Social sustainability measured by intermediate approach for DEA environmental assessment: Chinese regional planning for economic development and pollution prevention

This study examines the level of simultaneous achievement on economic prosperity and environmental protection, so measuring the level of sustainability by a newly proposed intermediate approach. Conventionally, DEA (Data Envelopment Analysis) for performance evaluation was used to assess various economic activities of organizations that utilized inputs (e.g., the number of employees) to yield desirable outputs (e.g., the number of products). The methodology was usually classified into radial or non-radial category. In an effort of extending it to environmental assessment, DEA needs to incorporate undesirable outputs (e.g., the amount of CO₂) into the computational framework. This type of assessment is referred to as “DEA environmental assessment”. The proposed intermediate approach develops a new type of DEA environmental assessment by combining the analytical features of radial approach with those of non-radial approach. The new approach measures the level of unified inefficiency on each production factor and determines the level of total unified inefficiency from the average of the sum of these inefficiency scores. A rank sum test and a mean test are additionally incorporated into the proposed intermediate approach. Such a combination enhances the statistical capability. As an application, this study examines the level of sustainability related to 30 provinces in China from 2003 to 2014. The application finds four policy implications. First, it is important for China to allocate its resources to western provinces at a level that it has used for coastal developments. Second, the government continues to reinforce the policy making effort on environmental protection by paying attention to central and southern regions. The Chinese industries need to transfer toward “green” energy. The transfer should be efficiently executed for their future developments. Third, the government has focused on the sustainability development in urban provinces and then has gradually shifted the policy influence toward rural areas. Finally, the policy implementation needs a time lag until it becomes effective. The time lag on economic policy is longer than that of environmental policy. The economic policy has historically produced a regional imbalance, often leading to educational and income imbalances, among Chinese provinces.     

DEA approach for unified efficiency measurement: Assessment of Japanese fossil fuel power generation

This study discusses a new DEA (Data Envelopment Analysis) approach to measure the unified (operational and environmental) efficiency of energy firms. It is widely known that they produce not only desirable (good) outputs (e.g., electricity) but also undesirable (bad) outputs (e.g., CO₂) as a result of their plant operations. The proposed approach incorporates an output separation (desirable and undesirable outputs) for the performance evaluation of energy firms. In addition to the output separation, this study separates inputs into energy and non-energy inputs. Consequently, the proposed approach incorporates not only the output separation but also the input separation within a computational framework of DEA non-radial measurement. This study compares the proposed approach with other previous DEA approaches used for the performance evaluation of energy firms. After the methodological comparison, this study applies the proposed approach for measuring the unified efficiency of Japanese fossil fuel power generation. This empirical study confirms that the implementation of Kyoto Protocol (2005) has not been effective on the unified efficiency of Japanese fossil fuel power generation during the observed period (2004-2008). Although the empirical result is inconsistent with the current Japanese environmental policy under Kyoto Protocol, it contains policy implications for guiding the future direction of Japanese environmental policy on the electric power industry.     

Environmental assessment on coal-fired power plants in U.S. north-east region by DEA non-radial measurement

This study discusses a new use of DEA (Data Envelopment Analysis) environmental assessment to measure unified (operational and environmental) and scale efficiencies among inputs, desirable and undesirable outputs. In particular, the measurement of scale efficiency is discussed by two non-radial models. That is a new methodological contribution. To discuss these efficiency measures, this study first examines a concept of disposability from the perspective of corporate strategies to adapt a regulation change on undesirable outputs. The concept is separated into natural and managerial disposability. After discussing how to measure the degree of scale efficiency within the non-radial approach, this study applies the proposed DEA environmental assessment to measure the performance of coal-fired power plants in the U.S. north-east region. The region has been long producing a large amount of coal from the Appalachian Mountains. The coal mining industry has supported U.S. energy utility and other industries. Because of the long history, the quality of coal became worse and the coal-fired power plants have been producing a large amount of undesirable gases. This study has statistically confirmed that there is a significant difference between the two types (BIT: bituminous coal and SUB: subbituminous coal) of coal-fired power plants in terms of their unified efficiency measures, including their scale efficiencies, under the concept of managerial disposability (the first priority: environment performance and the second priority: operational performance). In contrast, under the natural disposability (the first priority: operational performance and the second priority: environmental performance), this study cannot find such a statistical significance between them. The fact, in which BIT outperforms SUB in terms of their unified and scale efficiencies, suggests the policy implication that these power plants need to shift their coal combustions from SUB to BIT in the United States. Besides the empirical finding, this study cannot confirm the other hypothesis on whether coal-fired power plants with small operation (less than 50% in plant capacity factor) outperform ones with large operation (more than 50% in plant capacity factor), and vice versa, in terms of their unified and scale efficiency measures under natural and managerial disposability. An exception is found in environmental performance under variable returns to scale. The rationale is because their plant operations are frequently monitored by regulatory agencies. As a consequence, this study cannot find such a statistical difference between them on operational performance. This result implies that the regulation on coal-fired power plants has been effective on their unified performance but large power plants may have a potential to improve their environmental performance.     

