Environmental performance:: an index number approach

Tyteca [J. Environ. Manage. 46 (1996) 281] reviews the literature on environmental performance indicators. In that paper he calls for an index that simultaneously accounts for resources used, good outputs produced and pollutants or undesirable outputs emitted. Here, we provide a formal index number of environmental performance which can be computed using data envelopment analysis (DEA) techniques. The implicit benchmark is that of finding the highest ratio of good to bad outputs. Our environmental performance index is constructed from distance functions which implies that it satisfies a number of desirable properties. Since the component distance functions require only information on input and output quantities, the fact that bad outputs typically are not marketed and therefore have no readily observable 'price' poses no obstacle. We apply our method to a sample of OECD countries for 1990. (C) 2003 Elsevier B.V. All rights reserved.