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Nonlinear Production, Abatement, Pollution and Materials Balance Reconsidered

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  • Rüdiger Pethig

Abstract

In the environmental economics literature the standard approach of modeling nonlinear production and abatement processes is to treat waste emissions "simply as another factor of production" (Cropper and Oates 1992). That approach doesn't map the materials flow involved completely and hides, moreover, the exact links between production, residuals generation and abatement. This paper shows that production functions with emissions treated as inputs can be reconstructed as a subsystem of a comprehensive production-cum-abatement technology that is in line with the materials-balance principle. In a simple economy with full regard of the materials flow it also explores the consequences for allocative efficiency and efficiency-restoring taxation of multiple and interdependent residuals generated in the transformation processes of production, abatement and consumption. Finally, the paper demonstrates that efficiency may require setting the emissions tax rate above or below conventionally defined marginal abatement cost if the residual subject to abatement is not the only residual causing pollution.

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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1549.

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Date of creation: 2005
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Handle: RePEc:ces:ceswps:_1549

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Keywords: residuals; abatement; pollution; materials balance;

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References

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  1. Cropper, Maureen L & Oates, Wallace E, 1992. "Environmental Economics: A Survey," Journal of Economic Literature, American Economic Association, vol. 30(2), pages 675-740, June.
  2. Thomas Eichner & Rüdiger Pethig, 2000. "Recycling, Producer Responsibility and Centralized Waste Management," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 57(3), pages 333-, May.
  3. Krysiak, Frank C. & Krysiak, Daniela, 2003. "Production, consumption, and general equilibrium with physical constraints," Journal of Environmental Economics and Management, Elsevier, vol. 46(3), pages 513-538, November.
  4. Ayres, Robert U & Kneese, Allen V, 1969. "Production , Consumption, and Externalities," American Economic Review, American Economic Association, vol. 59(3), pages 282-97, June.
  5. Klevorick, Alvin K. & Kramer, Gerald H., 1973. "Social choice on pollution management: the genossenschaften," Journal of Public Economics, Elsevier, vol. 2(2), pages 101-146, April.
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Citations

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Cited by:
  1. Kai A. Konrad & Stergios Skaperdas, 2005. "The Market for Protection and the Origin of the State," CESifo Working Paper Series 1578, CESifo Group Munich.
  2. Rausser, Gordon C. & Papineau, Maya, 2008. "Managing R&D Risk in Renewable Energy," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt41j9f6ks, Department of Agricultural & Resource Economics, UC Berkeley.
  3. Mahlberg, Bernhard & Luptacik, Mikulas, 2014. "Eco-efficiency and eco-productivity change over time in a multisectoral economic system," European Journal of Operational Research, Elsevier, vol. 234(3), pages 885-897.
  4. Lisann Krautzberger & Heike Wetzel, 2012. "Transport and CO 2: Productivity Growth and Carbon Dioxide Emissions in the European Commercial Transport Industry," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 53(3), pages 435-454, November.
  5. Frank Joest & Martin Quaas, 2006. "Environmental and population externalities," Working Papers 0427, University of Heidelberg, Department of Economics, revised Aug 2006.
  6. Forsund, Finn R., 2009. "Good Modelling of Bad Outputs: Pollution and Multiple-Output Production," International Review of Environmental and Resource Economics, now publishers, vol. 3(1), pages 1-38, August.
  7. Murty, Sushama & Robert Russell, R. & Levkoff, Steven B., 2012. "On modeling pollution-generating technologies," Journal of Environmental Economics and Management, Elsevier, vol. 64(1), pages 117-135.
  8. Hampf, Benjamin, 2011. "Separating Environmental Efficiency into Production and Abatement Efficiency – A Nonparametric Model with Application to U.S. Power Plants," Darmstadt Discussion Papers in Economics 53901, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute of Economics (VWL).
  9. Leleu, Hervé, 2013. "Shadow pricing of undesirable outputs in nonparametric analysis," European Journal of Operational Research, Elsevier, vol. 231(2), pages 474-480.
  10. Rødseth, Kenneth Løvold, 2013. "Capturing the least costly way of reducing pollution: A shadow price approach," Ecological Economics, Elsevier, vol. 92(C), pages 16-24.
  11. Guohua Feng & Apostolos Serletis, 2013. "Undesirable Outputs and a Primal Divisia Productivity Index Based on the Directional Output Distance Function," Working Papers 2013-15, Department of Economics, University of Calgary.
  12. Lauwers, Ludwig, 2009. "Justifying the incorporation of the materials balance principle into frontier-based eco-efficiency models," Ecological Economics, Elsevier, vol. 68(6), pages 1605-1614, April.
  13. Kuosmanen, Natalia & Kuosmanen, Timo, 2013. "Modeling Cumulative Effects of Nutrient Surpluses in Agriculture: A Dynamic Approach to Material Balance Accounting," Ecological Economics, Elsevier, vol. 90(C), pages 159-167.
  14. Fagnart, Jean-François & Germain, Marc, 2011. "Quantitative versus qualitative growth with recyclable resource," Ecological Economics, Elsevier, vol. 70(5), pages 929-941, March.
  15. Akao, Ken-Ichi & Managi, Shunsuke, 2007. "Feasibility and optimality of sustainable growth under materials balance," Journal of Economic Dynamics and Control, Elsevier, vol. 31(12), pages 3778-3790, December.
  16. Neophyta Empora & Theofanis Mamuneas, 2011. "The Effect of Emissions on U.S. State Total Factor Productivity Growth," Review of Economic Analysis, Rimini Centre for Economic Analysis, vol. 3(2), pages 149-172, October.
  17. Van Meensel, Jef & Lauwers, Ludwig H. & Van Huylenbroeck, Guido & Van Passel, Steven, 2009. "Exploring production-theoretical insights for analyzing trade-offs between economic performance and environmental pressure at firm level," 2009 Conference, August 16-22, 2009, Beijing, China 51725, International Association of Agricultural Economists.

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