Distribution of the Value Added to the Input of the Environmental Goods based on the Materials Balance Principle

Abstract

In the 1960’s, the problem of environment and pollution was considered as due to the difference between the private and social costs. The focus of the problem was often laid on the conflict between the polluters (firms) and the pollutees (consumers or residents). It was substantially resolved by the progress in the technology of the environmental protection. However, it has to be notified that the environmental problem which has been recently argued from the global view point is a consequence of the principle of materials balance. The environment is the source of the inputs of natural resources or energies into the production process of the human beings, and is also the destination of the wastes which are residuals of the production and the consumption. The materials are conserved through the production and consumption and the same amount of industrial, recycled, and consumption wastes are discharged into the environment. Recently, the amount of the discharged pollutants have been dominating the natural capacity to remove the pollutants. The pollutants have been rapidly accumulated in the environment. The level of the accumulated pollutants is about to go beyond the critical threshold of the human beings to be alive. In this paper, we consider that any economic activity makes the difference of value between the inputs and outputs of the activity. We will present an eco-system model in which the interaction between the socio-economic and the ecological systems is taken into account, and value added of each economic activity is not only distributed to the inputs of the usual factors of production but also paid in return for the input of the stock of the environmental goods. The latter distribution of the value added is to be sufficed for the ‘gross’ depreciation of the stock of the environmental goods. We specify a linear eco-system model. There are two types of industries. One is the usual industry which produces usual economic goods, and jointly discharges pollutants. The other is the pollution abating industry which remove the pollutants or convert them less hazardous ones. The goods are classified into the usual economic goods or the environmental goods. An increase in the specified pollutant is a decrease in the environmental goods associated with the specified pollutant. The activity of consumption by the household as well as the activities of the usual and pollution abatement activities will discharge pollutants into the environment. Based on the ‘producers pay principle’, the rate of the value added tax on each activity of the usual or pollution abatement industry is derived using the value system associated with the material system of the eco-system. The rate of the tax is dependent on the rate of the value added distributed for the unit product of the usual goods to the rate of the value added which should be allocated for the unit abatement of a pollutant. © 1995, JAPAN SECTION OF THE REGIONAL SCIENCE ASSOCIATION INTERNATIONAL. All rights reserved.