Environmental performance and equilibrium
In this paper we show why firms' or industries' rankings in terms of environmental performance depend not only on the technology but also on market equilibrium. Between two industries committed to the same environmental constraint, the more eco-efficient is the one with the higher output level. By comparing industries and firms, we show that the rankings are not robust, for they are affected by market outcome. The role of eco-efficiency in firms' profitability in equilibrium is also scrutinized. All this shows that the usual eco-efficiency indicators are inadequate. To tackle this problem, we propose a sound indicator.
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Volume (Year): 40 (2007)
Issue (Month): 4 (November)
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"A theoretical measure of environmental efficiency,"
THEMA Working Papers
2003-21, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
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- W. Erwin Diewert & Alice O. Nakamura, 1999. "Benchmarking and the measurement of the best practice efficiency: an electricity generation application," Canadian Journal of Economics, Canadian Economics Association, vol. 32(2), pages 570-588, April.
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