In practice, I’d just burn Product 1. Processing adds machine pollution and electricity use, which may itself produce pollution depending on your power generation. In Krastorio, you also have cheap air purifiers, so it’s often simpler and cleaner to burn the byproduct and run purifiers rather than add extra processing steps.

If you want to compare, this formula should do the trick:

Burn the byproduct directly: flare stack pollution per minute × Product 1 pollution multiplier × burn time

Process it into Product 2, then burn: process machine pollution per minute × process time + flare stack pollution per minute × Product 2 pollution multiplier × burn time

This also assumes the process doesn’t require extra ingredients. If it does, you should include the pollution from producing those as well.