The role of government policies and regulatory mechanisms in promoting sustainable development of the automotive industry

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National Technical University of Ukraine «Igor Sikorsky Kyiv Polytechnic Institute», Kyiv

Department of Theory and Practice of Management

The role of government policies and regulatory mechanisms in promoting sustainable development of the automotive industry

Akimov Ruslan Ivanovych

phd-student of the

Pashov Rostyslav Ivanovych

Phd of Philosophical Sciences

senior lecturer

Abstract

This scientific article examines the integral role of government policy and regulatory mechanisms in stimulating sustainable development within the automotive industry. Tracing the historical trajectory of government involvement, the study scrutinizes the evolution of policies aimed at balancing economic growth with environmental, social and economic sustainability goals. The article assesses the success of various policy frameworks, offering insights into strategies that have positively impacted sustainable practices in the automotive sector.

In addition, the study delves into the intricacies of implementing sustainable development policies, exploring the potential challenges and conflicts associated with striking a balance between environmental preservation, economic growth, and social justice. For this, the automotive industry must work hard for sustainable development, and government policies and regulatory frameworks must adapt to achieve these goals. And the very unevenness of the growth of the automotive sector, taking into account state incentives, can be used to build a system of promoting the achievement of sustainable development goals and mitigating the environmental footprint of industry. Regulatory mechanisms should include enforcement strategies, monitoring systems and joint initiatives, with the aim of verifying and evaluating their effectiveness in aligning industry innovation practices with sustainable development goals.

In conclusion, the article emphasizes the need for the active participation of the government in directing the automotive industry to the path of sustainable development. It advocates for collaborative and adaptive policies that encourage innovation, encourage environmentally conscious practices and ensure the long-term viability of the automotive sector. By understanding the specific nuances of the causal relationship between government policy and sustainable automotive development, this study contributes to the discourse around a sustainable and responsible industry that meets both current and future societal needs.

Keywords: state policy, sustainable development, automobile industry, economic growth, social justice, social responsibility of business.

Акімов Руслан Іванович аспірант кафедри теорії та практики управління, Національний технічний університет України «Київський політехнічний інститут імені Ігоря Сікорського», м. Київ

Пашов Ростислав Іванович кандидат філософських наук, старший викладач кафедри теорії та практики управління, Національний технічний університет України «Київський політехнічний інститут імені Ігоря Сікорського», м. Київ

Роль державної політики та регуляторних механізмів у сприянні сталому розвитку автомобільної промисловості

Анотація

government policy automotive industry

У цій науковій статті досліджується невід'ємна роль державної політики та регуляторних механізмів у стимулюванні сталого розвитку в автомобільній промисловості. Простежуючи історичну траєкторію участі уряду, дослідження ретельно розглядає еволюцію політики, спрямованої на збалансування економічного зростання з екологічними, соціальними та економічними цілями стійкості. У статті оцінюється успішність різноманітних політичних рамок, пропонується уявлення про стратегії, які позитивно вплинули на сталу практику в автомобільному секторі.

Крім того, дослідження заглиблюється в тонкощі реалізації політики, орієнтованої на сталий розвиток, досліджуючи потенційні проблеми та конфлікти, пов'язані з досягненням балансу між збереженням навколишнього середовища, економічним зростанням і соціальною справедливістю. Задля цього, автомобільний сектор промисловості має наполегливо працювати над сталим розвитком, а державна політика та нормативно-правова база мають адаптуватися для досягнення даних цілей. А саму нерівномірність зростання автомобільного сектору з урахуванням державних стимулів можна використати для побудови системи сприяння досягненню цілей сталому розвитку та пом'якшення екологічного сліду промисловості. Регуляторні механізми, повинні включаючи стратегії забезпечення дотримання, системи моніторингу та спільних ініціатив, з метою перевірки та оцінки їх ефективності в узгодженні галузевої практики впровадження інновацій з цілями сталого розвитку.

