Eco-efficiency, -productivity and –effectiveness in a productive

efficiency framework

Helsinki, 17th-21th June 201313th EWEPA

Ludwig Lauwers, Koen Mondelaers & Jef Van Meensel

ILVO , Social Sciences Unit

Institute for Agricultural and Fisheries ResearchSocial Sciences Unit

www.ilvo.vlaanderen.be

Agriculture and Fisheries Policy Area

The eco-efficiency notion

2

• WBCSD, 1991: role/contribution of business to sustainability

• Basically a ratio indicator

• Support DMU: firm or governance level

• Macro indicator:– Green Growth, “doing more with less”

– Factor 10 (stronger version of Factor4)

Origin

EE= econ. perf./ ecol. perf.

• Effectiveness

• Productivity

• Efficiency

• Cost efficiency

• Profit efficiency

• Eco-efficiency

CAN EPA HELP?

Performance of a DMU

3

Eco-efficiency = twin targets

4

MULTIPLE CRITERIA = MULTIPLE INDICES

x (GGE in kg CO2-eq.)

y

(milk in €)

A

Example

B

Production (milk production): A < BResource use (Greenhouse gas emission): A < B

���� Who outperforms who? = > Multiple messages�Indexing, e.g. Agricultural Production Index, GGE

Eco-efficiency = twin targets

5

INCREASING ECO-EFFICIENCY

x (GGE in kg CO2-eq.)

y

(milk in €)

Farm A Farm B

Farm A outperforms Farm B:B

B

A

A

x

y

x

y>

• + : simple ratio calculus and straightforward interpretation

• - : still need for indexing

• - : rebound effect

• Rebound effect

• Weighting multiple eco-indicators

• Jevons Paradox

• Respecting threshold levels

• Scale issues

• Incorporating social issues

PROBLEMS/DRAWBACKS

The eco-efficiency issue

6

Rebound effect

7

• Rebound effect:

– Negative

– [0-100]

– More than 100%

• Old wine in new bottles:

– Jevons , 1865, the coal question

– Saunders, 1992, the Khazzoom-Brookes

postulate

A FORM OF REBOUND EFFECT

Jevons paradox

8

Rebound effect

9

• Substitution effects

• Coupled rebound effects

• Need for indexing and weighting

• Quid with hardly to quantify impacts, e.g. social?

Multiple criteria

10

Carrying capacity

11

Added Value

Environmental impact

• Effectiveness

• Productivity

• Efficiency

• Cost efficiency

• Profit efficiency

• Eco-efficiency

CAN EPA HELP?

Performance of a DMU

12

• Partial ↔ total eco-productivity

• Use of environment as production factor

• Scarcity of

– Natural ressources

– Clean environment (air, soil , water)

– Undamaged nature, wildlife, biodiversity

• Step to production analysis is now straightforward

SIMILARITY WITH FACTOR PRODUCTIVITY

Eco-productivitity

13

• Although bad output, mostly modelled as another input, sometimes as weak disposable bad output

• Subvector efficiencies allow for studying the resource use efficiency or environmental impacts

• This approach is interesting for scarce inputs (water, land, energy, …) or undesirable outputs (pollutants)

AS ANOTHER INPUT

“Eco” in production analysis models

14

SUBVECTOR EFFICIENCY

Inefficient use of a specific resource

Subvector efficiency for

input x1 is determined

parallel to the axe for x1 :

0´A´ / 0´A

• Definition:

• Tyteca (1996) : the normalised undesired output approach

• Callens & Tyteca (1999), Tyteca (1991), Kuosmanen en Kortelainen (2005), Kortelainen (2007)

MULTIPLE OUTCOMES/CRITERIA SETTING

“Eco” in production analysis models

16

• Adj. EPA versus frontier eco-efficiency

FRONTIER ECO-EFFICIENCY

“Eco” in production analysis models

17

3.a 3.b

Econ. outcomeO, BO

Ecol. outcome I, BO

B

F1 F2

A

0 0

P E

P2

P1

E2

E1

• Treat environmental impact as an outcome of EPA next to the economic outcome (Coelli et al., 2007; Lauwers, 2009)

• Based on the material balance principle

• Allows for trade-offs analysis

• Third way, besides two previous ones

A THIRD TYPE

“Eco” in production analysis models

18

ECO-EFFICIENCY COMPOUNDS AS EPA OUTCOMES

“Eco” in production analysis models

19

• Let’s

– X = input

– Y = output ; Ybad = bad output

– f = function (profit, revenues , value added, emission, …)

– O= outcome (profit, revenues , value added, emission, …)

• Type 1:

– Y, Ybad = f (X)

– Y = f (X, Ybad)

• Type 2

– Oecon = Oecol

• Type3

– Oecon = f(X, Y)

– Oecol = f(X, Y)

THREE TYPES

“Eco” in production analysis models

20

• Rather an eco-productivity connotation than a relative efficiency measure

• Traditional production frontier methods can help to

– derive a real efficiency measure

– decomposes eco-efficiency compounds

• Quid with:

– Capacity constraints

– Firm’s contribution to sustainability

DID WE SOLVE THE PROBLEMS?

