Measuring Eco‐efficiency of Production with Data Envelopment Analysis

TLDR

Aggregating environmental pressures into a single damage index is a major challenge, but DEA accounts for substitution possibilities between resources and emissions without requiring subjective weight judgments, though soft weight restrictions can be incorporated. The article examines how DEA can be adapted to aggregate environmental pressures into a single damage index. The authors adapt DEA and illustrate it by assessing ecoefficiency of road transportation in Finland’s three largest towns. The approach is demonstrated by evaluating ecoefficiency of road transportation in Finland’s three largest towns.

Abstract

Summary Aggregation of environmental pressures into a single environmental damage index is a major challenge of eco‐efficiency measurement. This article examines how the data envelopment analysis (DEA) method can be adapted for this purpose. DEA accounts for substitution possibilities between different natural resources and emissions and does not require subjective judgment about the weights. Although DEA does not require subjective or normative judgment, soft weight restrictions can be incorporated into the framework. The proposed approach is illustrated by an application to assessing ecoefficiency of road transportation in the three largest towns of eastern Finland.