Managerial Disposability Research Articles

Regional operational and environmental performance evaluation in China: non-radial DEA methodology under natural and managerial disposability

In this article, we used a non-radial DEA under natural and managerial disposability to measure the unified efficiency of 30 administrative regions in China and then evaluated their operational and environmental performances. We proposed the performance progress unified index (PPUI) based on the non-radial DEA methodology in a time horizon under natural and managerial disposability with a crossover to measure the performance variety of DMUs. The results of the unified efficiency measured under natural and managerial disposability showed that both operational and environmental performance in eastern China were the highest among the three regions during 2000–2011. The PPUIs under natural and managerial disposability indicated that the operational and environmental performance of the three regions improved during 2000–2011, and the rate of operational and environmental performance of eastern China was higher than the other two regions.

DEA environmental assessment in time horizon: Radial approach for Malmquist index measurement on petroleum companies

The climate change and various pollutions have been influencing our societies and economies. The environmental assessment, to be discussed in this study, is increasingly important because it serves as an initial step toward pollution prevention. Corporate leaders, policy makers, researchers and individuals who are interested in environmental protection have been paying attention to the assessment so that they can prepare policy suggestions on the global warming and climate change. As a methodology for the assessment, this study proposes a use of Data Environment Analysis (DEA) in a time horizon. Most of data sets on the climate change are sampled in a time series where the performance of organizations fluctuates every moment. In applying the DEA environmental assessment to such a data set, it is necessary for us to classify outputs into desirable (e.g., oil production) and undesirable (e.g., CO2 emission) categories because all organizations usually produce not only desirable but also undesirable outputs as a result of their economic activities. To unify the two different types of outputs, this study incorporates the concept of natural and managerial disposability into the computational framework of DEA and extends them into a time horizon. For the research purpose, this study incorporates Malmquist index into the proposed DEA environmental assessment to examine an occurrence of a frontier shift among multiple periods. The frontier shift indicates a technology progress and/or managerial innovation during an observed period. The index is further separated into four subcomponents in a time horizon. These subcomponents are differently expressed under the natural and managerial disposability. Thus, eight different subcomponents on the Malmquist index are proposed to measure the frontier shift. As an application, this study uses the proposed DEA approach to examine whether the frontier shift (due to technology progress) occurs or not in the petroleum industry from 2005 to 2009. Our empirical study finds that the industry has not exhibited any major frontier shift under natural disposability, but showing a considerable frontier shift under managerial disposability. In other words, the petroleum firms have improved their environmental performance by eco-technology to reduce an amount of CO2 emission during the observed annual periods.

Railway transportation and environmental efficiency in China

Railway is one of the most efficient and environmental-friendly ways to transport people and goods. High-speed railway has been developing rapidly and the railway mileage has increased by 21.18% in China during the period of 2006–2011 and thus it is interesting to evaluate whether the railway transportation has reduced the environmental impact of transport in China. In this paper, we first use a non-radial DEA under managerial disposability to measure the environmental efficiency of 30 regions in China; then we propose a panel beta regression with fixed effects to model the impact of railway transportation on environmental efficiency. The results indicate that the environmental efficiency slowly increased during 2006–2011 and it exhibits regional disparities with the eastern area having the highest environmental efficiency and the western area being the lowest one; Moreover, we also find a significant positive impact of railway transportation on higher environmental efficiency.

Data envelopment analysis for unified efficiency evaluation: an assessment of regional industries in China

Data envelopment analysis has recently gained popularity and attention in operational and environmental assessment. A common feature of previous studies is decreasing an input vector to decrease the vector of undesirable outputs which is referred to as natural disposability. However, little research has considered how to increase the amount of capital input for clean production technology to decrease the amount of undesirable outputs in a data envelopment analysis framework, which is referred to as managerial disposability. Thus, this paper proposes an improved approach that considers measuring unified (operational and environmental) efficiency for managerial disposability, and compares this approach with the one for natural disposability. The proposed approach provides a positive strategy to reduce undesirable outputs and improve unified efficiency through increasing capital investment in clean production technology. A case study of regional industries in China in 2006–2010 utilizing this approach is also presented. The empirical study shows that the unified efficiencies of regional industries in China have relatively high scores for managerial disposability, and increasing capital investment is vital to achieve sustainable development in clean production technology.

