Evaluation and decomposition of energy and environmental productivity change using DEA

In this chapter, we present an input specific Luenberger energy and environmental productivity indicator. The data envelopment analysis (DEA) approach is utilized to estimate the directional distance function for composing the Luenberger energy and environmental productivity indicator. We further decompose the Luenberger productivity indicator in two ways. Firstly, it can be decomposed into four components that measure the changes of pure efficiency, scale efficiency, pure technology, and scale technology to energy and environmental productivity change. This decomposition helps to identify the effects of catching up to the frontier and the frontier shift, as well as the economy of scale (both from an efficiency perspective and a technical perspective) towards energy and environmental productivity change. Secondly, it can be additionally decomposed into the productivity changes of specific energy input factors and undesirable output (emission) factor. This decomposition enables to examine the contributions of specific input and undesirable output factors toward energy and environmental productivity change. An illustrative empirical application of the Luenberger energy and environmental productivity indicator and its decompositions are also provided in this chapter.