На завершення стаття наголошує на необхідності активної участі уряду в спрямуванні автомобільної промисловості на шлях сталого розвитку. Він виступає за спільну та адаптивну політику, яка заохочує інновації, стимулює екологічно свідомі практики та забезпечує тривалу життєздатність автомобільного сектору. Розуміючи особливості причинно-наслідкового зв'язку між урядовою політикою та сталим автомобільним розвитком, це дослідження робить внесок у дискурс навколо стійкої та відповідальної галузі, яка відповідає як поточним, так і майбутнім потребам суспільства.

Ключові слова: державна політика, сталий розвиток, автомобільна промисловість, економічне зростання, соціальна справедливість, соціальна відповідальність бізнесу.

Formulation of the problem

The relevance of researching the role of government policies and regulatory mechanisms in promoting sustainable development of the automotive industry is driven by various factors. Firstly, it is emphasized by the overall context of sustainable development. As modern society increasingly focuses on achieving sustainable development, which entails the harmonious combination of economic growth, social justice, and environmental preservation. The automotive industry has a significant impact on these aspects and requires regulation to achieve the goals defined by the government. It is also crucial to consider different environmental challenges. The rise in air pollution, climate change, and environmental issues associated with the use of traditional fuels in transportation necessitate the implementation of effective measures to reduce the negative impact of the automotive industry on the environment. Government policies and regulatory mechanisms can facilitate the transition to clean, so-called “green” and sustainable technologies in the automotive sector. We should also mention the economic aspect of this problem, as transition to sustainable development mode of governance in the automotive industry can create new opportunities for economic growth, new job creation, and enhanced competitiveness. Government policies can foster a favourable investment climate, support research and development, and stimulate innovation in the automotive industry. As social aspect of this problem one can find less relevant, we should consider that major sustainability expectations are based on proper behaviour model of social groups. That is why societal demand for sustainability and social responsibility accumulates hidden power to make policies real and expectations come true. Moreover, consumers are increasingly demanding sustainable practices from industries, including the automotive sector. Government policies that promote sustainable development in the automotive industry can align with societal expectations and enhance public trust and engagement.

Regulatory mechanisms are essential to ensure compliance with sustainable practices in the automotive industry. Governments monitor and enforce emission standards and regulations to ensure that automakers comply with the set standards. Certification and labeling programs for sustainable vehicles have also been established to provide consumers with information on the environmental impact of their vehicles. Furthermore, environmental impact assessments are carried out for new automotive projects to evaluate their potential impact on the environment. These mechanisms ensure that sustainable practices are adhered to, and the industry operates within the set regulations.

Analysis of recent research and publications

The automotive industry is at a crossroad, balancing economic growth with social justice and environmental sustainability. Government policies like emission regulations and electric vehicles subsidies drive the industry towards greener practices, creating new jobs in renewable energy and public transportation while ensuring equitable access through smart infrastructure planning. Businesses have a responsibility to invest in sustainable technologies and ethical sourcing, while consumers can be at the same time the drivers of demand. This web, supplied by research on low-carbon technologies adoption and car-sharing programs, leads the way to the future with cleaner technologies, responsible practices which are working together for a sustainable future. All this is reflected in the researches of the following scientists: Gillingham, K., Yan, S., Zimm, C., Kagawa, S., Nansai, K., Kondo, Y., Hubacek, K., Suh, S., Minx, J., Kudoh, Y., Tasaki, T., Nakamura, S., Masoumi, S.M., Kazemi, N., Abdul-Rashid, S.H., Cao, J., Chen, X., Qiu, R., Hou, S., Lukin, E., Krajnovic, A., & Bosna, J. and others.

The purpose of the article

By investigating the role of government policies and regulatory mechanisms in promoting sustainable development in the automotive industry, this research aims to contribute to the understanding of how public interventions can effectively shape the trajectory of the automotive sector towards a more sustainable future.

Presenting main material

The role of the state in market regulation is crucial for ensuring efficiency, stability, and fairness in the economy. The government acts as a regulator and supervisor, establishing rules of the game and implementing control mechanisms that help ensure economic discipline and protect the interests of society.