Environmental assessment on coal-fired power plants in U.S. north-east region by DEA non-radial measurement

This study discusses a new use of DEA (Data Envelopment Analysis) environmental assessment to measure unified (operational and environmental) and scale efficiencies among inputs, desirable and undesirable outputs. In particular, the measurement of scale efficiency is discussed by two non-radial models. That is a new methodological contribution. To discuss these efficiency measures, this study first examines a concept of disposability from the perspective of corporate strategies to adapt a regulation change on undesirable outputs. The concept is separated into natural and managerial disposability. After discussing how to measure the degree of scale efficiency within the non-radial approach, this study applies the proposed DEA environmental assessment to measure the performance of coal-fired power plants in the U.S. north-east region. The region has been long producing a large amount of coal from the Appalachian Mountains. The coal mining industry has supported U.S. energy utility and other industries. Because of the long history, the quality of coal became worse and the coal-fired power plants have been producing a large amount of undesirable gases. This study has statistically confirmed that there is a significant difference between the two types (BIT: bituminous coal and SUB: subbituminous coal) of coal-fired power plants in terms of their unified efficiency measures, including their scale efficiencies, under the concept of managerial disposability (the first priority: environment performance and the second priority: operational performance). In contrast, under the natural disposability (the first priority: operational performance and the second priority: environmental performance), this study cannot find such a statistical significance between them. The fact, in which BIT outperforms SUB in terms of their unified and scale efficiencies, suggests the policy implication that these power plants need to shift their coal combustions from SUB to BIT in the United States. Besides the empirical finding, this study cannot confirm the other hypothesis on whether coal-fired power plants with small operation (less than 50% in plant capacity factor) outperform ones with large operation (more than 50% in plant capacity factor), and vice versa, in terms of their unified and scale efficiency measures under natural and managerial disposability. An exception is found in environmental performance under variable returns to scale. The rationale is because their plant operations are frequently monitored by regulatory agencies. As a consequence, this study cannot find such a statistical difference between them on operational performance. This result implies that the regulation on coal-fired power plants has been effective on their unified performance but large power plants may have a potential to improve their environmental performance.

China's regional sustainability and diversified resource allocation: DEA environmental assessment on economic development and air pollution

Environmental protection, including the prevention of air pollution and health hazard materials such as PM2.5 and PM10, is now a very serious policy issue in China after attaining the rapid economic growth and development. The PM stands for “Particular Matter”, indicating the size of both solid particles and liquid droplets found in air. Unfortunately, the economic development has produced a serious healthcare problem in not only China and other surrounding nations. To enhance people's healthcare and appeal a good national image to the world, China is recently looking for the new industrial and environmental policy direction to attain social sustainability in terms of economic development and environmental prevention. To discuss policy implications on the new policy direction, this study utilizes Data Envelopment Analysis (DEA) for assessment on its regional performance by incorporating PM2.5 and PM10 as undesirable outputs, along with two disposability concepts (i.e. natural disposability and managerial disposability). No previous DEA study has incorporated the amount of PM2.5 and PM10 in empirical investigation. Using a simulated data set for the period of 2013–2014, this study measures the efficiency of municipality cities under four different types of regional classifications. The empirical results indicate that the Chinese government should distribute its economic resources to cities, which locate in the northwest region (including Lanzhou, Xining, Yinchuan and Urumqi), and reinforce more strict regulation on energy consumptions for environmental prevention in major cities (e.g. Beijing, Tianjin, Shanghai and Chongqing). The industrial policy change from the economic growth to the environment protection is essential for the future of China, which is currently the second largest economic power in the world. The environmental protection can enhance the China's image of contributing in economics, industry and environmental protection to all other nations. It can be envisioned that the new policy effort reduces the regional imbalance and increases the social sustainability in China. The empirical findings and policy implications discussed in this study are applicable to not only China but also other industrial and developing nations and those are useful in guiding their industrial and environmental policy development.