Should the US clean air act include CO2 emission control?: Examination by data envelopment analysis

This study proposes a new use of Data Envelopment Analysis (DEA) to measure the operational, environmental and both-unified efficiency measures of US coal-fired power plants. The power plants produce not only desirable outputs (e.g., electricity) but also undesirable outputs (e.g., CO₂ and NO_x) as a result of their plant operations. A Range-Adjusted Measure (RAM) is used as an original non-radial DEA model. Then, it is reformulated for handling undesirable (bad) outputs. The proposed use of DEA models measures the environmental and unified performance of power plants under two variable alternatives (with and without CO₂ emission control) in order to examine both the influence of US Clean Air Act (CAA) on the acid rain causing gases (NO_x and SO₂) and its extension to the CO₂ regulation. This study finds that the acid rain program under the CAA has been effective on the emission control of SO₂ and NO_x produced at US coal-fired power plants. Moreover, additional regulation on CO₂ may enhance their environmental and unified performance. Thus, it is recommended that the US federal and state governments need to expand the legal scope of CAA to the emission control on CO₂ because the gas is considered as a main source of global warming and climate change.     

Performance analysis of US coal-fired power plants by measuring three DEA efficiencies

Data Envelopment Analysis (DEA) has been widely used for performance evaluation of many organizations in private and public sectors. This study proposes a new DEA approach to evaluate the operational, environmental and both-unified performance of coal-fired power plants that are currently operating under the US Clean Air Act (CAA). The economic activities of power plants examined by this study are characterized by four inputs, a desirable (good) output and three undesirable (bad) outputs. This study uses Range-Adjusted Measure (RAM) because it can easily incorporate both desirable and undesirable outputs in the unified analytical structure. The output unification proposed in this study has been never investigated in the previous DEA studies even though such a unified measure is essential in guiding policy makers and corporate leaders. Using the proposed DEA approach, this study finds three important policy implications. First, the CAA has been increasingly effective on their environmental protection. The increased environmental performance leads to the enhancement of the unified efficiency. Second, the market liberalization/deregulation was an important business trend in the electric power industry. Such a business trend was legally prepared by US Energy Policy Act (EPAct). According to the level of the market liberalization, the United States is classified into regulated and deregulated states. This study finds that the operational and unified performance of coal-fired power plants in the regulated states outperforms those of the deregulated states because the investment on coal-fired power plants in the regulated states can be utilized as a financial tool under the rate-of-return criterion of regulation. The power plants in the deregulated states do not have such a regulation premium. Finally, plant managers need to balance between their environmental performance and operational efficiency.     

DEA environmental assessment in time horizon: Radial approach for Malmquist index measurement on petroleum companies

