Environmental efficiency analysis based on relational two-stage DEA model

Abstract

Data envelopment analysis (DEA) efficiency measures integrated with the environmental DEA technology have gained popularity in environmental performance measurement of production system including undesirable outputs. Most studies treat the production system as a black box. This study measures the environmental performance considering the internal structure of production system as a two-stage process. The first stage is characterized as the production stage, and the second stage is the pollutant treatment stage. We extend the relational model from the constant returns to scale framework to the variable returns to scale version. The environmental efficiency of the entire two-stage production system for each DMU is a product of the environmental efficiencies of both stages, and a heuristic search is applied to the extended relational model. An example of industry system in some Chinese provinces shows applicability of the proposed approach. Since the model can effectively analyze a DMU’s environmental efficiencies for the overall system as well as both sub-stages. It can imply more veracious decision-making information for environmental management.