Environmental assessment for corporate sustainability by resource utilization and technology innovation: DEA radial measurement on Japanese industrial sectors

This study proposes a new use of DEA (Data Envelopment Analysis) radial approach to examine the corporate sustainability of Japanese industrial sectors. The concept of corporate sustainability is measured by its subcomponent measures, including UEN (Unified Efficiency under Natural Disposability), UEM (Unified Efficiency under Managerial Disposability), UENM (Unified Efficiency under Natural and Managerial Disposability), UEI (Unified Efficiency for Intermediate measurement) and UENM(DC) (Unified Efficiency under Natural and Managerial Disposability with Desirable Congestion). Among the five measures, the UEI examines a degree of how each firm can efficiently utilize its resources. The UENM(DC) examines a degree of how the firm can reduce an amount of undesirable outputs by technology innovation and/or managerial change. Such a combined use between UEI and UENM(DC) has been never explored in DEA environmental assessment. The empirical results obtained from the proposed approach have identified two important implications. One of the two implications is that the Japanese energy industry has been long under governmental regulation so that energy firms do not have corporate governance capabilities at the level of other industrial sectors which are competing in a global market. In particular, the implication is applicable to Japanese electric power firms. It is necessary for them to change their corporate governances (e.g., by adding new executive board members who have international experience and/or woman executives, as widely found in American and European energy industries) so that they can pay attention to consumers, not regulatory agencies of the Japanese government. The other implication is that technology innovation can more effectively improve the performance of the energy sector. Employing high efficiency and low carbon generation technologies to achieve desirable fuel mix is essential for improving the corporate sustainability of the Japanese energy sector.

A data envelopment analysis model with interval data and undesirable output for combined cycle power plant performance assessment

Determining the optimal scale size of a combined cycle power plant is inherently a complex problem often with multiple and conflicting criteria as well as uncertain factors. The complexity of the problem is compounded by the production of undesirable outputs and the presence of natural and managerial disposability. We propose a customized data envelopment analysis (DEA) method for solving the return to scale (RS) problem in the presence of uncertain data and undesirable outputs. A combined cycle power plant is considered a decision making unit (DMU) which consumes fuels to produce electricity and emissions. The uncertainty of the inputs and outputs are modeled with interval data and the emissions are assumed to be undesirable outputs. The proposed DEA method determines the interval efficiency scores of the DMUs and offers a practical benchmark for enhancing the efficiency scores. We demonstrate the applicability of the proposed method and exhibit the efficacy of the procedure with a six-year study of 17 combined cycle power plants in Iran. The main contributions of this paper are six fold: we (1) model the uncertainties in the input and output data using interval data; (2) consider undesirable outputs; (3) determine the efficiency scores of the DMUs as interval values; (4) develop a group of indices to distinguish between the efficient and inefficient DMUs; (5) determine the most economic scale size for the efficient DMUs; and (6) determine practical benchmarks for the inefficient DMUs.

Industrial Energy and Environment Efficiency of Chinese Cities: An Analysis Based on Range-Adjusted Measure

Industrial energy and environment efficiency evaluation is essential in guiding national and environmental policy making, since the industrial sector is the largest energy consumer and major pollutants producer in China. This study utilizes the Range-Adjusted Measure (RAM)-based models to evaluate the energy and environment efficiency of industrial sectors in 31 Chinese major cities. The empirical results show that eastern Chinese cities outperform their western counterparts in terms of industrial energy efficiency, and central Chinese cities outperform their eastern counterparts in terms of industrial environment efficiency. Under natural disposability, 23 cities exhibit decreasing returns to scale, and under managerial disposability, 18 cities exhibit increasing damages to scale.

Investment strategy for sustainable society by development of regional economies and prevention of industrial pollutions in Japanese manufacturing sectors

