Measuring CO2 emission efficiency in OECD countries: Application of the Hybrid Efficiency model

• Published in: Economic modelling 2013-05, Vol.32, p.130-135
• Main Authors: Lu, Ching-Cheng, Chiu, Yung-Ho, Shyu, Ming-Kuang, Lee, Jen-Hui
• Format: Article
• Language: English
• Subjects: CO2 emission; Hybrid Efficiency; Undesirable DEA model
• ISSN: 0264-9993; 1873-6122
• DOI: 10.1016/j.econmod.2013.01.047

This paper selects 32 countries in the Organization for Economic Cooperation and Development (OECD) from 2005 to 2007, using the input variables of industry and population and the output variances of gross domestic product (GDP) and the amount of fossil-fuel CO2 emissions. In recent years the study of environmental themes (e.g., carbon emissions) has more and more internalized negative externalities with DEA (data envelopment analysis), and therefore undesirable outputs are jointly produced with desirable outputs. Even though a few research studies look at the status of variables (e.g., undesirable variables), they neglect to consider some input/output variables that are non-proportional at the same time. The purpose of this research is to incorporate both undesirable and non-proportional variables in order to solve for the non-radial output variables that change non-proportionally and the radial input/output variables that could be exchanged proportionally. The results show that the countries' efficiency rankings from 2005 to 2007 when controlling CO2 emissions present more volatility. Almost all European countries are the most efficient, while Japan is the only Asian country with an efficiency score close to 1 in this period. In addition, Germany and New Zealand have become more efficient during this period. All OECD countries are required in the next several years to reduce CO2 emissions by 6.66%–7.49%. As such, the results herein provide helpful guidance for them to achieve those levels. ► This study incorporates undesirable and non-radial variables to measure efficiency. ► Our methods incorporate the undesirable DEA and Hybrid Efficiency model. ► All OECD countries shall reduce CO2 emissions by 6.66%–7.49%. ► Almost all European countries are the most efficient.