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Environmental production and productivity growth: evidence from european paper and pulp manufacturing

  • S.I.: OR for Sustainability in Supply Chain Management
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Abstract

The production and manufacturing sector is one of the primary factors that affects the environment, which has been a very important topic of recent studies. Many approaches are employed to reduce the impact of production on the environment. More recently, carbon-abatement technology and activities have been introduced into the production processes to reduce carbon emissions, such as the implementation of emission trading programs in many industrial sectors, including the paper and pulp sector. Nevertheless, the costs of abatement activities will result in a certain level of sacrifice in productivity growth, when the inputs are reallocated from good output production to abatement activities to maintain bad output under the regulatory limit. However, how and the extent to which such technology will affect productivity remain unclear. Therefore, it is worth investigating the opportunity cost of introducing such technology. In this paper, we offer new empirical evidence by studying panel data on 17 EU member states from 1995 to 2006. Productivity changes are calculated using a data envelopment directional distance function with and without adapting the carbon-abatement technology in the paper and pulp production. The results support our concern about the potential opportunity cost of introducing carbon-abatement technology, which leads to a decline in productivity growth. In addition, industrial production is not operating efficiently; on average it moves further away from the efficient production frontier over time.

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Notes

  1. See Färe and Primont (1995) for a discussion.

  2. The usual strong disposability of good outputs condition: \( \left( {y,b} \right) \in P\left( x \right)\, {\text{and }}\,y^{\prime} \le y \,{\text{imply}}\,\left( {y^{\prime},b} \right) \in P\left( x \right) \) This condition implies that a reduction of the good outputs is feasible without a simultaneous reduction of the bad outputs.

  3. See Shephard and Färe (1974).

  4. See Shephard (1970).

  5. See Krautzberger and Wetzel (2012) for a similar approach.

  6. As noted by Shestalova (2003), technological regress can be reasonably explained for sectors such as mining, whereas in most industrial sectors technology progresses or at least remains unchanged. In the paper and pulp manufacturing sector, we expect a technological progress in the EU27 countries.

  7. Note that if the observed data for observation \( k^{\prime} \) in period \( t + 1 \) are located above the frontier in period \( t \) the linear program for the mixed period directional distance function \( \vec{D}_{o}^{t} \left( {t + 1} \right) \) yields an infeasible solution.

  8. Note that the derectional distance function for Model 2 is \( \vec{D}_{o}^{t} \left( {x^{{t,k^{\prime}}} ,y^{{t,k^{\prime}}} , 0;y^{{t,k^{\prime}}} ,0} \right) = \hbox{max} \theta \) in which the bad outputs are excluded. That means the linear programming is to optimize solely the good outputs for given inputs.

  9. Switzerland and the nine other member states of the European Union could not be included in the analysis because of missing data.

  10. GDP deflators are used due to incomplete industry-specific deflators in the OECD Structural Analysis database.

  11. This variable choice follows the gross output concept of productivity measurement appropriate when analysing firm or industry level data. For a detailed comparison of gross output based and value-added based productivity measures see the “OECD Manual on Measuring Productivity” (OECD 2001).

  12. The 5% depreciation rate is a country average derived from diverse sources such as Abadir and Talmain (2008). Testing the robustness of our estimations, we also applied a 3% and a 10% depreciation rate. The results reveal no significant differences. The information on the gross fixed capital formation was drawn from the STAN.

  13. NACE stands for ‘Nomenclature statistique des activités économiques dans la Communauté européenne’.

  14. All reported indices are geometric means. Please refer Sect. 2 for an economic interpretation.

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Authors and Affiliations

  1. Management School, University of Liverpool, Liverpool, UK

    Yan Li

  2. Nottingham University Business School China, University of Nottingham Ningbo China, Ningbo, China

    Hing Kai Chan & Tiantian Zhang

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  1. Yan Li
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Li, Y., Chan, H.K. & Zhang, T. Environmental production and productivity growth: evidence from european paper and pulp manufacturing. Ann Oper Res (2018). https://doi.org/10.1007/s10479-018-3126-2

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