Environmental Compliance, Corruption and Governance: Theory and Evidence on Forest Stock in Developing Countries

This paper analyses the relationships between environmental compliance, corruption and environmental regulations in the case of forestry. Using a Principal-Agent model, we highlight interrelationships between firm's environmental non-compliance and corruption conditioned to the efficiency of the legal and regulatory framework. Moreover, we show that environmental compliance and judicial efficiency may be complementary or substitutable depending on the level of judicial efficiency to strengthen the forest stock. After having design a new indicator of environmental compliance, we test these predictions using cross section data for 59 developing countries. The empirical results support the predictions of the model. Judicial efficiency reduces corruption and environmental non compliance which are positively correlated and conditioned to judicial efficiency. We also find empirical evidences on the substitutability and complementarity of environmental compliance and judicial efficiency to preserve the forest stock.corruption;Environmental compliance;Forest Stock;political economy;governance

Resource use efficiency of US electricity generating plants during the SO2 trading regime: A distance function approach.

This paper measures resource use efficiency of electricity generating plants in the United States under the SO2 trading regime. Resource use efficiency is defined as the product of technical efficiency and environmental efficiency, where the latter is the ratio of good output (electricity) to bad output (SO2) with reference to the best practice firm, i.e., one that is producing an optimal mix of good and bad outputs. This concept of environmental efficiency is similar to that of output oriented allocative efficiency. Using output distance functions we compare three methods for the calculation of resource use efficiency, namely, stochastic frontier analysis (SFA), deterministic parametric programming and nonparametric linear programming. This paper reveals the strengths and weaknesses of these methods for estimating efficiency. Both SFA and linear programming approaches can estimate the efficiency scores. For plants in the dataset the overall geometric mean of the three methods for technical efficiency, environmental efficiency and resource use efficiency is 0.737, 0.335 and 0.248, respectively. The rank correlation coefficient between technical efficiency, environmental efficiency and resource use efficiency is 0.213, 0.617 and 0.877, respectively. The regression analyses of performance across plants shows units in phase I of the SO2 trading programme are negatively related to measures of economic and environmental performance. This suggests that the market for SO2 allowances, per se, may not be minimizing compliance cost. We also find that a decrease in SO2 emission rates not only increases environmental efficiency but also leads to an increase in resource use efficiency. This finding concurs with the hypothesis that enhancement in the environmental performance of a firm leads to an increase in its overall efficiency of resource use as well.Technical efficiency ; Environmental efficiency ; Resource-use efficiency ; Distance functions ; SO2 allowance program

Environmental Efficiency Measurement with Translog Distance Functions: A Parametric Approach

We use a flexible parametric hyperbolic distance function to estimate environmental efficiency when some outputs are undesirable. Cuesta and Zofio (J. Prod. Analysis (2005), 31-48) introduced this distance function specification in conventional input-output space to estimate technical efficiency within a stochastic frontier context. We extend their approach to accommodate undesirable outputs and to estimate environmental efficiency within a stochastic frontier context. This provides a parametric counterpart to Färe et al.’s popular nonparametric environmental efficiency measures (Rev. Econ. Stat. 75 (1989), 90-98). The distance function model is applied to a panel of U.S. electricity generating units that produce marketed electricity and non-marketed SO2 emissions.Undesirable outputs; parametric distance functions; stochastic frontier analysis; environmental efficiency

Impacts of environmental regulations on the efficiency of arable farms in France and Germany

This paper develops a methodology for asymmetric treatment of desirable and undesirable outputs. First, a hyperbolic output efficiency measurement is used to describe a middle term transformation of production processes where producers try to improve their competitiveness together with a reduction of the negative impact on the environment. Second, a radial efficiency measurement, called directional output distance function, is used to depict a long-term transformation of the production process. A non-parametric Data Envelopment Analysis (DEA) and a Stochastic Frontier Analysis (SFA) are used to evaluate the impact of agricultural policy changes, both in France and Germany, on the technical and environmental efficiency of arable farms, taking into account participation or not in agri-environmental programs. The results from both methods indicate only limited possibilities for environmental improvements, mainly for farms participating in agri-environmental programs.Frontier analysis, technical and environmental efficiency, environmental regulations, Agricultural and Food Policy, Environmental Economics and Policy, Productivity Analysis,

Voluntary Agreements and the Environmental Efficiency of Participating Farms

Voluntary environmental agreements have been popular with government agencies in several countries. However, many questions remain about their efficiency as a regulatory tool. Recent analyses suggest that they are more effective than conventional regulatory or economic approaches when dealing with diffuse pollution and when innovation processes at the source are necessary to define effective regulation. This paper applies an activity-based framework to assess the contribution of such a voluntary agreement to the environmental performance of farms participating in a whole farm plan in the Southern part of Belgium. Using a cross-section of 52 farms, our results show that farms entering into environmental agreements are environmentally more efficient than non-participating farms in terms of the preservation and provision of landscape features. However, their environmental efficiency with regard to the reduction of non-desirable outputs, such as organic nitrogen, is mostly determined by technical efficiency and not by participation in the whole farm plan.Agri-environmental indicators, Data envelopment analysis, Environmental efficiency, Voluntary agreements, Whole farm plan, Environmental Economics and Policy, C14, Q12, Q2,

