Circular water economy performance evaluation based on dynamic network data envelopment analysis

Abstract

In this study, a looplike dynamic network data envelopment analysis (DEA) framework is proposed to assess technical efficiency in Germany's water economy at the federal state level. In the wake of growing political attempts in Europe to strengthen circular, sustainability-oriented practices in a variety of economic realms, our tailored approach enables, arguably for the first time, simultaneous analysis of public water provision, wastewater services and natural water endowment while accounting for water demand in an encompassing feedback-type context. Our model addresses the issues of water sector infrastructure and environmental sustainability. By measuring divisional efficiencies in addition to composite network efficiency over time, we extend previous static ‘black box’ DEA studies to provide comprehensive and in-depth insight into water economy dynamics. Our framework goes beyond the existing models by unifying distinct yet interrelated water economy processes under an encompassing circular technical efficiency evaluation paradigm to underpin holistic, environmentally-prudent water resource management concerning infrastructure, production, consumption, cleaning, recycling and reuse. Our empirical case study reveals high levels of efficiency in Germany on the whole, and we find little variation among regions in terms of composite water economy efficiency. The natural water endowment segment, which correlates more strongly with the overall water economy than any other network component, exhibits considerable efficiency score volatility. Furthermore, we find that the wastewater treatment section harbours many best-practice regions. Our results also show that the most substantial performance-optimising input reduction required pertains to land area consisting of vegetation and water, which suggests both natural resource endowment efficiency underperformance and sustainability overachievement in the sense of an excess capacity to free up resources for other uses. The largest output increase called for concerns consumers, with regard to water sector value added. Regional water sector infrastructure utilisation appears to be generally adequate, although several federal states fail to meet the optimal levels.