It is evident that processes unique to each of the world’s nationsgovern them when it comes to law formulation. Therefore, companiesmust be aware of the sets of regulations, which affect theiroperations in a given nation. In the United Kingdom, despite theroles of the Parliament, they have found difficulty in making cleardistinctions between other significant areas of the country’s legalsystem and commercial law (Mitchell, 2008 p. 9). Due to this, themaking of laws in this particular nation has proved to be tedioussince there lacks a clear distinction between the country’s legalsystems. Therefore, the law making processes require due process toensure the laws work in the best interest of the concerned companies.The law formulating a process of any given nation is primarilyoverseen by the Parliament making the process amongst the significantprimary tasks granted to the Parliament (Mitchell, 2008 p. 14). It isa process known to take a considerable portion of the Parliament’stime. Concerning this, a bill, which is a proposed law, undergoesintroduction into Parliament by any particular Member of Parliament.Once a debate ensures regarding the bill, it then approved by everyHouse of Parliament receiving Royal Assent leading it to become lawalso referred to as an Act (Mitchell, 2008 p. 25).

As indicated by Mitchell (2008 p. 23), the statute formulationprocess within any given category of the legal system is describableusing six-part processes. For instance, even the 201 Regulationsfollow these processes. The first five repeated in the House ofParliament as well as the House of Commons and the last in the Houseof Lords. These six-part processes include the first reading, secondreading, committee phase, report phase, third reading and lastlyroyal assent (Mitchell, 2008 p. 24). In agreement with Mitchell (2008p.25), the first stage is mainly an official stage where the billtitle is made known to the House of Parliament. Subsequently, thesecond reading brings forth a debate about the general principlesthat the bill holds, which consequently leads to a vote. The nextstage involves the bill being debated each clause at a time involvingStanding Committees comprised of Members of Parliament originatingfrom distinct parties. In this stage, there may also follow anamendment to the proposed bill. In the report stage, any particularamendment established in the committee stage is then reported to theHouse and voted upon, which may further instigate further amendments.Subsequently, in the third reading, there forms another overalldebate concerning the revised bill. Once the bill has already passedthrough the House of Parliament, it will then experience passingthrough the House of Commons following a similar sequence. As notedbyMitchell (2008 p. 25), the bill then either find itself into theHouse of Lords who accept, delay, or amend the said bill. If anyamendments occur in the House of Lords, they should undergoconsideration in the House of Commons, which may decide to eitherreject or accept the modifications. Lastly, the bill then goesthrough an official stage named royal assent that has been supportedsince 1707 (Mitchell, 2008 p. 25). After this, the bill is an Act.


Globalization as a concept is increasingly growing in the world ofbusiness today making it an area of interest for most internationalcompanies. The crossing of boundaries for these companies ensuresthat they attain a greater market audience and, as a result, increasetheir profits. Despite this being true, the companies working acrossmultiple boundaries experience certain degrees of regulations thatare the intrastate. Therefore, for them to be successful in suchcountries such as the United Kingdom, they need to adhere to thenation’s set laws. For instance, the United Kingdom enforces the2012 regulation laws, which mainly focus on regulating the greenhousegas emissions of companies operating within their borders (EmissionsEU ETS, 2015). As evident in the system, the United Kingdom’s lawsare made by their Parliament transforming a bill into an Act. Thecountry through this show they focus on creating anenvironment-friendly nation for their citizens concerning thecompany’s operating within its boundaries.

Although the United Kingdom is keen on maintaining anenvironment-friendly space for their citizens through the creation ofthe 2012 Regulations, it is also linked to the European Union (EU).The European Union managed to create an Emissions Trading System(ETS) aimed at reducing the greenhouse gases emissions making the2012 Regulations a fragment of the supra state. Since the UnitedKingdom is a member of the EU, it is required, therefore, to abide bythe EU ETS regulations. The EU ETS regulations apply mainly tocertain heavy industrial operations establishing a compulsory systemreferred to as cap and trade (Emissions EU ETS, 2015). With this, itmeans that the company operations within the United Kingdom shouldsolely comply with the EU ETS greenhouse gas emissions. If thecompanies operating within the United Kingdom fail to comply with theset regulations, then they face a penalty.

