A critique of non-parametric efficiency analysis in energy economics studies

Chien-Ming Chen

Energy Economics, 2013, vol. 38, issue C, 146-152

Abstract: The paper reexamines non-additive environmental efficiency models with weakly-disposable undesirable outputs appeared in the literature of energy economics. These efficiency models are used in numerous studies published in this journal and other energy-related outlets. Recent studies, however, have found key limitations of the weak-disposability assumption in its application to environmental efficiency analysis. It is found that efficiency scores obtained from non-additive efficiency models can be non-monotonic in pollution quantities under the weak-disposability assumption — which is against common intuition and the principle of environmental economics. In this paper, I present taxonomy of efficiency models found in the energy economics literature and illustrate the above limitations and discuss implications of monotonicity from a practical viewpoint. Finally, I review the formulations for a variable returns-to-scale technology with weakly-disposable undesirable outputs, which has been misused in a number of papers in the energy economics literature. An application to evaluating the energy efficiencies of 23 European Union states is presented to illustrate the problem.

Keywords: Non-parametric production models; Undesirable outputs; Environmental efficiencies (search for similar items in EconPapers)
JEL-codes: C52 C61 D24 Q49 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (24)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:38:y:2013:i:c:p:146-152

DOI: 10.1016/j.eneco.2013.03.009

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