Measuring Eco-efficiency of Production with Data Envelopment Analysis

Authors

  • Timo Kuosmanen,

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      Environmental Economics and Natural Resources Group Wageningen University P.O. Box 8130, 6700 EW Wageningen The Netherlands <Timo.Kuosmanen@wur.nl>
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    • Assistant professor in the Environmental Economics and Natural Resources Group at Wageningen University, The Netherlands.

  • Mika Kortelainen

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    • Doctoral candidate at the Department of Business and Economics, University of Joensuu, Finland.


Environmental Economics and Natural Resources Group Wageningen University P.O. Box 8130, 6700 EW Wageningen The Netherlands <Timo.Kuosmanen@wur.nl>

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.

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