Therefore, in the United Kingdom, the companies that operate withinits boundaries are required to adhere to both the countriesintrastate laws that are mainly formulated by the Parliament as wellas those brought forward by the EU ETS. The regulations introduced bythe EU ETS are not the United Kingdom specific but associated withevery member of the European Union (Emissions EU ETS, 2015). With theknowledge of this, it is evident that the 2012 Regulations throughtheir linkage with the compliance with the EU ETS. Through this, itis evident that currently the 2012 Regulations governing companiesoperating in the United Kingdom are of a supra-state nature.According to Emissions EU ETS (2015), this means that the EU ETSmainly makes the laws concerning the greenhouse gas emissions in thenations. The union also manages to oversee how these regulations areimplemented and comes up with penalties on the matter if any breachis detected.

Since the EU ETS body formulates and oversees the emissionregulations, it means that the lawmaking process in the UnitedKingdom fails to solely integrate the Parliament. Therefore, it isevident that the Parliament is affected in one way or the other bythe 2012 Regulations connections to the EU ETS. Customarily, theParliament takes responsibility for the making the laws that aremeant to govern their country ensuring that the law undergoes crucialamendments that will be of the benefit of every citizen andorganization within the United Kingdom. With the country being amember of the EU and its professed compliance to the EU ETS, theParliament shares its role in making the laws that are mainly relatedto the greenhouse gas emissions. In agreement with Emissions EU ETS(2015), this is because the nation follows the cap and tradeprocedure developed by the EU ETS that ensures the regulations aremet making Parliament powerless concerning the area.


The emissions trading also known as the cap and trade is a strategythat began with the aim of promoting environmental sustainability.The EU ETS represents an example of the cap and trade method that isimplemented across companies within the European Union countries withthe aim of reducing environmental pollution. The government also usesthe command and control scheme to manage the environment, but ananalysis of the market economies shows that with individuals pursuingtheir interests, there are environmental control methods that may befor efficient. In this case, the EU ETS is considered to be moreefficient than the command and control approach because of differentreasons.

Cap and trade are more efficient than the CAC approach because theenvironmental laws are not imposed and mandatory. In cap and trade, alimit is set on the emissions released to the atmosphere. Companiesthen purchase the right to emit a specific amount within a specifiedperiod and over the years, the emissions increases (Haab, Whitehead &ampCaviglia, 2014, p.7). The less the pollutants, the lesser the amountpaid by the company. However, in command and control method, thegovernment formulates environmental laws that are imposed on allbusinesses. It is mandatory for all companies to abide by the lawsset by the government and those that fail to do so face theconsequences. Imposing laws on companies is considered inefficientbecause applying uniform laws across different companies might notaddress the environmental problems. Companies are engaged in variousactivities, which imply that their emission levels may vary. Thus, byimposing the environmental laws means that companies that produce lowemissions can increase their amount of pollutants as long as they donot exceed the set limit.

The EU ETS is also an efficient cap and trade strategy because itallows the government to manage the environment at lower costs thanthose incurred in command and control approach. EU ETS allowsorganizations to purchase the right to release pollutants into theatmosphere. The system reduces the amount of emissions that companiesare allowed to emit over the years. Cap and trade allow firms thatemit lower emissions to sell their rights to other industries andreduce emissions to the atmosphere (Haab, Whitehead &amp Caviglia,2014, p.6). Organizations shall focus on strategies that are costeffective to avoid increasing their operational costs. However,command and control is considered inefficient because theenvironmental policies that are created to manage the environment arefocused on achieving specific goals. For example, the government canset the amount of carbon emissions for industries as 15 metric tonsand any industry that fails to meet the set level is fined heavily.Through the command and control scheme, the process of managing theenvironmental damage becomes slow since the legislation process ofsetting new emission limits is time-consuming. Additionally, themethod imposed by the government does not focus on the expenditurethat shall be incurred by companies in complying with the set rules.There are companies that may have to incur high expenses whileabiding by the laws that may interfere with their operational costs.

