Study of the Impact of Environmental Pollution on Efficiency and Sustainable Development using Data Envelopment Analysis

Abstract

Environmental changes resulting from industrial activity have been occurring for many years, and with the increasing production of greenhouse gases and other pollutants, these changes have played a critical role in global warming. Nowadays, all countries have become aware of the great importance of attention to the environment alongside economic growth. Therefore, they are all after solutions that would allow maximum economic growth with minimum harm to the environment. In the present study, the environmental efficiency of a given system is evaluated using data envelopment analysis (DEA). For this purpose, the economic and environmental dimensions are taken into consideration for each decision-making unit (DMU), with the condition of having undesirable outputs in the environmental dimension. Then, using the concept of “order of efficiency”, an enhanced DEA method is proposed based on weak and strong disposability axioms, which can be used to compare and rank units with undesirable outputs. Next, the capabilities of the proposed approach are demonstrated through an example involving various industries in Iran. Enhanced DEA not only takes more comprehensive input and output sets into account but also monitors the units based on the principles of sustainability.