The climate change and various pollutions have been influencing our societies and economies. The environmental assessment, to be discussed in this study, is increasingly important because it serves as an initial step toward pollution prevention. Corporate leaders, policy makers, researchers and individuals who are interested in environmental protection have been paying attention to the assessment so that they can prepare policy suggestions on the global warming and climate change. As a methodology for the assessment, this study proposes a use of Data Environment Analysis (DEA) in a time horizon. Most of data sets on the climate change are sampled in a time series where the performance of organizations fluctuates every moment. In applying the DEA environmental assessment to such a data set, it is necessary for us to classify outputs into desirable (e.g., oil production) and undesirable (e.g., CO₂ emission) categories because all organizations usually produce not only desirable but also undesirable outputs as a result of their economic activities. To unify the two different types of outputs, this study incorporates the concept of natural and managerial disposability into the computational framework of DEA and extends them into a time horizon. For the research purpose, this study incorporates Malmquist index into the proposed DEA environmental assessment to examine an occurrence of a frontier shift among multiple periods. The frontier shift indicates a technology progress and/or managerial innovation during an observed period. The index is further separated into four subcomponents in a time horizon. These subcomponents are differently expressed under the natural and managerial disposability. Thus, eight different subcomponents on the Malmquist index are proposed to measure the frontier shift. As an application, this study uses the proposed DEA approach to examine whether the frontier shift (due to technology progress) occurs or not in the petroleum industry from 2005 to 2009. Our empirical study finds that the industry has not exhibited any major frontier shift under natural disposability, but showing a considerable frontier shift under managerial disposability. In other words, the petroleum firms have improved their environmental performance by eco-technology to reduce an amount of CO₂ emission during the observed annual periods.     

Malmquist index measurement for sustainability enhancement in Chinese municipalities and provinces

This study discusses a use of DEA environmental assessment in a time horizon. We use a radial approach to examine a dynamic change of index measures related to China's regional development and industrial pollution prevention. In applying the proposed assessment to a time-series data, we need to examine components that produce a shift of an efficiency frontier in a time horizon. A unique feature of the proposed assessment is that it incorporates a framework of Malmquist index to examine the frontier shift among multiple periods. Here, the frontier shift indicates a progress potential on technology development and/or managerial improvement among observed periods. Thus, it is not an efficiency measure. Rather, the measurement eliminates inefficiency by shifting an organization to an efficiency frontier. In this study, the index is conceptually separated into 6 subcomponents, which are further disaggregated into 12 different elements (6 subcomponents × 2 disposability concepts) under natural and managerial disposability concepts. The proposed index measurement needs to consider a possible occurrence of a frontier crossover among different periods because technology diffusion on production activities usually has a time lag until it becomes really effective. Methodologically, this study conveys the message that DEA is an approximation method, so being not perfect. Therefore, it is necessary for us to use several different approaches (e.g., potential improvement by measuring a frontier shift and efficiency analysis) to obtain reliable empirical evidence. As an application, this study examines the level of sustainability related to 30 municipalities and provinces in China from 2003 to 2014. The following six policy implications are obtained in this study. First, all municipalities and provinces have made a considerable progress on their economies and pollution prevention efforts. Second, the effect of the frontier crossover is limited in China because they attain a high level of their potentials on economic development and pollution prevention. Of course, this effort is within the Chinese boundary, not international, because this study does not compare them with other industrial nations. Third, China needs to allocate its resources to western provinces at a level that it has used for coastal developments. Fourth, the government should reinforce efforts on environmental protection in central and southern regions. Fifth, the government has focused on the sustainability development in urban municipalities and provinces and then has gradually shifted the policy influence toward rural areas. Finally, different empirical results are confirmed by the potential analysis which consists of the Malmquist index measurement and the efficiency analysis. Both approaches need to be examined for future planning on Chinese regional development.     

Environmental assessment for corporate sustainability by resource utilization and technology innovation: DEA radial measurement on Japanese industrial sectors

This study proposes a new use of DEA (Data Envelopment Analysis) radial approach to examine the corporate sustainability of Japanese industrial sectors. The concept of corporate sustainability is measured by its subcomponent measures, including UEN (Unified Efficiency under Natural Disposability), UEM (Unified Efficiency under Managerial Disposability), UENM (Unified Efficiency under Natural and Managerial Disposability), UEI (Unified Efficiency for Intermediate measurement) and UENM(DC) (Unified Efficiency under Natural and Managerial Disposability with Desirable Congestion). Among the five measures, the UEI examines a degree of how each firm can efficiently utilize its resources. The UENM(DC) examines a degree of how the firm can reduce an amount of undesirable outputs by technology innovation and/or managerial change. Such a combined use between UEI and UENM(DC) has been never explored in DEA environmental assessment. The empirical results obtained from the proposed approach have identified two important implications. One of the two implications is that the Japanese energy industry has been long under governmental regulation so that energy firms do not have corporate governance capabilities at the level of other industrial sectors which are competing in a global market. In particular, the implication is applicable to Japanese electric power firms. It is necessary for them to change their corporate governances (e.g., by adding new executive board members who have international experience and/or woman executives, as widely found in American and European energy industries) so that they can pay attention to consumers, not regulatory agencies of the Japanese government. The other implication is that technology innovation can more effectively improve the performance of the energy sector. Employing high efficiency and low carbon generation technologies to achieve desirable fuel mix is essential for improving the corporate sustainability of the Japanese energy sector.     