Provision of an environmental output within a multi-output distance function approach

This paper redefines technical efficiency by incorporating provision of environmental goods as one of the outputs of the farm within a multi-outptut distance function framework. Permanent and rough grassland area are used as a proxy for the provision of environmental goods. The multi-output distance function approach is used to estimate technical efficiency. A Bayesian procedure involving the use of a Gibbs sampler is used to estimate the farm specific efficiency as well as the coefficients of the distance function. In addition, a number of explanatory variables for the efficiency were introduced in the analysis and posterior distributions of those were obtained. The methodology is applied to panel data on 215 dairy farms in England and Wales from the Defra Farm Business Survey. Results show that both farm efficiency rankings and determinants of inefficiency change when provision of environmental outputs by farms is incorporated in the efficiency analysis, which may have important political implications.Technical efficiency, environmental good, multi-output

Embedding the drivers of emission efficiency at regional level Analyses of NAMEA data

This paper provides new empirical evidence on regional-national disparities in environmental efficiency, based on analyses of NAMEA data referring to Italy and the Lazio region, where Rome is the main city. Shift-share analyses provide evidence on the drivers of environmental efficiency and on sector specificity. This confirms the usefulness of this method, in order to investigate structural and efficiency factors at the level of within country environmental efficiency performance. Our evidence shows that although the region around Rome has achieved higher environmental performance compared to Italy mainly thank to its being less industry based, some critical points in the energy sector and in some services should be taken into account in shaping the future development of the region. In addition, the use of regional NAMEA for econometric investigations of emission efficiency drivers at national level shows that though north south disparities favour northern and richer regions, in accordance with development oriented dynamics, environmental hot spots driven by specialization and efficiency related issues also appear in some northern industrial regions. Further, the role of public ad private R&D is of main relevance in enhancing emission on economic value ratios.

Multiple output production with undesirable outputs : an application to nitrogen surplus in agriculture

Many production processes yield both good outputs and undesirable ones (e.g., pollutants). In this article we develop a generalization of a stochastic frontier model that is appropriate for such technologies. We discuss efficiency analysis and, in particular, define technical and environmental efficiency in the context of our model. We develop methods for carrying out Bayesian inference and apply them to a panel data set of Dutch dairy farms, where excess nitrogen production constitutes an important environmental problem

The Relationship Between Environmental Efficiency and Manufacturing Firm’s Growth

This paper investigates the empirical link between emission intensity and economic growth, using a very large data set of 61,219 Italian manufacturing firms over the period 2000-2004. As a measure of lagged environmental performance (efficiency) at firm level we exploit NAMEA sector for CO2, NOx, SOx data over 1990-1999. The paper tests the extent to which (past) environmental efficiency/intensity, which is driven by structural features and firm strategic actions, including responses to policies, influences firms growth. Our results show, first, a typical trade off generally appearing for the three core environmental emissions we analyse: lower environmentally efficiency in the recent past allows higher degrees of freedom to firms and relax the constraints for growth, at least in this short/medium term scenario. Nevertheless, the size of the estimated coefficients is not large. Trade off are significant for two emission indicators out of two, but quite negligible in terms of impacts, besides the case of CO2. For example, growth is reduced by far less than 0.1% in association to a 1% increase of environmental efficiency. Environmental efficiency does not seem a primary cost factor and constraint to growth if compared to other factors affecting firm targets and firm competitiveness. In addition, non-linearity seems to characterise the economic growth-environmental performance relationship. Signals of inverted U shape appears: this may be a signal that both firm strategies and recent policy efforts are affecting the dynamic relationship between environmental efficiency and economic productivity, turning it from an usual trade off to a possible joint complementary/co-dynamics, where bad environmental performances hamper firm growth and investments in greener technologies may be associated to positive economic performances of firms and sectors.Firm growth, Manufacturing, Emission intensity, Economic performance, Environmental performance

Environmental Efficiency Analysis of Basmati Rice Production in Punjab, Pakistan: Implications for Sustainable Agricultural Development

The intensive use of chemicals worked as a catalyst to shift the production frontier but the most critical factor of maintaining a clean environment was totally ignored. The present study attempts to estimate the environmental efficiency of rice production by employing the translog stochastic production frontier approach. The data are collected from five major Basmati rice growing districts (Gujranwala, Sheikupura, Sialkot, Hafizabad, and Jhang) of Punjab in 2006. Chemical weedicides and nitrogen are treated as environmentally detrimental inputs. The mean technical efficiency index is sufficiently high (89 percent) but the environmental efficiency index of chemical weedicides alone is 14 percent while the joint environmental efficiency index of chemical weedicides and nitrogen is 24 percent implying that joint environmental efficiency is higher than chemical weedicide alone. It indicates that substantial reduction (86 percent) in chemical weedicide use is possible with higher level of productivity. Moreover, it is likely to contribute a considerable decrease in environmental pollution which is expected to enhance the performance of agriculture labour. The reduction in chemical weedicides will save Rs 297 per acre and Rs 1307.3 million over all from the rice crop in Punjab, improving the profitability of rice growing farmers by the same proportion. Empirical analysis indicates that reduction in environmental pollution together with higher level of profitability in rice production is achievable.Rice Production, Environmental Efficiency, Weedicide, Fertiliser (NPK), Stochastic Translog Frontier