Eco-efficiency and EPA

21

• Formally and from DMU viewpoint: =>

EPA tools

• Awareness of thermodynamic laws

• Still lot of work to do to bridge the relative

EPA efficiency figure with the absolute EE

concept

• In particular the absolute amount of natural

and social capital to use => need for firm’s

contribution to overall sustainability

INTERMEDIATE CONCLUSIONS

Eco-efficiency and EPA

22

• Merge the production analysis literature with

ecological economics (taking thermo-dynamic

laws into account)

• Drivers for economic-ecological rade-offs

analysis (Van Meensel et al., and this

congres)

• Eco-efficiency of benchmarks as opportunity

cost (Mondelaers et al, based on Figge and

Hahn and Kuosmanen and Kuosmanen)

• Capacity constraints (Mondelaers et al, )

ONGOING RESEARCH

Eco-efficiency at the frontier

23

Eco-effectiveness

24

Output increase

through output

efficiency increase

B1: sustainable

but inefficient

Output increase

through size

increase

Inefficiency versus

unsustainability

Introducing capacity constraints in SVA - pag. 25

A1: efficient

and sustainable

resource use

A2: efficient but

unsustainable

Output reduction

… and size increase

Input inefficiency

removal

B3: inefficient and

unsustainable –

efficiency

improvement

not enough

… and output

reduction

B3: inefficient and

unsustainable –

efficiency

improvement

enough

…and output

inefficiency

removal

Role of actors and actors’ arrangements

26

+ =

EnvP P1

EcP P1

EnvP P2 EnvPoverall

EcP P2EcPoverall

EnvPdesired

Producer P1 Processor P2 Chain P1 + P2

• Coelli, T., Lauwers, L. & Van Huylenbroeck, G. (2007). Environmental efficiency measurement and the

materials balance condition. Journal of Productivity Analysis, 28, 3-12.

• D'Haese M., Speelman S., Alary V., Lecomte P., 2009. Efficiency In Milk Production On Reunion Island:

Dealing With Land Scarcity. J. Dairy science. 92 (8) 3676-3683

• Lauwers, L. (2009). Justifying the incorporation of the materials balance principle into frontier-based eco-

efficiency models. Ecological Economics, 68(6), 1605-1614.

• Mondelaers, K., Van Huylenbroeck, G., Lauwers, L. (2011).Sustainable Value Analysis: sustainability in a

new light. Eurochoices, 10(2), 9-15.

• Mondelaers, K. et al. (2011). Sustainable efficiency of firms when new sustainability targets are introduced.

Paper XIIIth EAAE Congress Zurich

• Van Meensel, J., Lauwers, L., Van Huylenbroeck, G., Van Passel, S. (2010). Comparing frontier methods

for economic-environmental trade-off analysis. European Journal of Operational Research, 207(2), 1027-

1040.

• Van Meensel, J., Kanora, A., Lauwers, L., Jourquin, J., Goossens, L., Van Huylenbroeck, G. (2010). From

research to farm: ex ante evaluation of strategic deworming in pig finishing. Veterinarni Medicina, 55(10),

483–493.

• Van Meensel, J., Lauwers, L. Van Huylenbroeck, G. (2010). Communicative diagnosis of cost-saving

options for reducing nitrogen emission from pig finishing. Journal of Environmental Management, 91(11),

2370-2377.

• Van Passel, S., Van Huylenbroeck, G., Lauwers, L., Mathijs, E. (2009). Sustainable value assessment of

farms using frontier efficiency benchmarks. Journal of Environmental Management, 90(10), 3057-3069.

SELECTION OF PUBLICATIONS AND ONGOING WORK

Authors’ record

27

Thanks for your attention

Helsinki, 17th-21th June 201313th EWEPA

Ludwig LAUWERS

Institute for Agricultural and Fisheries ResearchSocial SciencesUnit

www.ilvo.vlaanderen.be

Agriculture and Fisheries Policy Area