A comparative study among fossil fuel power plants in PJM and California ISO by DEA environmental assessment

This study compares among fossil fuel power plants in PJM and California ISO by their unified (operational and environmental) performance. DEA (Data Envelopment Analysis) is used as a methodology. For comparative analysis, DEA incorporates strategic concepts such as natural and managerial disposability into the computational process. This study explores both how to measure Returns to Scale (RTS) under natural disposability and how to measure Damages to Scale (DTS) under managerial disposability. This empirical study obtains two implications on US energy policy. One of the two policy implications is that California ISO outperforms PJM in terms of the three unified efficiency measures. The result implies that strict regulation on undesirable outputs, as found in California, is important in enhancing the performance of US fossil fuel power plants. Thus, it is necessary for federal and local governments to regulate the fossil fuel power plants under the strict implementation of environmental protection. Under such a policy direction, it is possible for US fossil fuel power plants to attain economic prosperity (by enhancing their operational efficiencies) and to satisfy environmental regulation (by enhancing their environmental efficiencies). The other policy implication is that coal-fired and gas-fired power plants in PJM and California ISO need to reduce their operational sizes or introduce technology innovation on desirable and undesirable outputs and/or new management for environmental protection within their operations. Meanwhile, oil-fired power plants may increase their operational sizes if they can introduce technology innovation and new management on undesirable outputs.     

Unified efficiency measurement of coal-fired power plants in China considering group heterogeneity and technological gaps

China's coal-fired power generation has accounted for a large proportion of the power supply for a long time and the resulting environmental pollution and waste of resources have hindered the sustainable development of the power industry. To solve this problem, this study combines the concept of natural and managerial disposability with the non-concave meta-frontier method to determine the unified efficiency measurement of 251 coal-fired power plants in China from 2012 to 2014 and to investigate the sources of inefficiency in different areas. The results show that although the unified efficiency of China's coal-fired power plants improved significantly during 2012–2014, much room for improvement remains in terms of power generation and environmental performance. Due to the advanced technology of coal-fired power plants, the eastern area has the highest unified efficiency in terms of natural and managerial disposability. The western region has the lowest operational performance and the northeast region has the lowest environmental performance. The decomposition of the sources of inefficiency indicates that the inefficiency of coal-fired power plants in eastern China is mainly caused by management factors, whereas the inefficiency in northeastern China is due to a lag in technology. In the central and western areas, technical inefficiency and management inefficiency both account for a considerable proportion in their sources of inefficiency. Therefore, these regions need to improve both the management (e.g., reasonable allocation of utilization hours) and technology (e.g., clean coal technology) aspects to improve the unified performance of coal-fired power plants.     

DEA window analysis for environmental assessment in a dynamic time shift: Performance assessment of U.S. coal-fired power plants

This study discusses a new use of window analysis for DEA environmental assessment in a time horizon where DEA stands for Data Envelopment Analysis. The data sets on environmental protection are often structured by time series. In applying DEA to environmental assessment, it is necessary for us to examine a frontier shift between different periods because it indicates a technology progress on desirable and undesirable outputs. An important feature of the proposed approach is that it incorporates the concept of natural and managerial disposability into the computational framework of DEA and extends the two disposability concepts in a time horizon. To capture the frontier shift, this study proposes a new type of DEA window analysis for environmental assessment. This study applies the proposed DEA window analysis to a data set on U.S. coal-fired power plants during 1995–2007. The application finds that the coal-fired power plants have gradually paid attention to environmental protections under Clean Air Act (CAA). Consequently, their performance under managerial disposability has increased from 1996 to 2007. This indicates the importance of CAA and regulation on industrial pollutions. Thus, it is necessary for the United States to extend the scope of CAA for controlling the amount of CO₂ emission because current regulation has a limited policy influence on the source of global warming and climate change in our modern society.     