A balance between industrial pollution prevention and economic growth becomes a world-wide issue to develop a sustainable society in many industrial nations. To discuss the issue, this study proposes a new use of DEA environmental assessment to determine how to effectively allocate capital for developing regional industries. The amount of capital is used to invest for technology innovation for both local economic growth and environmental protection. In this study, the proposed approach separates outputs into desirable and undesirable categories. Inputs are also separated into two categories, one of which indicates an amount of investment on capital assets. The other category is used for production activities. The proposed approach unifies them by two disposability concepts. This study has evaluated the performance of manufacturing industries in 47 prefectures (local government units in Japan) by Unified Efficiency under Natural disposability (UEN), Unified Efficiency under Managerial disposability (UEM) and Unified Efficiency under Natural and Managerial disposability (UENM). The UENM is further separated into its two cases: with and without a possible occurrence on desirable congestion, or technology innovation, on undesirable outputs. This study has empirically confirmed that Japanese manufacturing industries need to make their efforts to reduce greenhouse gas emissions and air pollution substances by investing in technology innovation. Furthermore, most of economic activities are currently located at metropolitan regions (e.g., Tokyo) in Japan. To develop a sustainable society, Japan needs to allocate capital into regions with a high level of investment effectiveness by shifting the manufacturing industries from the metropolitan regions to much promising local areas identified in this study. Such a shift, along with technology innovation, makes it possible to reduce air pollutions in the entire Japan by balancing economic growth and pollution prevention. This empirical study confirms that the proposed approach is useful in both guiding regional planning and developing a sustainable society. It is easily envisioned that the proposed approach is useful for not only Japan but also the other industrial and developing nations.

DEA (Data Envelopment Analysis) assessment of operational and environmental efficiencies on Japanese regional industries

A balance between industrial pollution and economic growth becomes a major policy issue to attain a sustainable society in the world. To discuss the problem from economics and business perspectives, this study proposes a new use of DEA (Data Envelopment Analysis) as a methodology for unified (operational and environmental) assessment. A unique feature of the proposed approach is that it separates outputs into desirable and undesirable categories. Such separation is important because energy industries usually produce both desirable and undesirable outputs. This study discusses how to unify the two types of outputs under natural and managerial disposability. The proposed DEA approach evaluates various organizations by the three efficiency measures such as OE (Operational Efficiency), UEN (Unified Efficiency under Natural disposability) and UENM (Unified Efficiency under Natural and Managerial disposability). An important feature of UENM is that it separates inputs into two categories and unifies them under the two disposability concepts in addition to the proposed output separation and unification. This study incorporates an amount of capital assets for technology innovation, as one of the two input group, into the measurement of UENM. Then, it compares UENM with the other two efficiency measures. This study is the first research effort in which DEA has an analytical capability to quantify the importance of investment on capital assets for technology innovation. To confirm the practicality of the proposed approach, this study applies the three efficiency measures to a data set regarding manufacturing and non-manufacturing industries of 47 prefectures in Japan. This study empirically confirms the validity of Porter hypothesis in Japanese manufacturing industries, so implying that environmental regulation has been effective for betterment on the performance of Japanese manufacturing industries. Another important finding is that the emission of greenhouse gases is a main source of unified inefficiency in the two groups of industries. Therefore, Japanese industries, examined in this study, need to make their efforts to reduce the greenhouse gas emissions and air pollution substances by investing in capital assets for technology innovation.

DEA radial measurement for environmental assessment: A comparative study between Japanese chemical and pharmaceutical firms

Climate change and various pollutants have been influencing our societies and economies. Recently, many individuals, firms and public entities (e.g., the United Nations) are interested in environmental protection (e.g., reduction of CO2 emission). This study discusses a use of DEA (Data Envelopment Analysis) to measure unified (operational and environmental) efficiency by considering energy utilization and environmental protection. A DEA model used in this study belongs to the radial measurement whose frontier is shaped by the Debreu-Farrell type of efficiency measure. In applying DEA to environmental assessment, it is necessary for us to classify outputs into desirable and undesirable categories because private and public entities usually produce the two types of outputs as a result of their economic activities. After the classification, it is necessary for us to unify between desirable and undesirable outputs and then to incorporate the concept of natural and managerial disposability into DEA. Furthermore, this study theoretically explores how to measure the type of RTS (Returns to Scale) under natural disposability and how to measure the type of DTS (Damages to Scale) under managerial disposability. Such scale measures are quantitatively explored under two disposability concepts. As an illustrative application, this study compares between Japanese chemical and pharmaceutical firms in terms of their unified efficiency measures and the type of RTS/DTS. This study finds two empirical implications. One of the two implications is that approximately 50% of firms in the two groups belong to decreasing RTS. Therefore, it is recommended that they should reduce their corporate sizes to enhance the operational performance. The other implication is that 59.5% of chemical firms, belonging to increasing DTS, should reduce their sizes to reduce their environmental performance. Alternatively, this study recommends that they should introduce new environmental technology to reduce an amount of their undesirable outputs. The technology innovation on undesirable outputs has more practicality than the scale decrease for the chemical firms.

