Environmental efficiency measurement when producers control pollutants under heterogeneous conditions: A generalization of the materials balance approach

Andreas Eder

No 26 (2020), FORLand Working Papers from Humboldt University Berlin, DFG Research Unit 2569 FORLand "Agricultural Land Markets – Efficiency and Regulation"

Abstract: This article provides a generalization of the materials balance-based production model introduced by Coelli et al. (2007). Based on this, some new environmental efficiency (EE) measures are presented. The Coelli et al. (2007) EE measure and its extension by Rødseth (2016) produce biased efficiency estimates if the material flow coefficients (MFCs) are heterogeneous across decision-making units and non-discretionary. Furthermore, the Coelli et al. (2007) measure fails to reward emission reductions by emission control. To overcome these shortcomings, this paper proposes production models which allow for heterogeneous MFCs reflecting differences of external environmental factors or non-controllable heterogeneities in inputs and outputs, and which properly take into account emission abatement activities. Based on this, we provide new EE measures and decompose them into i) a part reflecting emission control efficiency (ECE), ii) a part measuring material input efficiency (MIE), and iii) a part reflecting the efficient allocation between material and non-material inputs (environmental allocative efficiency, EAE). The approach is illustrated by an empirical application to arable farming in Austria utilizing data from 90 farms for the year 2011. Soil erosion is considered an undesirable output and land a material input. The average EE, ECE, MIE, and EAE are 0.53, 0.96, 0.69, and 0.79, respectively. The results indicate that actual output can be potentially achieved with 47% less soil loss. Most of the potential to improve EE is due to differences in MIE and EAE. Removing inefficiencies in the implementation of existing, subsidized erosion controls allows soil loss to be reduced by 4%.

Keywords: Emission-generating technologies; Materials balance condition; Weak-G disposability; Data envelopment analysis; Non-discretionary factors; Soil erosion; Crop farms (search for similar items in EconPapers)
JEL-codes: C61 D24 Q12 Q15 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-agr, nep-eff and nep-env
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:forlwp:262020

DOI: 10.18452/22358

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