Environmental efficiency in carbon dioxide emissions in the OECD: A non-parametric approach

The role of the environment is an important issue in the policy-making and hence, the accurate assessment of the environmental conditions is vital. In this paper, an environmental efficiency index is developed for the OECD co untries using non-parametric techniques. The approach adopted is based on t he assumption that there is just one production process behind the producti on of both goods and pollution emissions. The index derived in this work me asures the extent of the required output sacrifice, due to the transformati on of the production process, from one where all outputs are strongly dispo sable to the one which is characterized by weak disposability of pollutants . Using this index, we first conduct cross-section comparisons on the state of each country's production process in its treatment of pollution emissio ns. We then trace each country's modification of their production processes overtime. The results indicate that if the disposability for CO2 emissions were strictly restricted as the result of an environmental regulation, the total value of output loss to the OECD countries as a whole would correspo nd to 3.7, 4.8 and 3.5% of the total OECD GDP for 1980, 1985 and 1990, resp ectively. (C) 2000 Academic Press.