Introduction
Waste management and energy conversion have become some of the most significant and effective ways to improve the environmental situation. The government of the United Arab Emirates has established sustainable development goals to reduce the amount of waste by applying an innovative approach (Waste Management, 2020). The conversion of landfill gas to energy is a project implemented by Green Energy Solutions & Sustainability (GESS) that supports the Dubai Energy Strategy. The cooperation between the government and such organizations might significantly reduce the overall amount of waste. The current work analyzes the efforts of Green Energy Solutions & Sustainability on Al Qusais Landfill from the perspective of market failure and externalities.
Market Failure
Evidently, the objectives of GESS align with sustainable development and the chosen government course. Nevertheless, the projects that benefit society are not always profitable in terms of revenue growth and overall productivity. A market failure is a term used to describe the inefficient allocation of resources, which eventually results in an economic loss (Cherry, 2017). In other words, the company either spends too much money or does not receive enough compensation. As a result, the services of the organization are not economically efficient and might be considered a market failure.
At the same time, this terminology does not imply the imperfections of the market, such as sustainable development in the current case. The improvement of the environment is a good cause with a large number of positive effects on society. Nevertheless, the construction industry with a sustainable focus might frequently be profitless, and this is the case with Green Energy Solutions & Sustainability. To mitigate the potential economic losses, the company initiated registration, consultancy, and certification services (About Us, n.d.). Consequently, the company needs more green investing – a business practice to support the groups that positively affect the environment (Horne, 2020). Ultimately, it is possible to mitigate the instances of market failure through thorough planning and support policies.
Positive and Negative Externalities
As mentioned briefly before, the organizations might experience a market failure not because of insufficient information or efforts but due to externalities. In general, externalities refer to costs or profits that the company causes to third parties (Owen, 2020). The two most common types are negative and positive externalities, which have different impacts on society (Owen, 2020). As seen from the name, negative externalities cause additional damage to people, the environment, and the economy, while positive externalities benefit them. For instance, pollution from manufacturing plants is a negative externality – while it is profitable for the company, it also causes significant environmental harm. At the same time, the operations of GESS can be considered as positive externalities. While the company lacks profit, it benefits society and the environment by reducing waste and converting it to energy. The figure below presents the overview of the company and the potential solutions to its problems.
The figure depicts the primary areas of development and concerns for Green Energy Solutions & Sustainability.
Government Intervention
Furthermore, it is in the best interest of the government to mitigate the negative externalities and promote positive externalities. In general, taxes, subsidies, regulations, and support policies are the standard means of government intervention. At present, a large number of organizations in the construction industry struggle to maintain both sustainability standards and their financial health. From these considerations, it is important that the government promotes positive externalities and provides support to such companies. The Dubai Integrated Waste Management Master Plan 2012 is one of the most fundamental programs that the government initiated to stimulate sustainability (Waste Management, 2020). Dubai Municipality cooperates with many official and commercial organizations to achieve this goal, and GESS is one of them. However, as the practice shows, the government needs to allocate additional funds to support this development course.
Impact on Social Welfare
The UAE government initiated the waste management plan to improve the overall environmental situation and have a positive impact on social welfare. Nevertheless, government intervention cannot solve all the potential problems of sustainable development. The intense taxes and regulations might significantly change the national economy and be harmful to a large number of organizations. Therefore, even though government intervention may have a positive impact on social welfare, it is important to limit the regulations.
Conclusion
Sustainability is one of the core objectives of the UAE government, and many organizations are working together to achieve this goal. However, some companies struggle to avoid a market failure due to externalities and insufficient support. Green Energy Solutions & Sustainability has initiated the energy conversion from gases on Al Qusais Landfill but struggled to maintain its financial health. Despite the positive externalities of the operations, the company requires additional assistance in terms of government interventions and other ways to make a profit. Nevertheless, the company pursues a good cause and might be able to recover its financial health in the future.
References
About Us. (n.d.). Green Energy Solutions & Sustainability.
Cherry, T. L. (2017). Accepting market failure: Cultural worldviews and the opposition to corrective environmental policies.Journal of Environmental Economics and Management, 85, 193-204.
Horne, C. L. (2019). Public health, public goods, and market failure. Public Health Ethics, 12(3), 287-292.
Owen, J. R., Zhang, R., & Arratia-Solar, A. (2020). On the economics of project-induced displacement: A critique of the externality principle in resource development projects.Journal of Cleaner Production, 285, 123-137.
Waste management.(2020). UAE Government Portal.