Some modern researchers (Munonyedi, 2018) critically examine the concept of market economy and government regulations, focusing on the disparities between the free-market economy and the government regulated market economy. They explore the role of the "invisible hand," a phrase coined by Adam Smith, in describing the forces that facilitate equilibrium between the demand and supply sides of a free market. Studies like that highlight the pros and cons associated with both market economies, particularly in the context of sustainable development, to enable economists to suggest suitable trade-offs.

Government regulation in the automotive industry, in particular, directly affects the way cars look, how their components are designed, the safety features that are included, and the overall performance of any given vehicle (Investopedia Team, 2021). Automotive regulations are designed to benefit the consumer and protect the environment, and automakers can face stiff fines and other penalties if they are not followed. In more recent years, government regulations have sought to shape what level of fuel efficiency automobiles must achieve.

One paper that assesses environmental regulation in automobile markets is "Assessing Environmental Regulation in Automobile Markets" by Kenneth Gillingham (Gillingham, 2022). This paper studies the economic effects of automobile market regulation and how it is governed by complex interactions between consumer behaviour and firm decisions in the markets for both new and used vehicles. This research demonstrates that interplay between sustainability and business has emerged as a prominent topic of discussion at both national and international levels, spanning across industrialized and emerging countries. Many existing business models have been found to lack crucial elements necessary for achieving sustainability objectives. Particularly, the automotive industry, which significantly impacts economic development, necessitates a reevaluation of its business models to mitigate environmental impact.

In recent years, there has been a growing focus on understanding the impact of large companies on society. The existing literature on sustainable business practices has predominantly centered around large companies, particularly multinational corporations, given their significant individual impacts. As a result of market regulations and procedural requirements, large manufacturing companies have begun reporting their efforts and engagement in sustainable development, aligning with internationally established standards.

Government regulation addresses externalities by imposing limitations on specific activities or implementing taxes/subsidies, aiming to ensure that companies consider the social costs or benefits of their actions more comprehensively.

However, it is widely recognized that these regulatory instruments can have their imperfections and limitations in practice.

Ronald Coase's influential work (Coase, 1960) introduced the idea of a private alternative to government regulation. The Coase theorem suggests that parties involved in creating and experiencing externalities can negotiate private agreements that are mutually acceptable and Pareto-efficient in resolving the problem. If the transaction costs of reaching and implementing such agreements are reasonably low, government intervention becomes unnecessary. From this perspective, CSR can be seen as a potential implementation of Coase's idea, resolving conflicts between companies (represented by their owners and management) and various stakeholders.

CSR provides a framework for companies to voluntarily consider and address the interests of stakeholders beyond their immediate shareholders. By engaging in responsible business practices, companies can take into account the social and environmental impacts of their operations and seek mutually beneficial solutions with their stakeholders. CSR initiatives often involve actions such as reducing environmental footprints, supporting local communities, promoting ethical business practices, and ensuring fair treatment of employees.

While CSR offers a private-sector approach to addressing externalities, it is important to recognize that it has its own limitations. CSR initiatives rely on the willingness and commitment of individual companies, and their effectiveness can vary widely. Furthermore, there are concerns about greenwashing or superficial implementation of CSR without genuine impact. Effective implementation of CSR requires transparency, accountability, and ongoing dialogue between companies and stakeholders to ensure meaningful engagement and positive outcomes.

Government regulations are commonly used to address externalities, but they have inherent limitations. CSR represents a private alternative to regulation, where companies voluntarily consider and address the interests of stakeholders. By implementing CSR initiatives, companies can strive for mutually beneficial solutions and contribute to sustainable development. However, it is crucial to ensure genuine commitment, transparency, and accountability in CSR practices to achieve meaningful outcomes and avoid the pitfalls of tokenism or superficial engagement. Both government regulation and CSR can play complementary roles in promoting responsible business practices and addressing externalities.

