An environmental input-output model with multiple criteria

It is often claimed that there is a trade-off between economic goals and the quality of the environment. For this reason, an environmental input-output optimization model with multiple objectives is formulated. The criteria are the minimization of factor costs to produce the Gross National Product and the minimization of net pollution for a given level of final demand. Using the LeChatelier-Samuelson principle, the authors analyze the changes in the production of the sectors and in the prices of the goods (described by the dual model) due to the change in the preferences of the decision makers. It can be shown that higher weights for the environmental objectives imply-in tendency-non-decreasing production of the sectors and non-decreasing abatement activities. The changes of prices are ambiguous. The condition for increasing prices is given. To some degree, the opposite results can be achieved, if maximization of the value of final demand (or of private consumption) and minimization of net pollution under the constraints for primary input are taken as objective functions. In this case, increasing weights for environmental goals will lead in tendency to non-increasing final demand and to non-increasing net pollution. Under given conditions, higher environmental quality will be achieved by non-increasing gross production and abatement activities.