Nonlinear Production, Abatement, Pollution and Materials Balance Reconsidered

24

awareness in both academia and the political arena (U.S. General Accounting Office 1996)
that the most efficient control strategy is to consider multiple pollutants simultaneously rather
than continue with the prevailing single-pollutant regulations. However, the demand for
multi-pollutant control approaches is quite often rationalized by growing concerns about the
potential risks to human health and/or to the environment from the interaction of multiple
pollutants after their emission. These are certainly serious concerns in their own right. Yet the
emphasis of the present paper is on allocative problems caused by multiple pollutants whose
generation is interdependent. In that case, a first-best tax strategy also needs to account for
the technical interdependencies among the residuals since such linkages impact on the effi-
cient levels of all tax rates. As a consequence, the time-honored rule of equating the emissions
tax rate and marginal abatement cost, defined in the conventional way, is shown to be no
longer efficient, in general.

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