Environmental efficiency measurement and the materials balance condition

Tim Coelli, Ludwig Lauwers, Guido Van Huylenbroeck

Research output: Contribution to journalA1: Web of Science-articlepeer-review

Abstract

The materials balance condition is a fundamental adding up condition, which essentially says that: ``what goes in must come out''. In this paper we argue that a number of the recently developed methods of incorporating pollution measures into standard productive efficiency models may be inconsistent with this fundamental condition. We propose an alternative method that involves the incorporation of the materials balance concept into the production model in a similar manner to which price information is normally incorporated. This produces a new environmental efficiency measure that can be decomposed into technical and allocative components, in a similar manner to the conventional cost efficiency decomposition. The approach is illustrated with the case of phosphorus emission on Belgian pig-finishing farms, using data envelopment analysis (DEA) methods. Our results indicate that a substantial proportion of nutrient pollution on these farms can be abated in a cost reducing manner.
Original languageEnglish
JournalJournal of Productivity Analysis
Volume28
Issue number1-2
Pages (from-to)3-12
Number of pages10
ISSN0895-562X
DOIs
Publication statusPublished - 1-Oct-2007

Keywords

  • environmental efficiency
  • materials balance condition
  • nutrient pollution
  • pig-finishing farms

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