An intertemporal approach to measuring environmental 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 (2008) [Dynamic environmental performance analysis: A Malmquist index approach. Ecological Economics 64, 701–715], we contribute an approach to assessing intertemporal environmental performance at the level of the management of specific pollutants, as the result of change in eco-efficiency and environmental technical change, which identify catching-up with best available environmental practices and eco-innovation, respectively. In doing so, we use Data Envelopment Analysis techniques, directional distance functions and Luenberger productivity indicators. Our approach is employed to assess environmental performance in the emission of greenhouse gases in the European Union-28 over the period 1990–2011. The main result is that environmental performance has been boosted by environmental technical change rather than by increases in eco-efficiency, although with certain differences among air pollutants. Accordingly, policy measures aimed at enhancing eco-efficiency are recommended to improve environmental performance in European countries regarding greenhouse gas emissions.