DEA window analysis for environmental assessment in a dynamic time shift: Performance assessment of U.S. coal-fired power plants

This study discusses a new use of window analysis for DEA environmental assessment in a time horizon where DEA stands for Data Envelopment Analysis. The data sets on environmental protection are often structured by time series. In applying DEA to environmental assessment, it is necessary for us to examine a frontier shift between different periods because it indicates a technology progress on desirable and undesirable outputs. An important feature of the proposed approach is that it incorporates the concept of natural and managerial disposability into the computational framework of DEA and extends the two disposability concepts in a time horizon. To capture the frontier shift, this study proposes a new type of DEA window analysis for environmental assessment. This study applies the proposed DEA window analysis to a data set on U.S. coal-fired power plants during 1995–2007. The application finds that the coal-fired power plants have gradually paid attention to environmental protections under Clean Air Act (CAA). Consequently, their performance under managerial disposability has increased from 1996 to 2007. This indicates the importance of CAA and regulation on industrial pollutions. Thus, it is necessary for the United States to extend the scope of CAA for controlling the amount of CO2 emission because current regulation has a limited policy influence on the source of global warming and climate change in our modern society.

DEA environmental assessment in a time horizon: Malmquist index on fuel mix, electricity and CO2 of industrial nations

Climate change and global warming become a major policy issue in the world. Economic activities produce not only desirable outputs (e.g., electricity) but also undesirable outputs (e.g., CO2 emission). The important policy issue is how each nation can balance between economic development and environmental protection to attain a sustainable society. In attaining the sustainable society, environmental assessment is increasingly important because it can serve as an initial step toward the green growth of each nation. For the purpose, this study proposes a new use of DEA (Data Environment Analysis) for environmental assessment in a time horizon. The proposed use of DEA incorporates Malmquist index to examine the degree of a frontier shift among multiple periods. The frontier shift indicates a technology progress and/or managerial innovation during an observed period. The index is conceptually separated into six subcomponents, which are further divided into twelve different subcomponents (six subcomponents×two disposability concepts) under the natural and managerial disposability. In the index measurement, it is necessary for us to consider a frontier crossover among different periods because technology innovation usually has a time lag until it really appears. As an empirical application, this study utilizes the proposed approach to identify the relationship among fuel mix, electricity and CO2 of ten industrial nations. This study finds three important empirical findings. First, there is a time lag in technology innovation on electricity generation and CO2 emission reduction. Consequently, it is necessary to consider the existence of a frontier crossover in assessing the electric power industry. Second, nuclear generation, as found in France, as well as hydro and renewable energy, as found in Netherlands, are important for the development of a sustainable society although the former is associated with a very high level of risk and the latter has a limited generation capacity. Finally, the electric power industry has been making a corporate effort to reduce the amount of CO2 emission by utilizing nuclear and renewable energy.

A comparative study among fossil fuel power plants in PJM and California ISO by DEA environmental assessment

This study compares among fossil fuel power plants in PJM and California ISO by their unified (operational and environmental) performance. DEA (Data Envelopment Analysis) is used as a methodology. For comparative analysis, DEA incorporates strategic concepts such as natural and managerial disposability into the computational process. This study explores both how to measure Returns to Scale (RTS) under natural disposability and how to measure Damages to Scale (DTS) under managerial disposability. This empirical study obtains two implications on US energy policy. One of the two policy implications is that California ISO outperforms PJM in terms of the three unified efficiency measures. The result implies that strict regulation on undesirable outputs, as found in California, is important in enhancing the performance of US fossil fuel power plants. Thus, it is necessary for federal and local governments to regulate the fossil fuel power plants under the strict implementation of environmental protection. Under such a policy direction, it is possible for US fossil fuel power plants to attain economic prosperity (by enhancing their operational efficiencies) and to satisfy environmental regulation (by enhancing their environmental efficiencies). The other policy implication is that coal-fired and gas-fired power plants in PJM and California ISO need to reduce their operational sizes or introduce technology innovation on desirable and undesirable outputs and/or new management for environmental protection within their operations. Meanwhile, oil-fired power plants may increase their operational sizes if they can introduce technology innovation and new management on undesirable outputs.