China's regional sustainability and diversified resource allocation: DEA environmental assessment on economic development and air pollution

Environmental protection, including the prevention of air pollution and health hazard materials such as PM2.5 and PM10, is now a very serious policy issue in China after attaining the rapid economic growth and development. The PM stands for “Particular Matter”, indicating the size of both solid particles and liquid droplets found in air. Unfortunately, the economic development has produced a serious healthcare problem in not only China and other surrounding nations. To enhance people's healthcare and appeal a good national image to the world, China is recently looking for the new industrial and environmental policy direction to attain social sustainability in terms of economic development and environmental prevention. To discuss policy implications on the new policy direction, this study utilizes Data Envelopment Analysis (DEA) for assessment on its regional performance by incorporating PM2.5 and PM10 as undesirable outputs, along with two disposability concepts (i.e. natural disposability and managerial disposability). No previous DEA study has incorporated the amount of PM2.5 and PM10 in empirical investigation. Using a simulated data set for the period of 2013–2014, this study measures the efficiency of municipality cities under four different types of regional classifications. The empirical results indicate that the Chinese government should distribute its economic resources to cities, which locate in the northwest region (including Lanzhou, Xining, Yinchuan and Urumqi), and reinforce more strict regulation on energy consumptions for environmental prevention in major cities (e.g. Beijing, Tianjin, Shanghai and Chongqing). The industrial policy change from the economic growth to the environment protection is essential for the future of China, which is currently the second largest economic power in the world. The environmental protection can enhance the China's image of contributing in economics, industry and environmental protection to all other nations. It can be envisioned that the new policy effort reduces the regional imbalance and increases the social sustainability in China. The empirical findings and policy implications discussed in this study are applicable to not only China but also other industrial and developing nations and those are useful in guiding their industrial and environmental policy development.     

Sustainability development for supply chain management in U.S. petroleum industry by DEA environmental assessment

Environmental assessment and protection are important concerns in modern business. Consumers are interested in environmental protection. They avoid purchasing products from dirt-imaged companies even if their prices are much less than the ones produced by green-imaged companies. The green image is very important for business survivability in our global market. A business concern associated with the green image is how to attain corporate sustainability where companies can attain both economic success and pollution prevention in their operations. There is tradeoff between economic prosperity and environmental concern. To attain a high level of corporate sustainability, companies need to measure the current performance in terms of their operational and environmental achievements. This study proposes a use of Data Envelopment Analysis (DEA) for such assessment. The proposed DEA assessment provides corporate leaders and managers with not only the measure of corporate sustainability but also information regarding how to invest for technology innovation for abatement of undesirable outputs (e.g., CO₂). As an application, this study utilizes the proposed approach to measure the corporate sustainability of petroleum firms in the United States. The petroleum industry is functionally separated into integrated and independent companies. The integrated companies, referred to as “Major”, have their large supply chains for both “upstream” (e.g., exploration, development and production of crude oil or natural gas) and “downstream” (e.g., oil tankers, refineries, storages and retails). Meanwhile, the independent companies focus upon the upstream function, but not the downstream, in their business operations. The empirical comparison between the two groups of petroleum firms identifies that the integrated companies outperform the independent companies because a large supply chain incorporated into the former group provides them with both a scale merit in their operations and an opportunity to obtain consumer's opinions on their business operations. Thus, the large supply chain system, covering business functions for upstream and downstream, enhances corporate sustainability in the U.S. petroleum industry. It is easily envisioned that the empirical findings discussed in this study are useful in preparing business strategy and industrial policy for the petroleum industry of not only the United States but also other nations involved in oil and gas production.     

Resource and environment efficiency analysis of provinces in China: A DEA approach based on Shannon’s entropy

Data envelopment analysis (DEA) has been widely used in energy efficiency and environment efficiency analysis in recent years. Based on the existing environment DEA technology, this paper presents several DEA models for estimating the aggregated efficiency of resource and environment. These models can evaluate DMUs’ energy efficiencies and environment efficiencies simultaneously. However, efficiency ranking results obtained from these models are not the same, and each model can provide some valuable information of DMUs’ efficiencies, which we could not ignore. Under this situation, it may be hard for us to choose a specific model in practice. To address this kind of performance evaluation problem, the current paper extends Shannon-DEA procedure to establish a comprehensive efficiency measure for appraising DMUs’ resource and environment efficiencies. In the proposed approach, the measure for evaluating a model's importance degree is provided, and the targets setting approach of inputs/outputs for DMU managers to improve DMUs’ energy and environmental efficiencies is also discussed. We illustrate the proposed approach using real data set of 30 provinces in China.     

