Non-linear production, abatement, pollution and materials balance reconsidered
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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- 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.
- 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.
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- Thomas Eichner & Rüdiger Pethig, 1999. "Recycling, Producer Responsibility and Centralized Waste Management," Volkswirtschaftliche Diskussionsbeiträge 83-99, Universität Siegen, Fakultät Wirtschaftswissenschaften, Wirtschaftsinformatik und Wirtschaftsrecht.
- 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.
- Ayres, Robert U & Kneese, Allen V, 1969. "Production , Consumption, and Externalities," American Economic Review, American Economic Association, vol. 59(3), pages 282-97, June.
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