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It is a standard procedure in environmental economics to model abatement as a non-linear
technological process to reduce the discharge into the environment of a residual generated as
a by-product of a wanted good. It is also standard in formal analyses of production-cum-
abatement to map incompletely the materials flow that is inevitably involved in that process.
The present paper shows how the standard way of modeling production-cum-abatement can
be brought into line with physical constraints securing materials balance. It demonstrates, in
particular, that the production function (1) can be reconstructed from a comprehensive pro-
duction-cum-abatement technology. Although (1) maps the materials flow incompletely, a
production function of type (1) has been shown to be implied by each technology (2) that
fully accounts for all materials flows involved. We have also been proved that the implied
function Y satisfies the properties (Y*) that are sufficient but not necessary for the properties
(Y). It remains an open question, therefore, whether for each function Y satisfying the afore-
mentioned properties (Y*) there exists a technology (2) such that Y is implied by that technol-
ogy. Therefore we also don’t know the comprehensive set of conditions that makes the func-
tions Y, R1 and R2 from (15) fully compatible with the technology (2).
Moreover, in a simple general equilibrium model with full regard of the materials flow the
paper explores the consequences for allocative efficiency and efficiency-restoring taxation of
multiple interdependent pollutants that are inevitably linked to 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 abate-
ment cost if the residual subject to abatement is not the only residual causing environmental
degradation.
Krysiak and Krysiak (2003) address the issue of modeling all processes of materials transfor-
mation consistently in an analytical framework that aims at maximum generality. We pro-
ceeded, instead, by trading generality for more specific and more informative results about the
emergence and consequences of multiple and interdependent residuals and pollutants involved
in production-cum-abatement when the materials-balance principle is explicitly and fully re-
garded.
As for the consequences of multiple residuals, we find, not surprisingly, that if the production
residual, ry , is the only pollutant it suffices to employ the 'truncated' production-cum-
abatement technology (1). However, as soon as the emission of at least one additional residual
in the pertaining materials flow also contributes to the degradation of the environment, the
need for an integrated multi-pollutant control arises (Guruswanny 1991). There is a growing