China’s regional energy and environmental efficiency: A Range-Adjusted Measure based analysis

Energy and environmental efficiency evaluation has recently attracted increasing interest in China. In this study, we utilize the Range-Adjusted Measure (RAM) based nonparametric approach to evaluate the regional energy and environmental efficiency of China over the period of 2006–2010. The desirable/good and undesirable/bad outputs, as well as the energy and non-energy inputs are considered in the efficiency evaluation so as to characterize the energy consumption, economic production, and CO2 emission process of different China’s regions. In addition, the economic concepts of natural disposability and managerial disposability are incorporated in the evaluation instead of the strong and weak disposability in conventional environmental efficiency evaluation. Therefore, the types of returns to scale and damages to scale of different China’s regions are measured and correspondingly the strategy and policy implications are proposed for guiding the future improvement of regional energy and environmental efficiency. This study finds that: (i) Beijing, Shanghai, and Guangdong had the highest integrated energy and environmental efficiency during the study period, which could be seen as the benchmarks of inefficient China’s regions. (ii) On average, east China had the highest integrated efficiency under natural disposability, and west China had the highest integrated efficiency under managerial disposability. (iii) During 2006–2010, the average production efficiency of China slightly decreased and the average emission efficiency of China slightly increased. (iv) Among China’s 30 regions, 19 regions exhibited decreasing returns to scale, 4 regions shown increasing returns to scale, and 7 regions have mixed returns to scale types under natural disposability in our study period. In addition, under managerial disposability, there are 18, 3 and 9 regions respectively exhibited increasing, decreasing and mixed damages to scale types over time. (v) For most Chinese regions, it is not recommended to simply increase or maintain their current scales of production, but alternatively, they should pay more attentions on technology innovation of energy utilization efficiency improvement, since up to 2010, China still had large energy conservation and emission reduction potentials.

DEA environmental assessment: Measurement of damages to scale with unified efficiency under managerial disposability or environmental efficiency

This study proposes a use of Data Envelopment Analysis (DEA) for environmental assessment. Firms usually produce not only desirable but also undesirable outputs as a result of their economic activities. The concept of disposability on undesirable outputs is separated into natural and managerial disposability. Natural disposability is an environmental strategy in which firms decrease their inputs to reduce a vector of undesirable outputs. Given the reduced input vector, they attempt to increase desirable outputs as much as possible. Managerial disposability involves the opposite strategy of increasing an input vector. The concept of disposability expresses an environmental strategy that considers a regulation change on undesirable outputs as a new business opportunity. Firms attempt to improve their unified (operational and environmental) performance by utilizing new technology and/or new management. Considering the two disposability concepts, this study discusses how to measure unified efficiency under managerial disposability and then discusses how to measure environmental efficiency. The proposed uses of DEA can serve as an empirical basis for measuring new economic concepts such as “Scale Damages (SD)”, corresponding to scale economies for undesirable outputs, and “Damages to Scale (DTS)”, corresponding to returns to scale for undesirable outputs.

Returns to scale and damages to scale on U.S. fossil fuel power plants: Radial and non-radial approaches for DEA environmental assessment