Government policies play a crucial role in promoting sustainable development in the automotive industry. One such policy is the incentives for electric and hybrid vehicles. Governments around the world are offering various incentives such as purchase subsidies, tax credits, and free parking to encourage the adoption of electric and hybrid vehicles [5]. These policies not only promote the use of sustainable transportation but also contribute to reducing air pollution and greenhouse gas emissions [6]. For instance, several states in the US are exploring policies to support hybrid and plug-in electric car adoption to increase energy security and reduce greenhouse gas emissions.

Another such successful example of market regulation by the government in the automotive sector is Norway and its effective policy to promote the use of electric vehicles. Norway has implemented a range of incentives that have helped make it one of the leading countries in electric vehicle adoption. The government has provided significant incentives to electric vehicle owners. For instance, electric vehicles were exempt from purchase tax, registration tax, and value-added tax (VAT). The government has also invested in the development of electric vehicle charging infrastructure, ensuring the installation of charging stations across the country. This has helped alleviate the issue of charging point scarcity and made electric vehicle usage more convenient and accessible. Another important role of the government was to subsidise electric vehicle purchases, reducing the cost of acquisition. This has made electric vehicles more affordable for the general public and stimulated their popularity.

As a result of these measures, Norway has achieved a significant increase in electric vehicle market share, with electric vehicles accounting for a substantial portion of new vehicle registrations. The successful regulation of the automotive market by the Norwegian government serves as a model for other countries looking to promote sustainable transportation and reduce carbon emissions.

The other policy that promotes sustainable development in the automotive industry is fuel efficiency standards. Governments around the world are implementing fuel efficiency standards to reduce the consumption of fossil fuels and promote the use of sustainable transportation. These standards require automakers to produce vehicles that meet certain fuel efficiency requirements, which in turn, reduces carbon emissions and air pollution [7]. Moreover, these policies encourage automakers to invest in research and development of new technologies to improve fuel efficiency, which ultimately contributes to sustainable development.

The other research (Sorte Junior, Waldemiro, 2011) investigates important direction of government policy - impact on the dynamics of supply chains and automotive market within another example - Brazilian automobile industry. The study focuses on how government interventions shape the structure and performance of supply chains in this particular industry context.

The research underscores the crucial role of government policies in shaping the competitiveness and structure of supply chains in the Brazilian automobile industry. These policies encompass regulations, tax incentives, and investment initiatives aimed at promoting local production, technology transfer, and job creation.

The authors analyse how these policies influence different stages of the supply chain, including the relationships between automakers, suppliers, and other stakeholders. They examine the mechanisms through which government interventions impact supply chain coordination, innovation, and efficiency.

The article underlines the role of collaboration, knowledge sharing, and skill development in building resilient and robust supply chains. It also emphasizes the importance of aligning government policies with industry needs and global market trends to ensure long-term competitiveness.

Sustainable development is crucial for the automotive industry to ensure a better future for the environment and society. At the same time the automotive industry faces a number of challenges in achieving sustainable development, including economic and political pressures, technological limitations, and resistance from industry stakeholders [9]. Government policies and regulatory mechanisms can play a crucial role in addressing these challenges and promoting sustainable development in the industry. However, progress in promoting sustainable development in the automotive industry is often hindered by economic, political, and regulatory obstacles, as well as a lack of national and global coordination.

Despite these challenges, government policies can have a significant impact on the industry's ability to transition to more sustainable practices. For example, policies promoting the adoption of electric vehicles (EVs) have been shown to be effective in increasing their market share [6]. Additionally, sustainable supply chain practices have been implemented in the automotive industry, which can help reduce environmental impact and promote social responsibility [10]. Governments can also play a role in promoting sustainable practices by incorporating environmental and social considerations into their procurement processes.

