Measuring eco-efficiency of production with data envelopment analysis

Aggregation of environmental pressures into a single environmental damage index is a major challenge of eco-efficiency measurement. This article examines how the data envelopment analysis (DEA) method can be adapted for this purpose. DEA accounts for substitution possibilities between different natural resources and emissions and does not require subjective judgment about the weights. Although DEA does not require subjective or normative judgment, soft weight restrictions can be incorporated into the framework. The proposed approach is illustrated by an application to assessing eco-efficiency of road transportation in the three largest towns of eastern Finland. © 2005 by the Massachusetts Institute of Technology and Yale University.