Assessing the Trade-Off Between Environment Preservation and Economic Development: A Non-Parametric Partial Frontier Analysis at Country Level

Recent studies show the need to include multiple inputs and outputs including undesirable outputs such as CO2 emissions in order to provide a better picture about the economic performance and ecological sustainability of countries. As undesirable outputs are not quantifiable in monitory units it becomes difficult to find suitable techniques in order to assess the efficiency of countries. The non-parametric techniques overcome this drawback and offer the appropriate methodology to measure eco-efficiency. The purpose of this paper is to examine the trade-off between the environment preservation and economic development by using non-parametric techniques in order to assess the relative efficiency at country level. Our study is using 2011 data in order to offer insights regarding balancing the use of traditional and eco-friendly energy sources and economic aspects. We employ full and order a partial hyperbolic measures in order to make a ranking of the countries in terms of eco-efficiency and economic development. The results for the full hyperbolic measures show that 27% of the efficient countries are large European economies. Order a partial hyperbolic rankings show different countries in the leaderboard in comparison with full estimates and in this case 33% of the less inefficient countries are large economies. Assessing the ecological efficiency of countries by taking into account renewable energy consumption and CO2 emissions shows important aspects related to the sustainability of the economic development of nations.