Measuring Eco‐efficiency of Production with Data Envelopment Analysis

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.

An approach to holistically assess (dairy) farm eco-efficiency by combining Life Cycle Analysis with Data Envelopment Analysis models and methodologies

“…subject to a number of constraints (see Kuosmanen and Kortelainen, 2005). In ratio 1 the output can be expressed in monetary or physical terms.…”

“…First, analyses involving multiple partial eco-efficiency ratios ignore the substitution possibilities that might exist between different EIs. That is, farms performing moderately for several EIs tend to be overlooked in favour of farms performing exceptionally well for one EI (Kuosmanen and Kortelainen, 2005). Second, with these ratios the allocation of EIs to products is challenging as dairy farms generally produce other products too, such as meat.…”

“…Second, with these ratios the allocation of EIs to products is challenging as dairy farms generally produce other products too, such as meat. Third, incommensurability between several criteria expressed by multiple eco-efficiency ratios rather than a single performance index can complicate decision making (Kuosmanen and Kortelainen, 2005). Fourth, analyses with methods such as regression and principal component analysis are subject to the method chosen to normalize/ standardize eco-efficiency ratios expressed in different units.…”

“…Fifth, assigning subjective weights to indicators (e.g. the eco-efficiency ratios) has been debated in the literature (Kuosmanen and Kortelainen, 2005). Sixth, allowance should be made for the fact that there exist factors affecting eco-efficiency that are beyond managerial control, such as the different bio-physical conditions under which farms operate (see Bogetoft and Otto, 2011;Jan et al, 2012).…”

“…For example, Jan et al (2012) and subsequently Pérez Urdiales et al (2015) used the DEA eco-efficiency model of Kuosmanen and Kortelainen (2005) to define a dairy farm eco-efficiency ratio. This ratio equalled the amount of (physical or monetary) dairy farm output to an aggregate EI index calculated as a weighted summation of all EIs considered in their study.…”