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Integrating Non-Separability in Agricultural Sector Models: A New Paradigm for Production and Pollution

This paper explores the non-separability concept in agricultural sector models, emphasizing the interplay between production, pollution, and abatement. It critiques traditional views of separable production and emissions, proposing a new theoretical paradigm where outputs are treated as interdependent. The discussion includes evolving theories, the role of joint production, and approaches to internalizing environmental impacts. Key steps for achieving environmentally sound production are outlined, highlighting efficiency, input substitution, and the adoption of new technologies to address externalities.

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Integrating Non-Separability in Agricultural Sector Models: A New Paradigm for Production and Pollution

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  1. Incorporating the non-separability concept of production, pollution and abatement in sector models Jef Van Meensel Centre for Agricultural Economics

  2. Introduction • Incorporating environmental effects in sector modelling: • Extend private economic view • Basics for internalization experiments • Contents: • Evolution of theoretical thinking • Translation of theoretical concepts to sector modelling

  3. Conventional theory • Production and emission are separable • Strict joint production (fixed proportions) Production X → Y Emission Y→ B TB Y (c) (b) (a) B

  4. New theoretical paradigm • Production & emission: to be treated as non-separable • (Y, B) = f(X) (joint inputs) • (Y, B) =f(X1,…,Xn) (input substitution) • Generalized joint production • Proportion of good and bad outputs to be varied • Rearrangement of productive inputs to counter externalities • Three consecutive steps to environmentally sound production (Hill et al, 1999) • Efficiency improvements • Input substitution • Output reduction Use of new technologies

  5. Graphical representation Y MAC Efficiency improvement Input substitution New technologies Reduction Y New technologies Input substitution at private cost Proportional reduction Y and B B B reduction Weakly disposable Strongly disposable Input substitution Efficiency improvement

  6. Translation to sector modelling • Conventional theory • B = f(aY) • New theoretical paradigm • Production function Y = g(X) • Objective function Z = p[g(X)] • Externality B = h[g(X)]

  7. Conclusion • Two challenges: • Theoretical: clear linkage between concepts of joint production, disposability and separability • Practical: include different steps to environmentally sound production in sector model

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