In order to achieve sustainable development in the automotive industry, it is crucial for governments to take a holistic approach that incorporates technology, environment, and social factors. This may involve institutional and policy changes, as well as a shift in resources among economic sectors and political constituencies. Furthermore, education and awareness-raising initiatives can help to promote sustainable development in the industry by encouraging individuals and organizations to adopt more sustainable practices. Ultimately, government policies and regulatory mechanisms can play a critical role in promoting sustainable development in the automotive industry, but they must be supported by coordinated efforts from all stakeholders.

One of the significant challenges is resistance from the industry, as sustainable practices may lead to increased costs and reduced profits. Additionally, there is limited public awareness and demand for sustainable vehicles, which may hinder the adoption of sustainable practices. Finally, global competition and trade agreements may limit the ability of governments to implement sustainable policies, as some countries may not have the same regulations or may have different priorities.

However, there is a need for increased government involvement to ensure that the automotive industry continues to make progress towards sustainability. Governments must lead the way in promoting sustainable practices, but progress is currently being held back by economic, political, and regulatory obstacles. A stakeholder engagement system for industry sustainable development can be established, which pushes government actions and increases public awareness [11]. Many governments have set ambitious targets for achieving a zero-emissions national government fleet, and it is essential that these targets are met to promote sustainable transportation.

Looking to the future, the automotive industry must continue to work towards sustainable development, and government policies and regulatory mechanisms must evolve to keep pace with this progress. The development of new energy vehicle markets supported by the government can be an essential step towards sustainable transportation. Moreover, the elaboration of business models of sustainability in the automotive industry can contribute to the framework for sustainable development [12]. The unbalanced development of automobile structure from the perspective of government incentives can be analyzed to provide a logical framework for promoting sustainable development. Therefore, continued collaboration between the automotive industry and government agencies is necessary to promote sustainable development and reduce the environmental impact of the industry.

Conclusions

It is essential for governments to increase their involvement and implement more policies and regulations to overcome these challenges and ensure a sustainable future for the automotive industry. The future outlook for sustainable development in the industry is promising, and with continued efforts, we can achieve a greener and more sustainable future.

References

1. Egbo, Munonyedi. (2018). "The Market and Government Regulation: The Need for Appropriate Balance for Sustainability." DOI: 10.4172/2375-4389.1000324.

2. Investopedia Team. (2021, October 19). "What Regulations Affect the Automotive Sector?" Investopedia. URL: https://www.investopedia.com/ask/answers/042015/how-much-impact-does-government-regulation-have-automotive-sector.asp.

3. Gillingham, K. (n.d.). "Assessing Environmental Regulation in Automobile Markets." National Bureau of Economic Research. URL: https://www.nber.org/reporter/2022number1/assessing-environmental-regulation-automobile-markets.

4. Coase, R.H. (1960). "The Problem of Social Cost." Journal of Law and Economics, Vol. 3 (Oct., 1960), pp. 1-44.

5. Yan, S. (2018). "The economic and environmental impacts of tax incentives for battery electric vehicles in Europe." In Energy Policy (Vol. 123, pp. 53-63). Elsevier BV. DOI: 10.1016/j.enpol.2018.08.032.

6. Zimm, C. (2021). "Improving the understanding of electric vehicle technology and policy diffusion across countries." In Transport Policy (Vol. 105, pp. 54-66). Elsevier BV. DOI: 10.1016/j.tranpol.2020.12.012.

7. Kagawa, S., Nansai, K., Kondo, Y., Hubacek, K., Suh, S., Minx, J., Kudoh, Y., Tasaki, T., & Nakamura, S. (2011). "Role of Motor Vehicle Lifetime Extension in Climate Change Policy." In Environmental Science & Technology (Vol. 45, Issue 4, pp. 1184-1191). American Chemical Society (ACS). DOI: 10.1021/es1034552.

8. Sorte Junior, Waldemiro. (2011). "Supply Chain Management in The Brazilian Automobile Industry: Bottlenecks."

9. Masoumi, S.M., Kazemi, N., & Abdul-Rashid, S.H. (2019). "Sustainable Supply Chain Management in the Automotive Industry: A Process-Oriented Review." In Sustainability (Vol. 11, Issue 14). MDPI AG. DOI: 10.3390/su11143945.

