Abstract
In the following four chapters, the static allocation aspect is analyzed. We study production theory, assuming emissions as joint outputs of production and treating environmental quality as a variable in the production set (chapter 3). After defining the production possibilities, we study which prices should be set in order to reach optimal results with respect to a welfare criterion. Also, we analyze whether optimality can be attained in a competitive equilibrium when environmental quality is taken into consideration (chapter 4). In chapter 5, we present the public-goods approach to environmental allocation. Benefit/cost analysis, the Lindahl solution, and institutional mechanisms which reveal individual preferences are discussed. Whereas the public-goods approach starts from the assumption that environmental quality cannot be attributed to individuals, the property-rights discussion stresses the point that the introduction of property rights may solve the allocation problem (chapter 6).
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Notes
The inequality sign allows for the case where the generation of pollutants is inefficient in the sense that more pollutants are generated than necessary. Note, however, that because of the mass-balance concept, emissions are restricted.
Ido not consider the mass-balance concept in abatement. Note that declining marginal productivities in abatement imply residuals of abatement activities.
It is assumed here that pollutants ambient in the environment die away at the end of the period. In chapter 13 this assumption of the immediate decay of the pollutants is removed.
Note that the pollution intensity of sectors is defined in terms of marginal propensities. On the relation of marginal and average pollution intensities, compare Siebert et al. (1980).
A more detailed analysis is given in Siebert (1982g).
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© 1992 Springer-Verlag Berlin Heidelberg
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Siebert, H. (1992). Production Theory and Transformation Space. In: Economics of the Environment. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-662-02842-1_3
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DOI: https://doi.org/10.1007/978-3-662-02842-1_3
Publisher Name: Springer, Berlin, Heidelberg
Print ISBN: 978-3-662-02844-5
Online ISBN: 978-3-662-02842-1
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