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Eco-efficiency measurement and material balance principle: an application in power plants Malmquist Luenberger Index

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Abstract

Incorporating Material Balance Principle (MBP) in industrial and agricultural performance measurement systems with pollutant factors has been on the rise in recent years. Many conventional methods of performance measurement have proven incompatible with the material flow conditions. This study will address the issue of eco-efficiency measurement adjusted for pollution, taking into account materials flow conditions and the MBP requirements, in order to provide ‘real’ measures of performance that can serve as guides when making policies. We develop a new approach by integrating slacks-based measure to enhance the Malmquist Luenberger Index by a material balance condition that reflects the conservation of matter. This model is compared with a similar model, which incorporates MBP using the trade-off approach to measure productivity and eco-efficiency trends of power plants. Results reveal similar findings for both models substantiating robustness and applicability of the proposed model in this paper.

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Notes

  1. Weak disposability can be written as: \((y, z)\in P(x)\,and\,0 \le \theta \le 1\,imply\,( \theta y, \theta z)\in P(x)\), while free or strong disposability can be defined as: \(( y, z)\in P(x)\,and\,y^{\prime }\le y\,imply\,(y^{\prime }, z)\in P(x)\).

  2. In this case, whereas electricity is the good output and \(\hbox {SO}_{2}\) is the bad one b which is the nutrient coefficient of the good output is 0. Sulfur is not a part of electricity.

  3. In many industries, these types of incentives are imposed to control fuel which consumed and to force the industries to improve their combustion technologies or run them in their best condition.

  4. The third constraint guarantees null jointness property, which is defined as: if \((y, b)\in P(x)\) and \(b=0\) then \(y=0\). Good and bad outputs are produced jointly—see Chung et al. (1997)

  5. In here, the technology is assumed to be fixed.

  6. Here, we can omit \(\mathop {\sum }\nolimits _{i=1}^I g_{xi} +\mathop {\sum }\nolimits _{j=1}^J g_{yj} +\mathop {\sum }\nolimits _{k=1}^K g_{bk} =1\), which does not change the frontier, but plays the role of a scaling constraint to keep inefficiency variable, \(\theta \), within the limit of [0,1].

  7. \(a_{1}=-1.86610\hbox {E}{-}06\hbox { Tone/Cal}\) and \(a_{2}=-6.84500\hbox {E}{-}06\hbox { Tone/Cal}\). See Result of the Comprehensive Plan of Tehran Air Pollution Control, 1997, by JICA and Municipality of Tehran.

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Authors and Affiliations

  1. Faculty of Economics and Administration, University of Malaya, Kuala Lumpur, Malaysia

    Behrouz Arabi & Susila Munisamy Doraisamy

  2. Aston Business School, Aston University, Birmingham, UK

    Ali Emrouznejad

  3. Department of Agricultural Engineering, Faculty of Agriculture, Yasouj University, Yasouj, Iran

    Alireza Khoshroo

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  1. Behrouz Arabi
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  2. Susila Munisamy Doraisamy
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  3. Ali Emrouznejad
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  4. Alireza Khoshroo
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Correspondence to Ali Emrouznejad.

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Arabi, B., Doraisamy, S.M., Emrouznejad, A. et al. Eco-efficiency measurement and material balance principle: an application in power plants Malmquist Luenberger Index. Ann Oper Res 255, 221–239 (2017). https://doi.org/10.1007/s10479-015-1970-x

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