General
This project is a part of the Third Phase of the Finnish Environmental Cluster Research Programme (of the Ministry of the Environment) titled "Ecoefficient Society".
Project Description
Economic activity consumes natural resources as its inputs, and produces undesirable emissions and waste as its output. Any encompassing measure of eco-efficiency should take into account both the input use and the by-products of the activity. It is a common perception that the natural resource inputs directly determine the emission levels. However, the link from resources to emissions is not always a straightforward one because of the substitution possibilities between inputs and outputs.
The economic literatures of production theory and productive efficiency analysis provide a natural starting point for the measurement of eco-efficiency. The empirical applications of production theory account for the substitution possibilities by estimating so-called efficient production frontiers from the cross-sectional or panel data of a number of comparable production units (such as firms). A production unit is called efficient if consumption of any input cannot be decreased without corresponding decrease of at least one output or increase of undesirable outputs.
A number of alternative approaches are available for the empirical estimation of production frontiers. In the context of eco-efficiency, one of the most promising techniques is Data Envelopment Analysis (DEA) (also known as nonparametric efficiency analysis or activity analysis). The advantages of DEA over the traditional regression -based techniques is its immediate applicability to multiple-input multiple-output technologies, and the minimal assumptions about the production technology. DEA does not impose any maintained assumptions about the function form of the production frontier or the distribution of inefficiencies, and it hence belongs to the family of nonparametric methods.
The objective of this project is to systematically investigate the applicability of the DEA-method to the measurement of eco-efficiency, and develop the method further towards more comprehensive framework supporting management and incentive mechanisms.
Dr. Timo Kuosmanen(Wageningen University, The Netherlands)
Mr. Mika Kortelainen (University of Joensuu, Finland)
Photo: Mika Kortelainen receives the 2nd prize for the Best Poster competition at the NAPW conference, Toronto 2004.
Available papers
"Measuring Eco-Efficiency of Production: A Frontier Approach", EconWPA working paper at WUSTL, no. 0411004, 2004 (with Mika Kortelainen).
Kuosmanen, T., and M. Kortelainen (2004): "Data Envelopment Analysis in Environmental Valuation: Environmental Performance, Eco-efficiency and Cost-Benefit Analysis", University of Joensuu, Discussion papers in Economics no. 21; EconWPA working paper at WUSTL, no. 0409004.
Kortelainen, M., and T. Kuosmanen (2004): Measuring Environmental Efficiency of Consumer Durables: Activity Analysis Approach, paper presented at the North American Productivity Workshop, Toronto, June 2004, and the 4th International DEA Symposium, Birmingham, UK, September 2004.
A list of references