This study proposes a new use of Data Envelopment Analysis (DEA) for environmental assessment, paying attention to a methodological bias (i.e., different methods produce different results). DEA is analytically classified into radial and non-radial approaches. The radial approach determines the level of unified (operational and environmental) efficiency by measuring an inefficiency score. The score indicates the distance of a projection from an observed performance to an efficiency frontier. In contrast, the non-radial approach determines the level of unified efficiency by measuring a total amount of slacks because each slack indicates inefficiency. To avoid the methodological bias, this study considers the use of radial and non-radial approaches. In this study, we consider a production process where all organizations produce not only desirable (good) but also undesirable (bad) outputs as a result of their business operations. To unify the two types of outputs, this study discusses the concept of disposability, which is separated into natural and managerial disposability. The natural disposability indicates negative adaptation to a regulation change on undesirable outputs. In contrast, the managerial disposability indicates corporate strategy by which a firm considers the regulation change as a new business opportunity. A firm attempts to improve its unified efficiency by utilizing new environmental technology and/or new management. This type of strategy indicates positive adaptation to the regulation change. Under the two disposability concepts, this study discusses how to measure RTS (Returns to Scale) under natural disposability and DTS (Damages to Scale: corresponding to RTS on undesirable outputs) under managerial disposability. The two scale measures are analytically discussed by the proposed radial and non-radial approaches with SCSCs or without SCSCs, where SCSCs indicate strong complementary slackness conditions. An illustrative example on U.S. fossil fuel power plants indicates a policy implication that they need to introduce new technology for environmental protection. This study also discusses a necessity of examining a methodological bias in energy studies. Empirical findings identified in this study document the practicality of the proposed approaches to measure RTS/DTS.

DEA environmental assessment of coal fired power plants: Methodological comparison between radial and non-radial models

This study discusses how to apply Data Environment Analysis (DEA) for environmental assessment. A unique feature of DEA environmental assessment is that it classifies outputs into desirable (good) and undesirable (bad) outputs because many firms often produce not only desirable outputs but also undesirable outputs as a result of their economic activities. A methodological difficulty of DEA applications is how to combine operational performance on desirable outputs and environmental performance on undesirable outputs in a unified treatment. Although previous DEA environmental studies have utilized mainly radial models and their extensions, this study uses a non-radial DEA model for the output unification because the non-radial model can unify the two types of outputs more easily than the radial models. This study incorporates three types of output unification in DEA environmental assessment. The first unification considers both an increase and a decrease in an input vector along with a decrease in the direction vector of undesirable outputs. This type of unification measures “unified efficiency”. The second unification considers a decrease in an input vector along with a decrease in the vector of undesirable outputs. This type of unification is referred to as “natural disposability” and measures “unified efficiency under natural disposability”. The third unification considers an increase in an input vector but a decrease in the vector of undesirable outputs. This type of unification is referred to as “managerial disposability” and measures “unified efficiency under managerial disposability”. All the unifications increase the vector of desirable outputs. Using the output unification under natural and managerial disposability, this study examines methodological strengths and drawbacks of the proposed non-radial approach. Moreover, using a data set on U.S. coal fired power plants, we compare methodological strengths and drawbacks of radial and non-radial models for DEA environmental assessments. The methodological comparison is important in guiding a large energy issue because policy implications depend upon a methodology(s) used for an empirical study.

Returns to Scale and Damages to Scale with Strong Complementary Slackness Conditions in DEA Assessment: Japanese Corporate Effort on Environment Protection

This study proposes a use of Data Envelopment Analysis (DEA) for environmental assessment. All organizations in private and public sectors produce not only desirable (good) but also undesirable (bad) outputs as a result of their economic activities. The proposed use of DEA determines the level of unified (operational and environmental) efficiency of all the organizations. A contribution of this study is that it explores how to measure not only RTS (Returns to Scale) on desirable outputs but also a new concept regarding “DTS: Damages to Scale” (corresponding to RTS for undesirable outputs). This study discusses how to measure RTS under natural disposability and DTS under managerial disposability by DEA. The measurement of RTS and DTS is formulated by incorporating “Strong Complementary Slackness Conditions (SCSCs)”. As a result, this study can handle an occurrence of multiple reference sets and multiple projections in the RTS/DTS measurement. The incorporation of SCSCs makes it possible both to restrict DEA multipliers in a specific range without any prior information and to identify all possible efficient organizations as a reference set. Using the unique capabilities of SCSCs, this study discusses the use of DEA environmental assessment by exploring how to classify the type of RTS/DTS with SCSCs. Such analytical capabilities are essential, but not previously explored in DEA environmental assessment for energy industries. As an illustrative example, this study applies the proposed approach for the performance evaluation of Japanese manufacturing industries. This study finds that these firms need to introduce technology innovation to reduce an amount of greenhouse gases and wastes. The empirical result confirms the importance of measuring RTS/DTS in DEA environmental assessment.