In a free market, they would not be allowed to do those things and the quality of the water and the air would be much better. Its only because the government has taken over the management of the environment that they get away with it.
You say that they "would not be allowed to do those things". Who would forbid them from doing so and how? In particular, if you think that the market would stop them, can you point to the process by which it would do so and justify why all the people involved in the market would act in that way?
The free market, and by magic