The Theory of By-Production of Emissions and Capital-Constrained Non-Cooperative Nash Outcomes of a Global Economy
The reduced form approaches that are commonly adopted in the literature to model emission-generating technologies (EGTs) do not distinguish between emission-causing and non-emission causing goods in production. We provide a new set of axioms to describe EGTs. Technologies that satisfy these axioms are called by-production technologies (BPTs). A distance function representation of BPTs is derived and it is shown that a BPT can be decomposed into a standard neo-classical intended-production technology and nature's emission-generation set (the relationship in nature between emissions and emission-causing goods). As an illustrative application of the BP approach, we study cross-country differences in emission levels due to cross-country di erences in capital endowments at a noncooperative Nash equilibrium, where emissions impose both local and global externalities. The change in emission levels as we move from capital-poor to capital-rich countries is decomposed into income and substitution e ects. The latter are a result of changes in the trade-off between intended-production and emission-generation, which is attributed to diminishing returns to emission-causing inputs or cleaning-up activities, while the nature of the former is governed by the assumption that emission is an inferior good. The implications of increasing returns to capital, substitutability or complementarity between capital and emission-causing inputs such as fuels, extraction costs of fuels, and inter-fuel substitution in production are studied and a set of conditions that result in an environmental Kuznets curve is derived.
|Date of creation:||2011|
|Contact details of provider:|| Postal: Streatham Court, Rennes Drive, Exeter EX4 4PU|
Phone: (01392) 263218
Fax: (01392) 263242
Web page: http://business-school.exeter.ac.uk/about/departments/economics/
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:exe:wpaper:1110. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Carlos Cortinhas)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.