Regulatory impact of environmental standards on the eco-efficiency of firms

Francisca Bauer, Christoph Bremberger, Mikulas Luptacik, Stephan Schmitt

Publication: Working/Discussion PaperWU Working Paper

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In this paper we propose one approach to implement environmental standards into Data Envelopment
Analysis (DEA) and in this way to measure its regulatory impact on eco-efficiency of firms. As one basic feature of DEA models lies in the exogeneity of inputs, desirable and
undesirable outputs, it is not possible to introduce environmental constraints for these parameters
directly into existing DEA models. Therefore, we implement the environmental standard in a bounded-variable way, which allows constraints on the efficiency frontier. The
regulatory impact is assessed as difference in eco-efficiency scores before and after fictive
introduction of an environmental standard. Furthermore, we distinguish between weak and strong disposability of undesirable outputs and develop according models.
Assessing the regulatory impact of environmental standards in advance provides support for environmental policy makers in choosing appropriate instruments and in adjusting the
intensity of regulation. Moreover, the procedure can be applied in a wide range of markets, as the proposed model framework offers several options. Policy makers can choose between different environmental standards and different disposability assumptions.

Publication series

SeriesWorking Papers / Research Institute for Regulatory Economics

WU Working Paper Series

  • Working Papers / Research Institute for Regulatory Economics

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