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Published on: January 16, 2020
Environmental externalities and efficiency measurement.
Andrés J Picazo-Tadeo1, Diego Prior
1Universitat de València, Dpto. Economía Aplicada II, Avda. dels Tarongers, s/n. 46022. Valencia, Spain. andres.j.picazo@uv.es
Journal of Environmental Management
|June 16, 2009
Summary
This study identifies production technologies that minimize pollution without sacrificing output. It reveals that producers can reduce environmental waste while maximizing marketable goods, benefiting both the economy and ecology.
Area of Science:
- Environmental Economics
- Production Theory
- Industrial Ecology
Background:
- Industrial production often generates harmful by-products, posing environmental challenges.
- Identifying technologies that decouple output from pollution is crucial for sustainable development.
- Previous research has explored production frontiers but often overlooks the trade-offs between output maximization and pollution abatement.
Purpose of the Study:
- To identify production technologies on the downward-sloping segment of the production frontier, where higher output does not correlate with higher pollution.
- To develop an empirical method for identifying such "win-win" technologies.
- To demonstrate that environmental improvements can be achieved without compromising economic output.
Main Methods:
- Utilizing directional distance functions to model production possibilities.
- Applying Data Envelopment Analysis (DEA) to empirically identify technologies on the desired frontier segment.
- Developing a specific algorithm for empirical identification.
Main Results:
- An algorithm was defined to empirically identify technologies that produce more output with less pollution.
- Producers utilizing these technologies can reduce waste (social goods) without limiting marketable output.
- The methodology was successfully illustrated with an application to Spanish ceramic tile producers.
Conclusions:
- It is possible to identify and implement production technologies that simultaneously enhance economic output and reduce environmental pollution.
- Producers can achieve environmental stewardship and economic efficiency by operating on specific segments of the production frontier.
- The findings offer a pathway for industries to pursue sustainable production practices.
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