Cost-constrained measures of environmental efficiency: a material balance approach

Ana M. Aldanondo, Valero Casasnovas and M. Carmen Almansa

MPRA Paper from University Library of Munich, Germany

Abstract: Joint cost-environmental efficiency analysis based on the material balance principle (MBP) has an important short-coming, in that the measures of allocative efficiency it produces do not fully integrate environmental and economic outcomes. Their limitation lies in their failure to take into account some decision-making units (DMU) use a combination of inputs that is more environmentally-harmful than that of the least-cost unit, or, more rarely, more costly than that of the least-polluting unit. Input substitution can therefore bring both environmental and economic benefits. This paper develops a method for differentiating between environmental allocative efficiency gains that involve an economic trade-off and those that do not. Drawing insight from the literature on multi-criteria analysis, we extend the MBP approach to new measures of cost-constrained environmental efficiency using data envelopment analysis (DEA). The proposed approach is illustrated by an application geared to assessing the efficiency of a sample of greenhouse horticultural production units in Almeria, Spain. The results for this case show that it is possible to increase environmental allocative efficiency by up to 34 % on average without incurring additional costs.

Keywords: Cross constrained cost-environmental efficiency; material balance condition; nitrogen pollution; green house horticulture (search for similar items in EconPapers)
JEL-codes: C61 D24 Q12 Q50 (search for similar items in EconPapers)
Date: 2016-07-11
New Economics Papers: this item is included in nep-agr, nep-eff, nep-env and nep-ger
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