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Non-linear production, abatement, pollution and materials balance reconsidered

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  • Pethig, Rudiger

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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Suggested Citation

  • Pethig, Rudiger, 2006. "Non-linear production, abatement, pollution and materials balance reconsidered," Journal of Environmental Economics and Management, Elsevier, vol. 51(2), pages 185-204, March.
  • Handle: RePEc:eee:jeeman:v:51:y:2006:i:2:p:185-204
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    References listed on IDEAS

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    1. Thomas Eichner & Rüdiger Pethig, 2000. "Recycling, Producer Responsibility and Centralized Waste Management," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 57(3), pages 333-333, May.
    2. 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.
    3. 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.
    4. Ayres, Robert U & Kneese, Allen V, 1969. "Production , Consumption, and Externalities," American Economic Review, American Economic Association, vol. 59(3), pages 282-297, June.
    5. 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.
    6. Rüdiger Pethig, 2003. "The 'materials balance approach' to pollution: its origin, implications and acceptance," Volkswirtschaftliche Diskussionsbeiträge 105-03, Universität Siegen, Fakultät Wirtschaftswissenschaften, Wirtschaftsinformatik und Wirtschaftsrecht.
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    More about this item

    JEL classification:

    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects

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