise with companies such as Tesla motors.
Alternatively, microeconomic policies aims to alter the supply-side of economics, whereby,
adjusting the structure and resource allocation within the economy.
The government can ban the production of environmentally dangerous and their use in society.
For example, in 2002, it was made illegal to sell leaded petrol as it had negative implications on the
human body. Moreover, promoting environmentally sound as an alternative. Moreover, many
environmentally sound practices are not conducted as it is not monetarily viable for the business.
Therefore, government often have to provide the good or service themselves. For examples, the
2008, $12 billion irrigation system in rural areas to improve the flow of water and reduce draught that may
affect crops. Whereby, private means were not viable. Moreover, creative positive externalities as farms
and residents were able to save money through the new system.

Nonetheless, issues lie in the enforcement and implementation of such notions. As various
constraints are inherent.
Conflict between economic growth and environmental sustainability. Moreover, the notion of
intergenerational equality.
Political constraints (Gillards policy fucked up)
Time lags.