Marginal Rate of Transformation and Rate of Substitution measured by DEA environmental assessment: Comparison among European and North American nations

This study discusses the new use of DEA (Data Envelopment Analysis) environmental assessment to measure MRT (Marginal Rate of Transformation) and RS (Rate of Substitution) among production factors (e.g., inputs, desirable and undesirable outputs). To measure the degree on MRT and RS, this study first examines a concept of disposability from the perspective of economic strategies to combat various environmental issues. The strategies are extendable to a policy change for pollution prevention. The underlying concept is separated into natural and managerial disposability. Under managerial disposability, it is possible for us to measure an occurrence of desirable congestion, or eco-technology innovation. Considering the disposability concept, this study discusses how to measure the type and magnitude of MRT and RS. A problem of the MRT & RS measurement is that these measures usually become unstable (e.g., very large or small in these magnitudes) because DEA does not assume any functional form for economic activities. To overcome such a difficulty, this study equips DEA environmental assessment with multiplier restriction by utilizing a unique feature on a proposed data treatment. The multiplier restriction in DEA has been never explored in previous works on environmental assessment. In an application, this study finds three important economic concerns on Europe and North America. First, Western Europe outperforms Eastern Europe and North America in their unified efficiency measures under managerial disposability. This study statistically confirms a difference between Western and Eastern Europe, but not between Western Europe and North America. This result exhibits that Eastern Europe is not yet well developed at the level of the other two regions. Second, Eastern Europe has exhibited MRT estimates that are different from Western Europe and North America. The nations in Eastern Europe have an economic potential for industrial developments because the level of their industrial pollutions is less than that of the other two regions. The potential is also found in their MRT estimates. Finally, an interesting difference can be found in the RS estimate between Eastern Europe and Western Europe from 2008 to 2012. They have statistically exhibited a difference between the two regimes, but not with North America. This is because most nations in both Western Europe and North America have already attained a high level of economic successes so that they have a limited industrial potential under current production technology and eco-technology. The situation of the two regions will be changed along with new technology development. In contrast, Eastern Europe is different from the other two regions in terms of attaining such a level of social sustainability because of limited capital accumulation and limited opportunity for technology innovation.     

Environmental efficiency analysis of power industry in China based on an entropy SBM model

In order to assess the environmental efficiency of power industry in China, this paper first proposes a new non-radial DEA approach by integrating the entropy weight and the SBM model. This will improve the assessment reliability and reasonableness. Using the model, this study then evaluates the environmental efficiency of the Chinese power industry at the provincial level during 2005–2010. The results show a marked difference in environmental efficiency of the power industry among Chinese provinces. Although the annual, average, environmental efficiency level fluctuates, there is an increasing trend. The Tobit regression analysis reveals the innovation ability of enterprises, the proportion of electricity generated by coal-fired plants and the generation capacity have a significantly positive effect on environmental efficiency. However the waste fees levied on waste discharge and investment in industrial pollutant treatment are negatively associated with environmental efficiency.     

Energy efficiency,CO2 emission performance and technology gaps in fossil fuel electricity generation in Korea: A meta-frontier non-radial directional distance functionanalysis

This paper proposes a meta-frontier non-radial directional distance function to model energy and CO₂ emission performance in electricity generation. This approach allows for the consideration of the group heterogeneity of electricity generation, non-radial slacks, and undesirable outputs simultaneously. We extend several standardized indices to measure total-factor energy efficiency, CO₂ emission performance, and technology gaps in electricity generation. We estimate the potential reductions in energy use and CO₂ emissions under different technology assumptions. We conduct an empirical analysis of fossil fuel electricity generation in Korea by using the proposed approach. The results indicate that coal-fired power plants show higher levels of total-factor energy efficiency and CO₂ emission performance than oil-fired ones. Under the meta-frontier technology assumption, coal-fired power plants show a smaller technology gap than oil-fired ones. This suggests that the Korean government should promote technological innovation to reduce technology gaps for oil-fired plants, thereby improving energy and CO₂ emission performance and meeting emission reduction targets in the electricity generation industry.     

