Nonlinear production, abatement, pollution
and materials balance reconsidered 1
Rüdiger Pethig, University of Siegen
1. The problem
As is well-known from the law of mass conservation, the flow of materials taken from the
environment for economic uses generates a flow of materials from the economy back into the
environment that is of equal weight (after accounting for time delays). The economic activi-
ties of production and consumption are merely processes of transforming materials that only
change the physical and chemical attributes and the composition of the materials flow. Quite
obviously, the composition of the flow of residuals from the economy into the environment is
of great significance because different kinds of residuals differ in their detrimental impact on
the environment.2
As a consequence, a sensible strategy for alleviating the problem of environmental degrada-
tion is to control the process of materials transformation by reducing the emission of the most
harmful pollutants through residuals abatement activities. Like production and consumption,
this activity is a process of transforming materials subject to the materials-balance principle:
the weight of all material outputs of that process equals the weight of all material inputs.
In their seminal paper on 'production, consumption and externalities', Ayres and Kneese
(1969) made a strong case for the need of a consistent and encompassing application of the
materials-balance principle to all transformation processes. In their formalized materials-
balance approach they employed linear technologies with fixed input-output coefficients but
since then the profession has revealed a preference for modeling non-linear rather than linear
technologies. In fact, the notion and empirical evidence of strictly increasing (real) marginal
abatement costs is at the core of many pollution control studies.
To be sure, it is possible to bring non-linear (abatement) technologies into line with materials-
balance requirements, too. This has been demonstrated in various previous studies the most
general and ambitious of which probably is Krysiak and Krysiak (2003). Yet fully regarding
the materials-balance principle in theoretical analysis comes at the cost of enormous addi-
1 Helpful comments by Thomas Eichner, Reyer Gerlagh and by two anonymous referees are gratefully acknowl-
edged. Remaining errors are the author's sole responsibility.
2 A more detailed analysis would need to focus on further determinants such as the medium of discharge and the
local environmental medium's assimilative capacity.