Environmental Efficiency Policies Related to Porter's Hypothesis

Abstract

Indonesia as one of the countries of the G20 with the manufacturing sector as one of the largest energy user sectors. Energy use in the industrial sector is contributing as emitters. The greater use of energy, the greater the amount of emissions produced. The need for environmental policy declared by Jaffe et al (1995) in his research called Porter's Hypothesis, namely environmental policies may affect innovation and market creation. But in the long-term costs of policy or government spending is specialized in the field of environment will benefit the government itself which will increase the level of the efficiency of the country. This study aims to analyze how the level of efficiency of the manufacturing sector in the city - metropolitan city in Indonesia under natural policy and managerial disposability policy. Secondly, this study try to analyze and find the causes of inefficiency variables, where the role of technological innovation is very important in increasing the level of efficiency both operational and environmental performance. The data sample is 33 provinces within Indonesia. By compositing six variables, which is three input variables and three output variables. The output variable consists of desirable output (good output) and undesirable output (bad output). The input variables consist of labor, investment, and energy consumption, while the output variable consists of the GDP, SO2, and NO2. The research utilized Data Envelopment Analysis (DEA). The research result is the efficiency in the manufacturing sector in 33 provinces in Indonesia with two ways of measurement that has been determined by using arithmetic models shows that the province of large provinces such as Jakarta and West Java has a high efficiency in the industrial sector. For example, Jakarta has an average efficiency of 100% perfect in UENM efficiency measurements during the observation period 2012-2015.