People aren't going to shit into the town well, but even there I am willing to question how far that is because they are aware of the consequences of their action, and not simply because they knew they'd get a beating from all the other townspeople. There'd certainly be people that would readily do so as long as there was another well somewhere else that they could drink out of.
But even that common sense you describe seems to go away really quickly as soon as the damage isn't completely obvious. In many places it's absolutely nothing unusual if you throw your trash into the same ocean the fish you're eating for dinner comes out of. Abstract that even further to ppms of invisible gases in a million cubic kilometers of air and even some people with doctorates seem to have trouble understanding the consequences.
Clearly, a dictatorship cannot handle this issue as well as a democracy can. The people in power are way too close to those few who benefit from lax environmental standards way more than they'd benefit from better environmental conditions. But as you noted, privatization is not an option for fleeting resources like water or air.
I find your segue into the anti-government rant a bit weirdly placed. Air quality is a textbook example of a "problem of the commons" situation - probably the biggest of them all because the atmosphere is literally one giant planet-spanning commons that everyone draws from.
And personally I cannot see a solution to the problem of the commons other than through goverment. Because even if people do realise they are also hurting themselves by polluting, it doesn't change the fact that a benefit from polluting less will be shared by everybody, while the costs of doing so are only applied to them. A rational actor will therefore always make the problem worse. Nobody wants to be the only guy on the block that spends double the money for oil heating, while still taking in 99% of pollution because everybody else is still on coal.
In a government, people can agree on reasonable restrictions that everybody needs to abide by to make the situation better. If you can outright make coal heating illegal, then people can expect 50% of pollution for double the money, and might even enjoy that change.
Now I do agree that there's a big caveat here and a possibility that such regulation would be overbearing, but I find it kind of silly to believe that we could have successfully made all the environmental progress of the past few decades in the west without the hammer of big government behind it.
Musk does have a bit of a habit of announcing Sci-Fi projects in grand strokes but never actually explaining how he's going to fix the problems that plagued earlier attempts.
The relaunchable rockets are the probably most realistic goal he's currently trying to achieve and that still hasn't worked out - the only rocket they've actually attempted to launch a second time blew up. And this after NASA had been doing the relaunching space transport thing for decades, and had to come to the conclusion that even if the Space Shuttle technically worked, it was probably more expensive than using regular discardable rockets would've been.
Now he's also trying to build a supersonic train, quadruple the number of satellites currently in space in five years, start up asteroid mining, and then colonize Mars?
2/3rds of the satellites will always be over water and have their bandwidth utterly wasted. A significant part of the rest will be over areas where almost nobody lives, or nobody can afford to pay for internet with hard currency. Meanwhile all 400m Europeans that live in the populated 5m square kilometers have to use the same 20 to 100 satellites.
Because the satellites are not geostationary they'll need to use omnidirectional antennae which puts some hard limits on bandwidth, while a lot of people will get FTTH and 5G mobile networks in the next decade.
Iridium can get away with these shortcomings because they target the customers that doesn't care about prices. But I kind of doubt that market can support 4000 satellites
Kill Ugly Radio - Frank Zappa