DEA environmental assessment in a time horizon: Malmquist index on fuel mix,electricity and CO2 of industrial nations

Climate change and global warming become a major policy issue in the world. Economic activities produce not only desirable outputs (e.g., electricity) but also undesirable outputs (e.g., CO₂ emission). The important policy issue is how each nation can balance between economic development and environmental protection to attain a sustainable society. In attaining the sustainable society, environmental assessment is increasingly important because it can serve as an initial step toward the green growth of each nation. For the purpose, this study proposes a new use of DEA (Data Environment Analysis) for environmental assessment in a time horizon. The proposed use of DEA incorporates Malmquist index to examine the degree of a frontier shift among multiple periods. The frontier shift indicates a technology progress and/or managerial innovation during an observed period. The index is conceptually separated into six subcomponents, which are further divided into twelve different subcomponents (six subcomponents × two disposability concepts) under the natural and managerial disposability. In the index measurement, it is necessary for us to consider a frontier crossover among different periods because technology innovation usually has a time lag until it really appears. As an empirical application, this study utilizes the proposed approach to identify the relationship among fuel mix, electricity and CO₂ of ten industrial nations. This study finds three important empirical findings. First, there is a time lag in technology innovation on electricity generation and CO₂ emission reduction. Consequently, it is necessary to consider the existence of a frontier crossover in assessing the electric power industry. Second, nuclear generation, as found in France, as well as hydro and renewable energy, as found in Netherlands, are important for the development of a sustainable society although the former is associated with a very high level of risk and the latter has a limited generation capacity. Finally, the electric power industry has been making a corporate effort to reduce the amount of CO₂ emission by utilizing nuclear and renewable energy.     

Environmental efficiency measurement with heterogeneous input quality: A nonparametric analysis of U.S. power plants

While there is an abundant theoretical and empirical literature on environmental efficiency measurement, the impacts of heterogeneous input quality on environmental efficiency remain unexplored. Failing to control for this heterogeneity may lead to performance measurement errors, i.e., fuel quality differences are confused with technical inefficiency. In this paper, we account for this problem by proposing a Materials Balance production model that accommodates heterogeneous material flow coefficients and thereby allows for heterogeneity in input quality. Based on this model, a decomposition of environmental efficiency is proposed which disentangles the contributions of fuel quality differences and technical inefficiency. We implement our approach using nonparametric methods to evaluate and decompose environmental efficiencies using panel data on U.S. coal-fired power plants. Our results show that most of the potential to improve environmental efficiency is due to fuel quality differences and that environmental regulations have had an adverse impact on fuel quality.     

A literature study for DEA applied to energy and environment

This study systematically summarizes previous research efforts on Data Envelopment Analysis (DEA) applied to energy and environment in the past four decades, including concepts and methodologies on DEA environmental assessment. Industrial developments are very important for all nations in terms of their economic prosperities. A problem is that the development produces various pollutions on air, water and other types of contaminations, all of which are usually associated with our health problems and climate changes. Thus, it is necessary for us to consider how to make a balance between economic success and pollution mitigation to maintain a high level of social sustainability in the world. It is widely considered that DEA is one of the methodologies to examine the level of sustainability. This study examines a recent research trend on DEA applications from 1980s to 2010s. Nowadays, many researchers have paid serious attention on how to combat various difficulties in the areas of energy and environment. As a result, the number of articles on DEA applications on energy and environment has dramatically increased, particularly after 2000s. However, it is true that DEA has strengths and drawbacks in the applications. Therefore, it is very important for us to carefully use DEA for guiding large policy issues and business strategies such as the global warming and climate change. An underlying premise of this study is that technology innovation in engineering and natural science may solve various problems by linking it with political and managerial efforts. The use of DEA provides a methodological linkage among them, so enhancing the practicality in mitigating problems due to climate change and environmental pollutions. This literature study, along with a summary on conceptual and methodological developments, provides us with guidelines for our future research works on DEA on energy and environment issues.