An economic model of pollution prevention

Pollution prevention is modelled with an approach that combines the substitutability of inputs in the twice-differentiable neoclassical production function and the discreteness of linear activity analysis. The polluting firm's emissions, which result from its use of a toxic input, can be reduced by substituting other inputs for the toxic input and&2.urule;or by switching to a nonpolluting process. The strengths of the model are that zero emissions are achievable at a finite marginal cost, the nonconvexity that may occur in conventional activity analysis does not occur in this model, and there is a range of output levels at which polluting and nonpolluting firms in the same industry realistically coexist.