Data Envelopment Analysis as a Tool for Measurement of Eco-Efficiency

Abstract

The new concept in the current state of the public discussion on environmental policy is the concept of eco-efficiency, in which not only efficiency with respect to input and output productivity but efficiency from an environmental point of view is taken into account simultaneously. We propose data envelopment analysis as an approach for measurement of eco-efficiency. First, we measure the eco-efficiency in two steps: We estimate the technical efficiency (as the relation of the desirable outputs to the inputs) and the so-called ecological efficiency (as the relation of desirable to the undesirable outputs) separately. Then taking the results of both models as the output variables for the new data envelopment analysis model, the indicator for eco-efficiency can be obtained. Second, we formulate a model by taking into account simultaneously the inputs, the desirable outputs (goods) and the undesirable outputs (bads). The bads are treated as the inputs in the sense that we wish to expand desirable outputs and reduce the undesirable outputs and inputs. For illustration and comparison of both approaches a numerical example is provided.