Flexibility is another essential element in the strategies adopted inmanaging the environment. EU ETS is more flexible than the commandand control scheme hence the reason it is considered more efficient.There are changes that are occurring on a daily basis within thebusiness environment. For instance, there are technological changesarising from the high rate of innovation that has resulted in theinvention of cleaner technological systems that can be used byorganizations to reduce the emissions to the environment. EU ETSallows companies to invest in cleaner technologies thus reducing theamount of environmental damage (Haab, Whitehead &amp Caviglia, 2014,p.7). EU ETS is flexible because it can change the set limits ofemissions depending on the changes in the business environment. Onthe other hand, command and control scheme is considered rigid sincethey do not easily respond to changes in the business environment.The process also involved in formulating laws under the command andcontrol scheme is slow and quite complex. Companies under the commandand control scheme cannot quickly embrace the use of cleanertechnologies in minimizing the damage made to the environment. Thedelay is caused by overreliance on the government to impose the rulesso that they can adapt the modern technologies.


In a business environment, various factors influence the operationsof a business such as the legal aspect. According to Goode, the legalsystems are aimed at addressing the issues that may arise in abusiness environment. Some of the laws set are environmental lawsthat protect the environment from destruction by the vast businessactivities. The European Union Emissions Trading Scheme (EU ETS) hasimplemented environmental laws such as Cap and Trade system as wellas the Command and Control scheme (CAC) thatpromote environmentalsustainability. The two legal systems affect the operations ofbusinesses in different ways.

Cap and Trade system affects business operations by controlling theamount of pollution that companies are allowed to release into theenvironment. Business owners and the government agree that whenperforming business operations such as the acquisition of rawmaterials, manufacturing, packaging and distribution of products andservices, there is bound to be environmental pollution. However, tominimize the amounts of pollution released into the environment, themanagers purchase the right to release emissions to a certain limit.Companies agree with the government as per the Cap and Trade systemon the emissions within a specific period. The system is consideredbeneficial since it allows the companies to plan on how to reducetheir emissions level annually.If the companies permit higher amountsthan the set limit, they can be sued for breach of contract by thegovernment and they are liable to pay fines or termination of acontract. The contract established under the Cap and Trade is systemis consideredlegally enforceable. Therefore, business operations arelikely to be affected if they fail to uphold the set limits ofemissions to the environment.

On the contrary, the Command and Control schemes may affect have anegative impact on business operations because of their rigid nature.Command and Control set a specific amount of emissions for allcompanies, and if a company produces a higher amount, it can be suedfor breaking the law. The command and control scheme negativelyaffects business operations because business activities vary from oneorganization to another. There are those companies that can releasehigher emissions as compared to others. Therefore, by setting uniformpollution levels for all companies interferes with their businessoperations. Additionally, the rigid nature of the command and controlschemes tends to prevent the companies from planning on how to reducethe amount of emissions periodically (Haab, Whitehead &amp Caviglia,2014, p.6). The command and control scheme only focuses on definingwhat is legal or not, and thus, it does not, provide companies withan opportunity to plan or implement measures to promote environmentalsustainability since they are contented with abiding by the laws.

A comparison of the cap and trade strategy to the command and controlscheme indicates that cap and trade may influence business operationsby encouraging innovation and investment in cleaner technology thusproviding long-term solutions to the environmental issues.However,command and control scheme may only provide short-term solutionssince they do not encourage innovation among organizations. The capand trade strategy may have a positive impact on business operationssince it allows it to reduce the amount paid in acquiring theemission permit by implementing environmentally friendly technologiesin their operations. The new environmental technologies allow them tohave the property rights as per the Intellectual Property Act givingthem an opportunity to benefit from their creation. On the otherhand, command and control scheme does not encourage innovation amongorganizations since they are only focused on ensuring that thecompany abides by the environmental laws. The responsibility ofprotecting the environment is shifted to the government who do sothrough the laws included in the command and control scheme. Based onthe above discussion, it is evident that Goode’s observation thatlaw can be relevant to trade if it is predictable and flexible. TheCap and trade strategy has embraced the predictability andflexibility traits in their laws thus allowing private businessorganizations to operate effectively and efficiently. However, thecommand and control scheme is more rigid which hinders the ability oforganizations to reap benefits since they cannot predict the futureor adapt to the changes in the business environment.


Haab, T.C., Whitehead, J.C. &amp Caviglia, J. L. (2014)Environmental and natural resource economics: an encyclopedia

Mitchell, A. (2008) AS Law, pp. 416, London :Routledge

Emissions EU ETS (2015) ‘EU ETS Monitoring and ReportingRegulation’, Retrieved on October 26 2015, from