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Data Envelopment Analysis in Environmental Valuation: Environmental Performance, Eco-efficiency and Cost-Benefit Analysis

Author

Listed:
  • Timo Kuosmanen

    (Wageningen University)

  • Mika Kortelainen

    (University of Joensuu)

Abstract

Data Envelopment Analysis (DEA) is a linear programming based method for evaluating performance of comparable production units such as firms. Although the method is already extensively applied in many areas of economics, its use in environmental economics and related fields remains limited. The purpose of this paper is to present basic principles of DEA and evaluate its application possibilities for a range of environmental valuation problems. We show how DEA has to be adjusted to the context of environmental performance, eco-efficiency and Cost-Benefit analysis (CBA). By modifying the traditional DEA framework to the specific features and purposes of environmental application we show that the valuation principles to which DEA is based on can offer useful insights and complement the conventional toolbox of environmental economists in valuation of the environmental services in general.

Suggested Citation

  • Timo Kuosmanen & Mika Kortelainen, 2004. "Data Envelopment Analysis in Environmental Valuation: Environmental Performance, Eco-efficiency and Cost-Benefit Analysis," Others 0409004, EconWPA.
  • Handle: RePEc:wpa:wuwpot:0409004
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    References listed on IDEAS

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    1. Isabelle Piot-Lepetit & Dominique Vermersch & Robert Weaver, 1997. "Agriculture's environmental externalities: DEA evidence for French agriculture," Applied Economics, Taylor & Francis Journals, vol. 29(3), pages 331-338.
    2. Hailu, Atakelty & Hailu, Atakelty, 2003. "Pollution abatement and productivity performance of regional Canadian pulp and paper industries," Journal of Forest Economics, Elsevier, vol. 9(1), pages 5-25.
    3. Fare, Rolf, et al, 1993. "Derivation of Shadow Prices for Undesirable Outputs: A Distance Function Approach," The Review of Economics and Statistics, MIT Press, vol. 75(2), pages 374-380, May.
    4. Runar Brännlund & Rolf Färe & Shawna Grosskopf, 1995. "Environmental regulation and profitability: An application to Swedish pulp and paper mills," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 6(1), pages 23-36, July.
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    Citations

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    Cited by:

    1. Kuosmanen, Timo & Kortelainen, Mika, 2007. "Valuing environmental factors in cost-benefit analysis using data envelopment analysis," Ecological Economics, Elsevier, vol. 62(1), pages 56-65, April.
    2. Mika Kortelainen & Timo Kuosmanen, 2007. "Eco-efficiency analysis of consumer durables using absolute shadow prices," Journal of Productivity Analysis, Springer, vol. 28(1), pages 57-69, October.
    3. Anthony Halog & Yosef Manik, 2011. "Advancing Integrated Systems Modelling Framework for Life Cycle Sustainability Assessment," Sustainability, MDPI, Open Access Journal, vol. 3(2), pages 1-31, February.
    4. Camelia Burja, 2012. "Determinants Of The Agricultural Productivity Growth Among Romanian Regions," Annales Universitatis Apulensis Series Oeconomica, Faculty of Sciences, "1 Decembrie 1918" University, Alba Iulia, vol. 1(14), pages 1-18.
    5. Tomasz Gerard Czekaj, 2013. "Measuring the Technical Efficiency of Farms Producing Environmental Output: Parametric and Semiparametric Estimation of Multi-output Stochastic Ray Production Frontiers," IFRO Working Paper 2013/21, University of Copenhagen, Department of Food and Resource Economics.
    6. Solovyeva, Irina & Nuppenau, Ernst-August, 2012. "Improving Measures for Targeting Agri-Environmental Payments: The Case of High Nature Value Farming," 126th Seminar, June 27-29, 2012, Capri, Italy 125648, European Association of Agricultural Economists.
    7. Solovyeva, Irina & Nuppenau, Ernst-August, 4. "Improving Measures for Targeting Agri-Environmental Payments: The Case of High Nature Value Farming," Politica Agricola Internazionale - International Agricultural Policy, Edizioni L’Informatore Agrario, issue 4.

    More about this item

    Keywords

    Data Envelopment Analysis; performance measurement; production theory; environmental valuation; environmental performance; eco- efficiency; Cost-Benefit analysis;

    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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