10. Masoumi, S.M., Kazemi, N., & Abdul-Rashid, S.H. (2019). "Sustainable Supply Chain Management in the Automotive Industry: A Process-Oriented Review." In Sustainability (Vol. 11, Issue 14). MDPI AG. DOI: 10.3390/su11143945.

11. Cao, J., Chen, X., Qiu, R., & Hou, S. (2021). "Electric vehicle industry sustainable development with a stakeholder engagement system." In Technology in Society (Vol. 67). Elsevier BV. DOI: 10.1016/j.techsoc.2021.101771.

12. Lukin, E., Krajnovic, A., & Bosna, J. (2022). "Sustainability Strategies and Achieving SDGs: A Comparative Analysis of Leading Companies in the Automotive Industry." In Sustainability (Vol. 14, Issue 7, p. 4000). MDPI AG. DOI: 10.3390/su14074000.

Література

1. Egbo, Munonyedi. (2018). The Market and Government Regulation: The Need for Appropriate Balance for Sustainability. 10.4172/2375-4389.1000324.

2. Investopedia Team. (2021, October 19). What Regulations Affect the Automotive Sector? Investopedia. https://www.investopedia.com/ask/answers/042015/how-much-impact-does-government-regulation-have-automotive-sector.asp.

3. Gillingham, K. (n.d.). Assessing Environmental Regulation in Automobile Markets. National Bureau of Economic Research. https://www.nber.org/reporter/2022number1/assessing-environmental-regulation-automobile-markets.

4. The Problem of Social Cost. R.H. Coase. / Journal of Law and Economics, Vol. 3 (Oct., 1960), pp. 1-44.

5. Yan, S. (2018). The economic and environmental impacts of tax incentives for battery electric vehicles in Europe. In Energy Policy (Vol. 123, pp. 53-63). Elsevier BV. https://doi.org/10.1016/j.enpol.2018.08.032.

6. Zimm, C. (2021). Improving the understanding of electric vehicle technology and policy diffusion across countries. In Transport Policy (Vol. 105, pp. 54-66). Elsevier BV. https://doi.org/ 10.1016/j.tranpol.2020.12.012.

7. Kagawa, S., Nansai, K., Kondo, Y., Hubacek, K., Suh, S., Minx, J., Kudoh, Y., Tasaki, T., & Nakamura, S. (2011). Role of Motor Vehicle Lifetime Extension in Climate Change Policy. In Environmental Science & Technology (Vol. 45, Issue 4, pp. 1184-1191). American Chemical Society (ACS). https://doi.org/10.1021/es1034552.

8. Sorte Junior, Waldemiro. (2011). Supply Chain Management in The Brazilian Automobile Industry: Bottlenecks.

9. Masoumi, S.M., Kazemi, N., & Abdul-Rashid, S.H. (2019). Sustainable Supply Chain Management in the Automotive Industry: A Process-Oriented Review. In Sustainability (Vol. 11, Issue 14). MDPI AG. https://doi.org/10.3390/su11143945.

10. Masoumi, S.M., Kazemi, N., & Abdul-Rashid, S.H. (2019). Sustainable Supply Chain Management in the Automotive Industry: A Process-Oriented Review. In Sustainability (Vol. 11, Issue 14). MDPI AG. https://doi.org/10.3390/su11143945.

11. Cao, J., Chen, X., Qiu, R., & Hou, S. (2021). Electric vehicle industry sustainable development with a stakeholder engagement system. In Technology in Society (Vol. 67). Elsevier BV. https://doi.org/10.1016/j.techsoc.2021.101771.

12. Lukin, E., Krajnovic, A., & Bosna, J. (2022). Sustainability Strategies and Achieving SDGs: A Comparative Analysis of Leading Companies in the Automotive Industry. In Sustainability (Vol. 14, Issue 7, p. 4000). MDPI AG. https://doi.org/10.3390/su14074000.

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