Deadweight loss in environmental policy: The case of the European Union member states

Abstract

With increased competition for scarce public financial resources and increased pressure on environmental policy, it is necessary to determine the effectiveness of current environmental policy. Therefore, the aim of this article was to determine the deadweight loss in public spending on the preservation of environment quality, including national expenditures, and the Common Agricultural Policy in individual EU countries between the years of 2005–2016. To determine the relative differences in efficiency on environmental policy between EU countries, bootstrapped data envelopment analysis and Malmquist total factor productivity index decomposition was used. It was found that, generally, the environmental prospects for European countries has improved over the last decade and have been reversely correlated to the deadweight loss. However, the inefficiency level of EU countries’ policy, is on average, relatively higher than what was reported in different regions of the world. The highest efficiency of environmental spending has been, therefore, achieved in Central-Eastern European and Scandinavian countries and Spain.