On the properties of an emission-generating technology and its parametric representation

Abstract

We propose a set of comprehensive axioms that seek to capture our intuitive understanding of the properties of an emission-generating technology (EGT). We show that an EGT that satisfies these axioms can be parametrically represented by more than one implicit production function that are derived from it. Here, these production functions take the form of distance functions first introduced by Shephard (Cost and production functions, Princeton University Press, Princeton, 1953) and Malmquist (Trabajos de estadistica 4:209–242, 1953). One of these production relations has properties of a neo-classical production function that shows how standard inputs are transformed into standard (intended) outputs. The remaining reflect trade-offs, observed in nature, between emissions, emission-causing goods, and cleaning-up activities of the producing unit. We illustrate this by considering two cases: (1) where each type of cleaning-up activity jointly mitigates all types of emissions and (2) where cleaning-up activities are emission-specific allowing also for the possibility that a cleaning-up activity, while helping to reduce certain emissions, can also contribute to more of some other types of emissions.