A dynamic approach to measuring ecological-economic performance with directional distance functions: greenhouse gas emissions in the European Union

The impact of economic activity on the environment is a matter of growing concern for firm managers, policymakers, researchers and society as a whole. Building on previous work by Kortelainen [Kortelainen, M., 2008. Dynamic environmental performance analysis: A Malmquist index approach. Ecological Economics 64, 701-715], we contribute an approach to assessing dynamic ecological- economic performance, or simply dynamic eco-performance, and its two determinants, ecologicaleconomic efficiency change and technical change, at specific-environmental-pressure level. In doing so, we use Data Envelopment Analysis techniques, directional distance functions and Luenberger indices. Our approach is employed to assess dynamic eco-performance in the emission of greenhouse gases in the European Union-27 over the period 1990-2010. The main result is that eco-performance has been boosted by technical change rather than by increases in eco-efficiency. Accordingly, policy measures aimed at enhancing eco-efficiency are recommended to improve eco-performance in European countries regarding greenhouse gas emissions.